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THE ULTIMATE GUIDE ON PROPERTY VALUATIONS



An accurate property valuation is a crucial part of the buying and selling process.


Whether you want to sell your current home or want to buy one, having a rough idea of what the property is worth will help you determine the following:


  1. What you should expect to pay for the new property, and

  2. How the value of the property you own has increased or decreased since you purchased it.


These insights are also useful to determine your tax obligations. However, it’s important to understand the different types of property valuations available and how they can benefit you.


To help you get your head around everything involved, here’s what you need to know.


What Is a Property Valuation?

Property valuations, in essence, identify the estimated price you can expect your home to sell for in an arm’s length transaction. At their most basic level, arm’s length transactions are matters that take place between two unrelated parties who act in their own self-interest.


Property valuations determine the approximate value that the market recommends your home is worth at that specific time. These assessments typically take the form of a report and include the following information:

  • A comprehensive description of the property;

  • The manner in which the valuation was conducted;

  • Market evidence of comparable properties; and

  • Calculations used for the valuation.


When Should You Get a Property Valuation?

You may find yourself in need of a property evaluation for a variety of reasons. For instance, pre-purchase property valuations can assist you in deciding how much to offer for a house you’re interested in purchasing.


Meanwhile, stamp duty property valuations can be helpful in situations where the property is being transferred between owners and ownership entities like trusts. Stamp duty is a significant expense, so we give fair market value calculations to ensure that you’re not paying more than necessary.


However, the following are some of the most common uses for property valuations.


Lenders

The most frequent reason for getting a property valuation is when a lender has made a request for a bank valuation report.


Mortgage brokers can use property valuations to ensure that they will be able to recover any debt if someone defaults on their loan. So, property valuations are an important part of risk assessment.


Tax Obligations

Property valuations are also typically used to identify tax obligations associated with a particular property.


For instance, the Australian Tax Office (ATO) requires a capital gains tax property valuation to determine the capital gain you have made from selling your investment property. You can also use this market assessment valuation tool.


It is common to use a market assessment valuation to determine the amount of tax levied on your property as opposed to estimating how much the property will bring in when it is sold.


A property valuer determines the market assessment value of the property by looking at a variety of different things, such as any improvements, renovations, or repairs that have been made to the property. It will also be taken into consideration the income that an owner receives from renting out the property and any that have recently been priced in the same bracket.


The market assessment value is then used as the basis to determine how much tax will ultimately be paid on a property.


Buyers and Sellers

In a property transaction, property valuations can prove to be beneficial to both the buyer and seller.


The property valuation you want to obtain is a market valuation. This estimates the property’s value based on the current real estate market:

  • Buyers should note that property valuations can help to reduce the risk of a buyer paying more for a property than it’s worth in terms of its current market value.

  • Sellers should note that property valuations offer an idea of an estimated selling price. If you know how much you could earn from the sale of your property, you can decide on the most advantageous time to sell it.


Property Valuations vs Property Appraisals

Property appraisals are an informal valuation typically provided by a real estate professional with no fee to the client. They are generally derived from current sales statistics and are not legally enforceable in any way.


Qualified and licenced valuers conduct property valuations. These professionals generally charge a fee for the services they provide.


Property valuations are reports that are legally enforceable and are based on relevant factors that are evaluated by the valuer.

You should consider using an independent valuer for an accurate assessment who is not connected to the buyer, seller, or their real estate agent. An independent valuer will not have a vested interest in the property in question.


How Much Property Valuation Costs

The following factors influence the price of a property valuation:


  • The rates of the independent property valuer

  • The value of the property

  • The size of the property


You should, however, anticipate that most property valuations cost between $300-$600.


Factors a Valuer Considers

A valuer will typically consider the following factors when conducting their assessment:

  • Number and type of bedrooms (are there three bedrooms and one home office?);

  • The size of the property;

  • Plan and equipment assets (like the fixtures and fittings on the property);

  • Location and the amenities in the surrounding area;

  • The architectural building structure;

  • Local council zoning regulations;

  • Market conditions; and

  • Recent sales in the same geographical area.


Key Takeaways

Property valuations can help to identify the market value of a specific home based on an accurate assessment of the property and market conditions.


They are different from property appraisals because they are more legally enforceable, comprehensive, and can be applied to calculate the following:

  • Mortgage loan risks for lenders

  • Stamp duty for property transfers

  • Capital gains tax on the sale of property.


If you’re a buyer or seller, it's recommended that you obtain a property valuation report from Duo Tax to assist in estimating the worth of your property in the real estate market.



Tuan Duong

Director at Duo Tax