Australia’s diverse cities and sprawling landscapes have led many investors to seek out opportunities in the local real estate market. However, underpinning every fair and informed property transaction is the real estate valuation process. Licensed valuers on the West Coast use this process to determine the fair market value of various kinds of real estate.
These services aid buyers and sellers in making informed decisions. They can also guide financial institutions in assessing loan applications or help identify a lucrative investment.
But just how accurate are these valuations?
One thing is certain: property valuations are a complex process. They consider:
- location
- size and condition
- amenities
- market trends
- comparable sales data and more.
The accuracy of a valuation is determined not only by the information used but by the valuation methodologies adopted by licensed, independent property valuers.
The most popularly employed methods are the sales comparison approach, income capitalisation approach and cost approach. Each method has its strengths and limitations, and the accuracy of the final valuation depends on the expertise and diligence of the valuer.
Naturally, various challenges and discrepancies can arise throughout the process.
Accuracy is impacted by numerous subjective factors, such as the valuer's judgement, market sentiment and the availability of accurate data. Various external factors play a role as well. These include economic conditions or changes in government policies that may render the results of a valuation outdated or inaccurate.
What can negatively affect accuracy?
The accuracy of a valuation can be affected by a range of market conditions, property-specific characteristics and external influences. This remains the same for residential, commercial, retail and even industrial property valuations.
Arguably the most volatile aspect of any valuation is the market itself.
Rapid fluctuations in the real estate market can make it challenging to accurately determine property values. Economic downturns, changes in interest rates and shifts in supply and demand can significantly impact property valuations.
Another huge aspect of any valuation is making market comparisons. Licensed valuers gain numerous insights from comparing the subject property to similar properties that have recently sold.
Limited availability of recent or comparable sales data can affect the accuracy of a valuation.
This can be influenced by the unique features of a property, which may make it harder to find suitable comparisons if they are not common in the market.
In addition, hidden defects or structural issues can have an effect as well. Undisclosed defects, such as structural problems or hidden damage, will likely lead to a lower valuation or negatively affect its accuracy. Furthermore, if these issues are not discovered during the valuation process, the assessed value may not reflect the true condition of the property.
Finally, the accuracy of information is vital. Incorrect or incomplete data provided to the valuer can lead to flawed valuations.
Are online property valuation tools reliable?
If you are looking to sell your home or determine a fair rental price, you may be wondering about the online valuation tools available to you.
Such tools have become popular as they provide quick and accessible estimates of property values. Unfortunately, these tools are not known for their comprehensiveness or accuracy. Regardless, they have become a subject of debate in the local real estate industry.
Online valuation tools are often considered a useful starting point. That said, they should not be relied on. They are limited in various ways.
For instance, these tools are based on algorithms and automated data analysis. This may not account for the intricacies and nuances of the local property market. They also use limited or outdated data and statistical models, which won’t necessarily reflect current market conditions.
The market itself fluctuates rapidly, making it very hard for these tools to provide up-to-date and precise valuations. They are also unable to account for the unique features of a property, such as renovations or improvements made.
Finally, online valuation tools typically cannot accurately account for localised variations across regions. In other words, the difference between property prices in different areas.
Your best bet for accurately and reliably managing the value of your property is consulting a professional valuer with adequate qualifications, experience and expertise.
How do valuers ensure accuracy?
Accuracy in a valuation is largely down to the work of the valuer.
Their methods of research and analysis play a crucial role in determining the market value of a property, which is essential for various purposes like:
- buying and selling
- insurance
- taxation
- mortgage financing.
Valuers can gather information on the physical aspects of a property through research and physical inspections. They also examine comparable sales in the area to understand market trends and assess the property's worth based on recent transactions.
This enables them to directly account for any improvements or renovations.
They are trained in the intricacies of supply and demand, economic indicators and local infrastructure developments. They therefore can account for market fluctuations more accurately than any currently available online tool.
The methods valuers use, as well as the guidelines and regulations they abide by, go to great lengths in guaranteeing accuracy. These methods generally involve assessing recent sales, rental incomes and replacement costs. Additionally, bodies such as the Australian Property Institute (API) and the Australian Valuers Standards Board (AVSB) provide guidance and oversight to licensed valuers.
For any questions on property valuations and their accuracy, reach out to one of our highly experienced valuers today.