Newspaper article Daily News (Warwick, Australia)

What Is a Property Valuation and How Do You Calculate It?

Newspaper article Daily News (Warwick, Australia)

What Is a Property Valuation and How Do You Calculate It?

Article excerpt

By Charlotte Cossar

A property valuation is a detailed report of a property's market value. This is defined by the International Valuation Standards Council as the estimated sale price "between a willing buyer and a willing seller in an arm's-length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion".

As the careful wording of that definition implies, the final sale price is usually different from the valuation contained in the report, as it's near impossible to predict how people's emotions, market knowledge and other motivations might affect negotiations.

When would I need a property valuation?

A property valuation offers benefits to both buyer and seller. In providing a clear indication of a property's market value, it reduces a buyer's risk of paying over the odds for a property; in offering a detailed analysis of a property's weaknesses, it can help a seller decide which renovations to make to enhance a property's value.

That said, the most common reason why people need a property valuation is because their mortgage lender (usually a bank) requests one.

According to Matthew Curtis, director of Curtis Valuations, the property valuation serves as a "risk report" for the lending institution, to ensure the security value of the property covers the loan.

The bank needs to be confident that it can recover any outstanding amount owned on the property, should the buyer default on their mortgage.

"Some lenders still have in-house valuers, or use internal algorithms or desktop assessments. However, in the majority of cases, (the property valuation) is outsourced to independent valuation companies who are recognised on the lender's panel," Curtis said.

Property valuations are also often required for financial reporting, for taxation compliance, for family law mediation and for determining the amount of compensation given to land owners for easements or land acquisition. …

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