Determining a property’s market value is a core component of all real estate transactions. This is generally done through the valuation process, often offered by real estate agents and financial institutions like banks. These valuations have far-reaching consequences that influence decision-making for buyers, sellers and any other parties involved. The issue is these services risk a conflict of interest, as their interests don’t always align with delivering unbiased appraisals.
This is the role of property valuers in Western Australia: offering impartial valuations.
Where banks and real estate agents fail
You should consider the aim of real estate agents and banks. Banks generally offer valuations when potential buyers apply for a mortgage. The banks aim to mitigate financial risks and secure their investments. The result is often a conservative valuation that may not reflect fair market value.
On the other hand, real estate agents generally look to optimise sale prices to earn higher commissions. This can result in inflated valuations.
These conflicts of interest can skew the property’s market value and potentially result in ill-informed financial decisions. Independent valuation services are free from vested interests in the property’s sale or financing.
They are legally obligated to provide impartial reports that objectively reflect true market value.
This is done by adhering to rigorous industry standards for objectivity, accuracy, transparency, and quality. They draw on decades of experience to deliver a fair and comprehensive assessment.
How valuers guarantee accuracy
Valuers play a critical role in the local real estate industry by providing services essential to all property-related transactions. These professionals undergo rigorous training and obtain certifications from recognised regulatory bodies such as the Australian Property Institute (API).
This ensures their competence and compliance with industry standards.
For one, Certified Practising Valuers (CPVs) are equipped with specialised knowledge, expertise, and experience in your local market. They understand the intricacies of:
- residential, retail, and industrial properties
- market and economic trends
- the relevant legislation and guidelines.
These factors make them better suited to well-informed judgments regarding your properties.
Much of this is due to their unique methodologies. For example, CPVs make use of the comparative market analysis approach. In other words, they compile and analyse data on similar properties in the area that were recently sold. These are compared to the subject property using over 200 factors.
In short, this method provides an objective and data-driven basis for valuation.
Another aspect of this service is physical inspection and measurement. CPVs review the property internally and externally, making determinations based on factors like size, condition, amenities, maintenance needs and any unique features.
Valuers conduct extensive research on the local economy, infrastructure, future development plans, growth potential and relevant codes of conduct. This is used in tandem with advanced software and data analytics tools to enhance the accuracy of their valuations and make data-backed assessments.
The role of the API
As mentioned, the API’s role in governing independent valuers is crucial.
This esteemed organisation guides and regulates property valuers, ensuring the industry’s integrity, transparency, and professionalism.
Their role also involves establishing the following:
- ethical standards
- education and training
- continuous professional development
- adherence to best practices.
The API maintains ethical standards and codes of conduct for property valuers. These foster trust between valuers and clients and uphold the profession's reputation.
Adhering to these standards ensures valuers act with integrity, impartiality, and objectivity during the valuation process, minimising the risk of potential conflicts of interest.
They also provide a strict accreditation process to regulate valuers. This requires trainees to meet rigorous educational and experience requirements to become API members. This includes participating in ongoing assessment and performance reviews throughout their careers.
Ultimately, this ensures that only qualified and competent valuers are entrusted with valuations.
Finally, the API’s continuous professional development programs encourage members to enhance their skills and stay abreast of industry trends and advancements. Overall, this commitment to ongoing learning improves the quality and accuracy of independent property valuation services.
All of the above contributes to a more robust, reliable, and credible valuation process.
The impact of valuations on property transactions
The importance of valuations and their accuracy is clear. For many, buying and selling real estate are their lives' most paramount financial transactions.
For buyers, property valuations determine the maximum amount they can borrow from a lender.
Conversely, valuations set the asking price for sellers. An inflated price may discourage potential buyers, while an undervalued price may result in financial loss for the seller. Accuracy is key to marketing property competitively and attracting buyers to facilitate a smoother sale.
Banks and financial institutions use valuations to determine the property’s worth and the mortgage amount they are willing to lend. An accurate valuation ensures buyers do not overpay for a property, protecting them from potentially severe financial risks.
Furthermore, these services impact negotiations between buyers and sellers.
When a valuation aligns with the asking price, it cultivates trust and confidence between the parties. Discrepancies may lead to contentious negotiations, however, and the deal may fall through if the parties cannot reach a compromise.
If you have questions on how valuations can help you, feel free to contact one of our specialists.