Let’s say you know typical yields on properties in a given area, similar to a property you might be considering for purchase. You know what the current rent on the property is. You can then calculate an approximate valuation and compare with the asking price to see if it is reasonable. Is valuation any more difficult than that?
Alternatively or complementing that, accessing data on recent sales in the area would also be a wise course of action.
My point here is if you were to use these simple methods, why do we need to pay a valuer to do the job? Maybe this is being too simplistic. Please let me know your experience.
Direct sales comparisons will be the most likely and possibly the only valuation method used for residential property.
Armed with confirmed sales evidence you can be fairly accurate, although most likely you won’t have internal access to many sales (valuers work specific areas and over time, build a significant data base of properties internally inspected, so when they drive past ‘comparable sales’ there is a high liklihood they have internally inspected many of them previously).
Remember you are paying an application fee, not a valuation fee in most instances, the fact that the application fee subsequently funds the valuation is inconsequential.
I’d be more miffed if the property transaction fell into a no val policy area, and the full app fee was still charged. This is the case for most of the mainstream lenders.
cheers
brahms
If you don’t ask, the answer is no!!
If it was that easy wezwaz, then people like me would not have spent 5 years at Uni !
I like your thoughts on valuation though…chuckle, when you know your area, it probably is that straight forward – yes i’m being factitious.
cheers
brahms
If you don’t ask, the answer is no!!
1HotValuer
You still haven’t given me any reasons why my suggestions aren’t reasonable. Whether it be property or shares many people have a habit of overcomplicating matters. Please tell me all the intricacies of valuation that I’m not aware of.
Wezwaz,
The registered valuations are determined by historical evidence, that’s the problem, they’re historical.
The banks and lending institutions require registered valuations as a reputable and consistent benchmark to satisfy their lending criteria – it’s their safety net.
As property investors we have to look at the future and your method of using cashflows to value a property are fine for making your own decisions, hence, Steve’s 11 second rule.
There are other things to consider in valuing such as the age and quality of the improvements.
So all in all your yield method or income capitalisation method of valuation is only one part of the process but one part you can do yourself.
Cheers
JeffHi Wezwaz,
The only(?) reason a lender requires a valuation is to protect their money. They generally couldn’t care less if you overpaid for the property as long as they have sufficient asset security to hold over you and get their money back should things go awry. It is for this primary reason that many of the two tiered marketing groups flourished in recent years.
For this reason they use a registered valuer. In most cases a registered valuer is hired by the bank to give them an indication of the worth of your property.
The registered valuer will largely use comparable sales to ensure they have sufficient evidence to justify their figure. Depending upon the nature of the market you are buying into some valuers may also include reference to land values, building costs and so on.
Ultimately the valuer will provide the lender with proof required to justify their figures so that they are covered by their professional insurance should the lender come knocking for their money.
Commercial valuations include acknowledgement for rental income.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
Wezwaz,
Derek and IBuy answered your question correctly.
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