Frequently Asked Questions
Ask a Senior Certified Practising Valuer
Welcome to the DOMINANT VALUATIONS Canberra ACT Help Centre.
Denis has compiled below some typical questions many clients frequently ask valuers. Your question not answered here? Please feel free to contact Denis on 02 6133 9964 or 0429 696 469 or firstname.lastname@example.org or just fill in the Contact Form.
What does a Certified Practising Valuer look for when inspecting a house?
A fair current market value of a residential property is determined by the Certified Practising Valuer (CPV) by firstly inspecting the subject property to determine: location or vicinity of schools, city amenities, sporting fields, parks, shops, bus and tram routes, nearest Town Centre, surrounding development, views from the property.
The CPV then takes note of the building site, its size, topography, cross fall, elevation above street level or fall below the street, signs of water drainage issues (especially during storms), ease of vehicular access.
Next are the building improvements. How are they constructed? How old are they? Are they functional or obsolete? Any additions or renovations? Any signs of damage, failing construction?
What service mains are connected, reticulated town water, natural gas (or bottled gas), telephone (and mobile reception), NBN, electricity (overhead or underground), sewer (or onsite septic system), storm water drainage.
What can I do to inexpensively increase the value of my house before the Valuer arrives?
There are many easy and inexpensive things you can do to make your house "look good" for the Valuer.
My suggestions are equally helpful for when you are preparing your property for an auction or inspection by potential purchasers. The CPV views the property with the eye of a potential buyer: what are the pros and cons of this property? How does it compare to other similar properties I have seen?
Firstly: remove any clutter, like too much furniture, too many nick-nacks, clean away rubbish, clean and tidy walls, floors, carpets, clean the bathroom and toilets (close toilet seats) remove bad smells, make the beds.
In the yard: mow the grass, remove rubbish, weed the garden, add mulch to garden beds.
Want to go further? add paint to some untidy parts of the buildings. It's up to you how far you want to go.
How does a CPV determine the value of a house?
The CPV takes note of all we discussed above and then looks at the land use.
Next the CPV searches the permitted use of the property per town plan zoning and or Crown Lease conditions (if available). This research may identify redevelopment potential, such as subdividing the land into two titles (or backyard subdivision) or consolidating the subject site with adjoining sites to develop medium density housing. Research may also identify that the property is affected by a heritage listing, restricting redevelopment or even repairing the property. Other restrictions may included drainage easements where you cannot build on part of your land or you are required to add extra-wide footings on your building to avoid weight transfer to easement pipes. This step essentially determines the value of the land.
Next the CPV compares the subject property to other nearby similar properties that recently sold (preferably settled or completed sales within the last three months). This is known as the Comparable Sales Approach. The closer the sale date is to the valuation date, the more reliable the sale is at assisting to determine the current market value of the subject property.
The CPV looks for comparable sale properties in the same or similar location, with similar permitted use, similar sized site with similar topography, similar site or land value, similar sized building improvements that are a similar age, condition, level of renovation, similar ground improvements, such as garages, carports, sheds, swimming pools.
Next step is the Summation Approach, where the CPV determines the land or site value from recent vacant site sales. This approach is assisted by "stripping" each sale property down to their site values, then the added values of the main improvements, then ancillary improvements such as garages, sheds, lawns, gardens, boundary fencing, swimming pools.
This sales analysis is then used by the CPV to calculate a Summation of the subject property's value.
The Summation Approach is very useful in determining whether or not a property is over or under capitalised.
What is Over Capitalisation?
Essentially the best house in the street can be over-capitalised.
When thinking about adding rooms or a level to your house, with a view to adding value, you need to do three things:
1. take a good look up and down your street and around nearby streets, take notice of the building ages, sizes, renovations, ancillary improvements like swimming pools.
2. consider whether or not your proposed improvements to your property will bring your property up to the general standard of your neighbourhood. Or will proposed improvements take your property above the median value of your neighbourhood?
3. if you decide to sell your property, will:
a) the local market pay for your added improvements, or
b) will your improvements add no value to your property?
If you answer "b", your proposed improvements will "over-capitalise" your property and the cost of those improvements will be lost.
Does Cost Equal Value?
This question is related to the over-capitalisation principle. If the market is willing to pay for your additional improvements to your property, then yes, cost does equal value.
In some cases, a highly sought after improvement that is difficult to obtain may even add more value to your property than it actually costs. A good example is that there may be strong demand in a neighbourhood for properties with granny flats, but the land use zone in your area prohibits granny flats and dual occupancies. The previous owner of your property built a granny flat when the zoning rules permitted granny flats. Your market research reveals that the added of a renovated granny flat is more than it will cost you to renovate your flat.
On the other hand you may decide to install an inground swimming costing $20,000. Does this pool actually add $20,000 to the value of your property? Simple research will quickly determine whether the market will pay for your new swimming pool. In your neighbourhood watch for sales of two similar properties, one with an inground swimming pool and one with no swimming pool. Did the property with the pool sell for more than the property without a pool? If they sold for the same price, you have determined that the cost to build your pool will not be recouped when you sell your property and the cost will not add value, hence over-capitalisation.