What Do Valuers Look For In A House Valuation in Australia?
Housing valuations are a crucial step in property transactions. They help regulate the market and ensure all parties get a fair deal. But often, it can feel like these valuations have been plucked out of the sky—how do property valuers actually arrive at these crucial conclusions?
Well, house valuations certainly aren’t decided on a whim; trained surveyors follow a regimented process for valuing properties that draw on a wide range of economic factors. Learning their secrets will give you an edge in the housing market.
Below, we explore the role of house valuations in Australia and the considerations valuers make to determine them.
What is a House Valuation?
What are the Different Types of House Valuations?
There are three types of house valuation you need to be aware of:
- Automated price estimate. This method uses historical data and comparable sales to quickly gauge a house’s estimated value. Its typically used by buyers and sellers to get a rough idea of a property’s value before progressing to the next stage of a transaction;
- Appraisal. This is where sellers approach a real estate agent or independent valuer for an estimation of their property’s market value before listing; and
- Mortgage valuation. This is where banks arrange a house valuation prior to mortgage agreement to determine the Loan to Value Ratio in a home loan application and the amount the bank is willing to lend to the buyer.
Why are House Valuations Important?
Accurate house valuations are critical for mortgage lenders, investors, and buyers and sellers of property. They ensure all parties involved in a property transaction receive a fair, competitive deal that reflects the market rate.
For sellers, house valuations indicate what they can reasonably expect to make when listing their property on the market. The sum also helps prospective buyers better understand what they’re getting for their money.
What Does a Surveyor Look for When Valuing a House in Australia?
Surveyors carry out a variety of checks during a housing inspection and use these insights alongside local market research to draw up an estimate of the house’s value. The key factors influencing a house valuation can be summarised as follows:
- Land features
- Number and type of rooms
- House condition
- Market conditions
We explore each of these factors in detail below.
Key land features include size, topography and development potential. The larger the floor space, the higher the valuation is likely to be. However, size isn’t everything; valuers will also pay close attention to how that space is arranged in terms of shape and dimensions.
That means inspecting the property at a very granular level. For example, where in the house receives sunlight? Clever design, along with ample space, is what will fetch a large price. Having excess space that could be used for an extension will also increase the house’s value.
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Number and Types of Rooms
Another key area for valuers is the number of rooms, as this directly influences how many people the house can accommodate. Having an extra bedroom and bathroom could be the difference between a house being viewed as a single-person dwelling or fit for a family.
Similarly, the types of rooms will be thoroughly inspected by the valuer. The addition of an en-suite bathroom or non-essential room such as a study or laundry room will instantly add value to the property.
Even the largest, most space-efficient house in town won’t go very far if it’s falling apart. Surveyors will take a good look at the house’s building structure and fit-out during the inspection, which includes things like fittings, fixtures, and built-in appliances.
This kind of check is crucial as it helps predict the need for future renovations. If a house’s interior appears outdated, this will be reflected in the price. Any noticeable faults picked up on by the valuer will immediately knock money off the house’s value.
Arguably the most influential factor in a house’s value is its location. Good access to local amenities such as schools, public transport links, shopping centres, parks, hospitals, and other services can add hundreds of thousands of dollars to a house’s value.
Valuers will likely research things like the safety and noise levels in the surrounding area. Planned infrastructure projects in the neighbourhood, as well as local council zoning and restrictions, may also influence valuation.
Having a driveway or, even better, a garage will add significant value to the property. This is especially important in more isolated areas with limited public transport, where residents will be relying on their cars to travel.
While vehicle access in urban areas may not be quite as important, a parking space in the city will come as a nice premium feature for potential buyers and help drive the house’s valuation up.
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To gain a more rounded view of the market and the property’s position within it, valuers will survey historical data of comparable sales. Generally, this involves a review of similar houses in the local area that have been sold within the last six months.
These figures are then used by the valuer as a benchmark for their own estimation of the property’s value. They’ll also try to account for wider market risks and fluctuations, such as real estate bubbles, in their valuation.
What Happens After a House Valuation?
Following a mortgage valuation, the surveyor gives their opinion to the mortgage lender on the value of the house. If the lender is satisfied with the property’s condition and valuation, they’ll submit a mortgage offer to the prospective buyer.
As for appraisals, sellers are under no obligation to use the house valuation they receive when listing their property; it’s merely a guideline for what they can expect to make on the house based on the market rate. They can request as many appraisals as they see fit before listing.
As we’ve seen, property surveyors draw on a wide range of economic factors when estimating a house’s value. These include, but are not necessarily limited to, land features, number and types of rooms, house condition, location, vehicle access, and market conditions.
By learning about the valuation process and the factors that influence it, you can gain a deeper understanding of house prices and better prepare yourself for any property sales or purchases you make in the future.