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New Zealand Property Index |
Why Do You Need A Valuation?
Why Do You Need A Valuation?
Anytime you buy or sell real estate, you need a valuation. The
primary purpose is to find out exactly how much your property is worth.
Banks and similar lending companies often require it, before a buyer
can obtain a mortgage.
A valuation is an “educated and trained opinion” on the value of the
property. It also, in some circumstances, may ascertain the best use of
the property, garnering the best selling price. For example, a
long-time residential property may be in an area that has been rezoned
for commercial activity, which could potentially bring in a higher
sales price than marketing the real estate to potential residential
buyers.
A valuer differs from an inspector, who is looking for things that need
to be corrected, repaired or replaced. Though a valuer will look at
these same things, he/she is only interested in developing the value of
the property.
A valuation is based on the highest and best use of real property —
what use of the property will produce the highest possible value? The
final appraisal must be both profitable and probable.
The Process
The valuer looks at each property individually, beginning with an
objective inspection of the interior and exterior of the home or
building, as well as driving through the surrounding neighbourhood. The
valuer looks for the assets, as well as the detriments, of the
property.
For homes, gross living space, quality of construction, location,
layout, the number of bedrooms and bathrooms, the lot size, condition
of the home and land, heating, landscaping, decks, fencing, recent
renovations, amenities provided by the surrounding neighbourhood, are
all considered by the valuer.
Living space is calculated by measuring the outside of the home. It
does not include such areas as the garage, porches, sheds, and so on.
Basements are generally calculated separately from the living space.
The contributory value of basements is determined by the local market,
local regulations, if it is finished or not (and the quality of the
finish), and so on.
If you are the real estate seller, you should point out any features,
amenities or improvements of your home that are not readily
discernable.
Next, the valuer analyses the available market data for your area and
the surrounding neighbourhood, including current and historical
comparable sales, current offers for comparable homes, and proposed
improvements. The valuer gathers data from a variety of sources, as
well as his/her own personal knowledge of the local market. The valuer
then compares your real estate to the broader market.
Each valuer has his/her own process of analysing, collecting and
reconciling the needed valuation data. If you get five different
appraisals for your real estate, you may receive five different
opinions. They should, however, all be within a similar value range, if
they are completed within the same time frame and under the same
conditions.
Though a valuation is not for public consumption, it may be shared with
all parties concerned. For instance, a buyer has offered $350,000 for a
home, but the buyer-side, commissioned valuation is only $335,000.
Sharing this appraisal with the seller means that the owner can do
needed improvements to bring the price up or offer the real estate to
the buyer for the valuation amount.
For the highest valuation possible, real estate sellers should have an
inspection and valuation done before putting the property on the
market. First, the inspection in order to make any needed repairs or
renovations. Then, get the valuation to ensure you are getting the most
for your real estate. |
