A property valuation is an important service for anyone involved in real estate. Individuals, professionals, and organisations all stand to benefit from it. A property valuation service in Tasmania may end up making your life a lot easier.
These valuations are performed by professionals who are registered with the Australian Property Institute (API) and have undergone extensive training and education. As such, each report is recognised as an official document in the eyes of the law and stays valid for six months after its completion.
An independent valuation can be useful in a variety of different circumstances. Whether you need help effectively managing your assets or guidance on the value prior to a potential sale, property valuation reports can help.
An often-touted stumbling block to valuation reports is the cost, and many turn to real estate appraisals or online valuation tools instead due to the cheap or free nature of the service. However, you should consider value for money and whether these options are the best for your needs.
How much does it cost to do a property valuation?
There is no universal cost applicable to all property valuations. The amount you’ll end up paying is dependent on a few different factors, including:
The type of property being inspected
A residential valuation is likely to cost less than a commercial valuation, as the latter is more complex with additional considerations. Valuations that require special expertise such as plant and machinery valuations will also fetch a higher price.
The size of the property
A larger property naturally requires a more intensive inspection to ensure that every aspect is examined. As such, the cost will rise with the size of the property as the task is more laborious for the valuer.
The level of detail required
Certain valuations require more detail than others. Reports needed for legal or taxation purposes thus may cost more than regular pre-purchase or pre-sale valuations. A retrospective valuation will also cost more than a valuation based on existing market conditions.
The organisation being used
Not all valuation firms are going to offer the same price. Different firms have different levels of experience and services on offer. Requesting a quote from a reputable firm is your best method of finding out the cost of a valuation.
What about real estate appraisals and online valuation tools?
Outside of independent valuation services, there are other methods of estimating a property’s worth. They are, however, far less reliable than a certified valuation report.
A real estate appraisal is a service offered by real estate agents who are assisting with the purchase or sale of a property. This, of course, means that they have an inherent bias, and the final report may be influenced by their interest in the transaction.
Realtors are often well-versed in all things property, but don’t have the same level of expertise as registered valuers. A real estate appraisal is also not seen as a certified report, and does not hold the same standard of legitimacy as property valuations.
Online valuation tools are another popular method of checking how much a property is worth. This service involves no inspection of the property and mostly uses automatic valuation models to estimate a property’s value.
An online tool can be useful when you’re looking at multiple properties and need to get an idea of the cost, but it should never be seen as conclusive proof of a property’s value.
How do valuers calculate a property's worth?
Professional valuers use a combination of trustworthy methodologies to determine the market value of a property. First, a valuer will choose a primary mode of calculation. The property expert will then use secondary methods to ensure the final amount is accurate.
There are several types of valuation methods available. A few of the most commonly used valuation techniques are:
The Direct Comparison Method
Valuers look at similar types of properties in the area to determine the average sales price. This gives them a good idea of the market, and they can then make the necessary adjustments according to the subject property’s features. This approach is mostly used as the primary.
The Income Capitalisation Method
A method used for properties that turn a profit. The valuers look at the yearly income minus the expenses and divide it by the capitalisation rate to find the market value of the property. Factors such as the size, location, parking, and more are also considered.
The Summation Approach
Also called the cost approach, it’s a method that involves assigning a monetary worth to each component of the property. The sum of each aspect of the property, taking depreciation into account, is equal to the house’s market value.
Summary
The probable cost of a property valuation is dependent on a few different factors and will vary from place to place. The type and size of the property, the purpose of the report, and the detail required all directly impact the cost of the valuation.
There are free (or cheaper) options that exist, but they are not as accurate nor do they hold the same degree of legitimacy as independent valuations. As only registered professionals can perform independent valuations, it is the most reliable method of assessing a property’s worth.
Valuers apply a combination of several different calculation methodologies when preparing the reports. While a wide range of methods exists, the three most commonly used are the direct comparison approach, the income capitalisation approach, and the summation approach.
For more information on the cost of independent property valuations, speak to one of our team members today.
