You’ve signed a time restrictive contract of sale to purchase your next property and are just waiting on the bank to come back with a valuation to confirm your unconditional loan approval.
But what happens if your lender’s appointed valuer decides the numbers don’t quite stack up in your favour? Not only can this be frustrating, it can potentially cost you the home or investment deal of your dreams as well.
The same applies for investors having one or more assets revalued in order to draw on existing equity, only to be told you have less equity than you first thought by a more conservative valuation than anticipated.
When all is said and done, how well you select your asset in terms of location, functionality and size, will ultimately determine its market value in the eyes of an independent valuer.
However, as with all things property, it isn’t quite so black and white. Valuations can be a relatively subjective undertaking, relying on different people’s perspectives, experience and capacity for good statistical research and analysis.
So while you can’t magically make an underperforming asset suddenly worth a lot more than is reasonable, you can have some potential influence over whether you achieve an ‘okay’ valuation’ or an ‘optimal’ valuation, when it really counts. Which is always!
1. Present your property well.
It speaks for itself really. And so will your property. The degree to which you’ve neatened up the gardens, cleaned out the gutters and made sure everything looks spick and span from the curb, can have an impact on that emotive, first impression response we all have as human beings. Yes, valuers are human!
2. Do any improvements beforehand.
Again it seems pretty obvious, but as much as you’re able to, make any improvements or refurbishments to the premises prior to the valuer coming. A lot of property owners are always ‘meaning to get around to’ that odd job. Valuers will set a price based on what they see now, not what you promise will be coming, ‘some time real soon.’
Of course if you’re looking to leverage off equity in the property being valued to undertake said improvements or renovations, then you should…
3. Ask for an ‘as if complete’ valuation.
If you plan on undertaking some sort of work that will potentially improve the value of your property, then explain your plans to the valuer and request what’s known as an ‘as if complete’ valuation. If you don’t communicate your intentions clearly, they’re likely to just go by what they see on the day.
4. Have a rates notice handy.
Municipal rates notices vary according to the local governing authority. Some only list a ‘site value’ or ‘unimproved land value’, which won’t be as much use to you as others that provide an ‘improved value’ for both the land and dwelling(s).
While not accurate per se, rates valuations, which are taken from statistical data, do provide the valuer with some sort of starting point.
5. Tell the valuer about any improvements.
If your property has been refurbished with new kitchen or bathroom fit outs, light fittings and window furnishings since it was last valued, make sure you share this information with the valuer.
If you can provide them with project specs and a building contract, even better; but remember, cost of renos does not necessarily equate with added dollar per dollar value. Which brings me to my next point…
6. Don’t overcapitalize!
Any improvements made to a property investment in particular, need to be within the realms of financial reality. Ideally, you want to make about two to three times the return on each dollar invested in capital works.
Always keep in mind that most value comes from improvements you can see, rather than (often costly) structural repairs, like re-stumping or rewiring.
7. Focus on the money makers
Certain cosmetic makeovers work better than others. Just look at Hollywood celebrities. Spend your money where it matters most, modernizing bathrooms, kitchens and other areas that ‘sell’ your home visually.
8. Be available to answer questions.
Some people feel the need to make themselves scarce when the valuer comes calling. But it can pay to give them a brief introduction to your property, during which you can tell them any information that might impact their decision, which isn’t readily visible on inspection. That being said…
9. Don’t be too ‘in your face’ with the valuer
Try not to stalk them from room to room, hovering and reading any notes they jot down over their shoulder. Remember, they have a job to do and if you get in the way, it could actually work against you.
It might seem like they breeze in and out again with nary a glance at all those wonderful features that make your property worth top dollar, but valuers are incredibly observant and have seen it all remember? Ten minutes is often all it takes the professionals to assess your property’s worth.
10. Be patient and let them do their job!
Don’t hound the valuer as their leaving to give you an ‘approximate idea’ as to what your property might be worth. Chances are they still have to return to the office and do some data analysis to get a complete picture of your property’s true value.
Essentially, you need to present your property at its finest and then stand back and let the professionals do their job. And of course, optimal asset selection always helps!
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).