Before You Get A Valuation
You’ve found your dream property, or parcel of land with spectacular views and now have to source the funds to pay for it. Your Bank advised that you need to get a Market Valuation Report to support your lending application and after deep thought you’ve selected a Valuer from the approved list… so what’s next? After formally engaging the Valuer and arranging for them to get access to the property, providing the following information is very helpful and can reduce the time taken to complete the report and get you a step closer to moving in.
First up, the plot plan, which outlines the gross and net land areas, the latter of which the Valuer will use to research sales of comparable size land in the same or other similar neighbourhoods. The plot plan also denotes those areas which cannot be built on, such as the verge, carriageway, and any drainage reserves.
Next are floor plans which should include measurements for each space within the property. If not available, the Valuer will have to measure every room and will therefore need access to every space in the property. The total building size is used when looking for sales of similar sized properties.
Is the property currently listed for sale? If so, the list price, your offer (if already submitted), and the length of time the property has been available on the market, are key details your Valuer needs. If a property is in a great location and has no obvious defects but has been listed for a few years at the same price - but has received no offers, that’s a sign to the Valuer that the list price is not market value!
Where you are looking at a commercial property, in addition to the items above, the Valuer will also need copies of any Town Planning applications/approvals submitted/received, a list of current tenants, leases for each tenant, a breakdown of base rent and service charge (if applicable), and annual operating expenses.
The Town Planning documents stipulate what the approved use of the property is, which guides the Valuer’s analysis. An example of this is a house which has recently started to be used as an office. If it does not have Planning permission for office use, then the Valuer can only consider the property as a house. This can have serious implications for any potential lending, and planned use post purchase.
The tenant details- space, lease terms etc. and operating expenses – are key to the Income Analysis which the Valuer will prepare. This analysis is typically used to estimate the value of properties where the basis of value is directly related to the income which the property is producing or capable of producing. Under this approach, the annual rental value is determined either from the actual rent in force (per the lease), or calculated through the use of comparables, from which relevant expenses are deducted to arrive at a net income position. The net income is then capitalized using rates of return derived from the market, and the resulting figure indicates the value of the property as an investment. Without the tenant list and rental details, the Valuer has to do further research, and this type of market data isn’t always accessible which can further delay the process.
Gathering this information takes time, but these documents are vital components of a thorough market valuation report. So when requesting a valuation, understanding what information is needed and providing this to the Valuer upfront, can save time and hopefully get you into your dream property sooner rather than later.