Whether you need one for buying or selling, for Stamp Duty, Capital Gains Tax or SMSF or for Family Law, you’ve probably wondered just how accurate a property valuation report is. Property valuations are important in the field of real estate. In this post, we’ll do a deep dive into this topic at hand.
The Accuracy of Property Valuations
Property valuations are based on a number of factors that can impact value and how precise they can be. Let’s explore why.
1. The Role of Property Valuers
A property valuation often starts with registered property valuers. These professionals evaluate your property using their market knowledge, expertise, and a details analysis of the property. Their accuracy depends on their experience, level of skill and the information they have available or provided to them.
2. Property Inspections
Any issues such as structural or water damage can significantly affect the valuation. A thorough inspection of your property by a property valuer is key for a valuation which you can rely upon.
3. Property Improvements
A property’s value can be affected by improvements or renovations you’ve made to your property. The impact of these can be subjective, and it is important to use a valuer who has the knowledge in construction costs. That being said, there is an old adage in the valuations industry in that cost does not equate to value.
4. Market Conditions
Market conditions also have an influence on property values. In a market that favours sellers, your property might have a higher value due to either an increased demand or a low supply (such as what is happening in Sydney despite multiple interest rate rises and inflation). On the other hand, the value might be lowered during times where it is more of a buyer’s market. Property valuers take into consideration these factors for their valuation reports.
There is a level of subjectivity when it comes to property valuations. While property valuers follow industry standards and have accepted methodologies, two valuers may value the same property differently. However, there is an industry acceptance of a margin of error of around 10% between valuers.
6. Zoning and Legal Factors
Zoning and legal issues can have influence on the value of your property. When it comes to comparing properties, it is best to look at properties that have the same zoning as yours.
7. Economic Factors
Property values can be impacted by broader economic factors.
8. Comparable Sales Data
Upon their analysis, property valuers depend on comparable sales data, or “comps.” These are used for what’s called a Direct Market Comparison methodology. They look at recently sold properties in your area (say within a 500 metre radius of your property) and with similar characteristics to yours (such as accommodation, floor area, outlooks and location). The more similar in improvements, close in proximity and recent these sales are, the more that your valuation will be reliable.
Valuations are important when it comes to knowing your property’s worth, but the dependence on them may be affected by the factors above. Although they are based on research and evidence, ultimately, they are an opinion based upon the valuer’s skill and experience, available recent data and current market trends.
If the accuracy of your property valuation is of concern, it may be worth getting multiple valuations from different valuers. This may aid in the piece of mind of knowing your property’s worth.
In conclusion, property valuation reports are a useful and often essential tool when it comes to knowing your property’s worth. It Is vital to choose the right valuer for the job including their skill level and experience in getting the job done.