By Steve Waters
Too many people leave valuations to fate. They don’t bother preparing any additional research for the valuer or even having a representative on-site when it takes place.
Many people also don’t recommend a value for their property beforehand or, if they do, they come up with something ridiculous, which may result in the valuer penalising them for being, well, a little bit stupid.
But there are a number of strategies that investors can use to help them get the very best valuation for their properties – every time.
First up, at Right Property Group we prepare a comprehensive report before the valuation that has some key differences to the general statistics that most people have access too.
Today, everyone can pretty much see the same property sales data from the big players like CoreLogic and PriceFinder and, of course, recent comparable sales have a part to play in valuations.
What we do differently, however, is to include “ground truth” data in our property value reports, which are the sales – perhaps next door or around the corner – that haven’t shown up on the various property data portals yet because they’ve only happened recently.
It can take about three months for sales stats to find their way to the various property data providers, so this on-the-ground knowledge is actually live data that shows what the market is doing in a specific location at a particular point in time.
All of this data ensures we are building a story about what we believe the value of the property is. We add to this by getting two local agents to provide us with appraisals that meet our suggested property value.
One of the common reasons for a valuation is to access the increased equity in a property that has been renovated, hopefully to buy more investment properties. With renovations, it’s even more important that you provide as much information as possible to the valuer – especially the before and after photos.
Valuers do a number of valuations every day so having our comprehensive report, as well as photos of the improvements made to the property will help the end result as they have a visual reminder of the property when they get back to their desks to punch the numbers.
Speaking of desks, there are generally three types of valuations; desk-top, kerbside and walk-in. Depending on your lender, the purpose of the valuation and your loan-to-value ratio, any one of these valuation types could be used to financially assess your property.
Desk-top valuations can be notoriously high or low because of the variances in property data at any point in time. Investors who benefit from a high desk-top val have to be smart about it though, and not borrow more than the property is worth because that’s just a silly thing to do.
With walk-in valuations, you have to ensure that your property is looking its very best, which means that your tenants have a role to play, too. Make sure that you give them ample notice of when the valuation is booked, because the property needs to be up to the standard of a routine inspection on the day.
Also, don’t forget the outside of your property because you don’t get a second chance to make a first impression. So this means mowing the lawn, tidying up the garden and generally making it look as presentable as possible.
The best piece of advice is never to attend the valuation yourself as you’re too emotionally invested in the result. We regularly attend valuations on our client’s behalf, where we give them the comprehensive report and are available to answer questions if asked.
If you get a bad valuation result, which can happen even with all the preparation in the world, you can challenge it and provide documentary evidence to support your position. You also can choose a different lender who likely uses a different valuation firm.
In my experience, new lenders tend to value higher than your existing lender because they want your business. Sure it’s supposed to be objective, but it’s not always that way.
And the difference between valuers can be stark! Recently, one of our clients got four different valuations done in the space of a week which ranged from $305,000 to $355,000. Guess which one came from their existing lender?
So, valuations don’t have to be a guessing game. The key is preparation and not leaving the fate of your property’s value solely in the hands of someone who doesn’t have as much information about it as you do.
By Steve Waters