5 Crazy Reasons Why To Get A Property Valuation
Whether you’re buying your first home or selling your home, the reason why you get a property valuation is that you want to know what the value of the property is. This will provide you with an expectation of what the market value of the property is worth. The purpose of this blog is to provide you with the many reasons why you should get a property valuation and which type of valuations you can get.
What is a property valuation?
There are many types of property valuations available. I will touch on the most common ones, but the main type of property valuation I’ll be detailing is the Registered Valuation (also known as an RV).
In a brief overview, all types of property valuation tools can be used to estimate the property value. Some are more reliable than others, for example, E-Val is based on computer models/algorithms and historical data to make a guesstimate, whereas an RV is a professional valuer who considers all areas of the property such as recent renovations, quality of the build and landscaping.
What are the different types of property valuations?
E-Value (E-Val) / Desktop Valuation
These evaluations are done through a valuation company such as Corelogic. Typically, the values are computed through algorithms and recent sales data.
These are not as reliable, however, certain banks still use it assuming that you have 20% deposit i.e. having 80% LVR.
Registered Valuation (RV)
This is the main valuation type that this blog will discuss, as it is a property valuation that you pay for. This is ordered through an online portal and a valuer will get in contact. The Registered Valuation is a report where it outlines the detail of the property. It will also provide and determine the estimated value of the property.
The downside to this type of valuation is that it’s very dependent on the individual valuer. Although they are professionals, it is still human nature that no report is ever the same!
CV (Capital Valuation) / Government Valuation (GV)
This valuation method is used by the councils and the government to calculate their rates. It is an extremely appropriate way of determining what the value of the property is worth. However, it is dependent on a lot of variables that the CV/GV don’t account for.
For example, the location i.e. Hamilton vs Christchurch, or even looking at individual suburbs within Auckland. Some sell over CV while others may be on par.
Online Valuations
These are very approximate estimate property values, similar to desktop and E-Vals. This is your typical Homes.co.nz or Trademe insights. Banks do not rely on these types of valuations.
Why get a property valuation?
Let’s face it, no one wants to spend additional money and time to get a registered valuation done on top of other costs adding up e.g. builders report, LIM report, solicitor fees and other miscellaneous fees. But the reality is that the banks and other non-bank lenders want to ensure they are receiving a ‘fair’ value as they are ultimately taking the risk of lending their money to you. They want to ensure that the security (property) is worth what you’re paying for. Wouldn’t you do the same?
The 5 common reasons why to get a registered property valuation are:
- 1Private Treaty (private sale, without the aid of a Real Estate Agent)
- 2Buying brand new property
- 3Building a new property
- 4Less than 20% deposit (High LVR - I’ve written a blog on this here
- 5Buying higher than what the bank is expecting it’s worth
How do you order a Registered Valuation?
The banks now require all valuations to be ordered through their respective valuation portals. The two most popular valuation portals are CoreLogic & Valocity.
You use to be able to order your own valuer to do it, similar to finding your own builder to complete builders' reports. However, the banks were finding valuers being placed in situations where they may not give a true and accurate estimate due to biases from either the owner or the buyer. Therefore, to limit fraudulent activity, the lenders or your mortgage adviser will order the valuation on your behalf.
The portal will randomise a valuer within the area and assign them the project. The mortgage brokers or mortgage advisers do not get a payment or commission for doing this for you.
Once it’s ordered, a payment link will be sent to you and you’ll have to pay before they act to complete the valuation. Once payment is received, the valuer will get in contact with either you, the developer (if you’re buying new) or the Real Estate Agent.
How long does it take to get a property valued?
Typically the valuers will require 3 - 5 days in advance to get the property inspected. Once inspected, depending on the valuer, it can take between 2 - 5 days for the report to come through. The report will be uploaded to the online portal and the customer will also receive a copy.
You can also pay for urgent service which will typically cost between $100 - $200 more. The turnover for these Registered Valuations will take between 2 - 3 days.
What does a Registered Valuer look for?
The valuer has a strong background in building and construction experiences. The typical things they look for and do are:
- The overall size of the property
- Take photos of the individual rooms
- Identify the building materials
- Condition of the overall structure and building
- The state of the property
- Identify any flooding areas
- Amenities around the property that may increase the value of the property
- Zoning of property
- Improvements required
- Maintenance issues or cost
- Renovations
- Estimate the property value
How much does a Registered Property Valuation cost?
There are many factors that contribute to the cost of the registered valuation. These include:
- Location - rural vs urban
- Demand on valuers being completed
- Size of property
- Amount of properties required to be valued - 1 vs 4 (i.e. if you’re developing)
From personal experience, the average cost for a property valuation is between $700 - $1,000+.
When do I need to get a Registered Valuation completed?
There are many reasons why to get a property valuation. I’ll touch on the 3 most common points or reasons why.
Buying
As pointed above, the 5 reasons why you may need one
Selling
You want to find out what the market value of your property is so you can price it fairly or what value to expect after completing your renovations
Better deal
If you’ve purchased a home with less than 20% deposit and on a Low Equity Margin i.e. a margin added on top of your interest rates and the value of your home has increased, you can get it revalued and if it falls within 80% then you can get those margins lifted.
Or if you are wanting to get a top-up on your property to purchase a new car or a deposit for an investment property.
The seller has completed their own Registered Valuation, can I use theirs?
The short answer is no, because the banks don’t know if the valuer and the vendor/seller have any connection and it’s very hard to prove.
If that is the case, why did the vendor get a Registered Valuation completed? Usually, this is if the property you’re looking at has done some big renovations and is not reflected around the neighbourhood or an E-val.
What happens if the Registered Valuation is below what it needs to be?
The most common thing I see is when clients have less than 20% deposit i.e. only having 10% to purchase their first home if you’re in Auckland. Most of the properties now are being sold at auction.
To bid at an auction, you must be fully unconditional. Meaning that you’ve completed your due diligence and have finance in place. One of the conditions is typically a RV needs to be completed as part of your finance. It’s like a catch 22 for most first home buyers.
Unfortunately, you’ll need to get a Registered Valuation completed before going to auction. If you do it after the auction and there is a difference between the price and the auction price, then you will have to find funding for the difference in the price!
So, it can be a costly experience if you miss out at auction each time, as then you’ll have to pay for another RV for the next property. Hence, why it pays to have 20% deposit. Here are my 8 hacks to growing a faster and bigger deposit.
That is why if you’re buying your first home through the alternative sale process, such as negotiation, it is a lot less stressful and you’ve got more time up your sleeve. Because you’re already pre-approved, you’ll still want to make sure you have a condition of subject to finance. This way, should the Registered Valuation come back lower or higher, you’ve got some options at play.
- If the property valuation is higher, then you can walk away from the deal using the finance clause as the bank won’t lend you any more money
- If the property valuation is lower, then you can negotiate a lower price with the vendor and give them a reality check
Can you get the valuer to reconsider the value? The short answer is yes, but it is very difficult to do so. You’ll have to provide an exceptional amount of sales and evidence to back up your claim.
Summary
Why get a property valuation? Hopefully, you got some great value out of this article that provided some information on registered valuations.
A registered valuation is very important with the lenders as it determines how much risk they take on and what they are willing to lend to the borrower. Every bank has different policies around RV’s. For example, one bank will always ask for a Registered valuation for new builds regardless if you have 20% or 30% deposit. Whereas another bank is happy not to request a valuation on a newly built home if you have 20% deposit. This can save you $700 - $1,100+.
If you have any questions, just comment below or provide me with some feedback if you’ve got some value out of this article.
If you’re a first home buyer and want to understand more about the process of buying your first home, you can book in a call with me below or flick me an email at will@simplyfinance.co.nz.