(An evergreen assessment of this profession)
When judging a property’s worth, their clout is rarely overestimated, writes Jerry Brown.**
The role of property valuers in the vast economies of our built environment is such that we project a form of realty omnipotence on them.
These people can, at least theoretically, answer one of life’s most profound riddles: what is my property worth on the current market? In truth, and off the top of their heads, they can’t do this, of course.
But it’s nice at least one player in the main game is considered to be completely independent. Even real estate agents who represent competition trust them. As <Maxwell K of a St Kilda real estate agency> says, “you can take what they say to the bank”.
You can’t do this with a real estate agent’s estimate of the “market appraisal” value of your property or a property you hope to buy, because, while they undertake the appraisal for no fee, <Mr K> says “agents will only focus on the positives and tell you what a property might be worth on a good day”.
If the agent is aiming for the listing, the appraisal may be optimistically over-inflated. Weighed against a valuer’s valuation, which is invariably on the conservative side, the difference can sometimes be hundreds of thousands of dollars.
“A valuer has specific methods of valuing..” <Mr K> says. “They will also focus on various negatives that might affect the saleability of the property”.
Valuation is a skill said to fall between art and science. To be able to value a skyscraper, a chook shed, a mansion or vacant land takes four years of tertiary education and the process must be creditable enough to stand up in court. There are approximately 1,700 very busy valuers in Victoria and according to the associate professor of property investment at <a tertiary institution in Victoria, David H>, “there is ongoing demand for property professionals like valuers in the current market”.
Jobs are out there for graduate valuers who can work for banks, superannuation funds and mortgage lenders to ensure properties on which mortgages are being issued actually do exist and are worth the loan risk.
Valuers also work for municipal councils as well as for divorcing couples, families who are contesting property legacies and developers trying to work out whether construction investments will be worthwhile in particular locations.
Valuers can also work out “the highest and best use of a property”, or in other words, the current and potential value.
Chris Plant, the president of the profession’s peak body, the Australian Property Institute, says valuers are “the eyes and ears of banks”. According to Mr Plant, these “property economists” have the onerous role of “filtering the uncertainties of the market and converting them to dollars and cents”. In verifying the value of property owned by ordinary folk, they are the watchdogs of “the biggest single asset component of the economy”.
“Property – whether it’s private…., commercial or government is a cornerstone of the economy and a large part of the asset base of the big four banks.” Mr Plant says.
Valuers are the anti-fraud squad of the sector and have virtually banished the practice of over-valuation, which was not uncommon up to five years ago.
In terms of the big picture of why a property is worth more than the one next door or in the next suburb, the tick-lists are similar, whether judged by a valuer or by a real estate agent.
According to Mr Plant, they are, in descending importance, location, size, the type and quality of home, the number of bedrooms, the number of bathrooms and contemporary or combined kitchen-living space.
What owners often see as value-adding attributes can be nice but they are not the contributors to an eventual price the construction costs might suggest. Other significant elements Mr Plant says “add to the amenity but not in a major way” include the property’s outlook. Garden, decks, pools, garages, carports and so far – sustainable features.
“These will differentiate one property from another and will influence a buyer’s decision” he says. “But at the same time, they are not fundamentals.”
Valuers also work on a case-by-case basis. “They use the same technique whatever the asset.” Mr Plant says. “What is it? What is the market for it? What have properties similar to this one sold for recently?”
<Brendan S>, the residential valuation manager of a large property group>, says valuers don’t drill down into the super-fine detail of a quantity surveyor, who will value points such as light fittings and taps.
“But they can sort out exactly what those unsympathetic aluminium windows on the Victorian terrace will cost in terms of detriment, whether the dated extension adds anything at all and whether the land, large or small, is a winning or a losing amount of space,” he says.
“Usable space in a property is always worth something.” A potentially big piece of land can be devalued by having a house set in a way that makes subdivision or extensions difficult and while slopes can offer views, they can also elevate building or rebuilding costs.
According to expert valuers, the architectural style of a home is almost as important as location and and land size. <Mr S> says period housing – anything older than 50 years – that has been well maintained holds up very well, especially in a location where there are other, similar period homes”.
Valuation services can cost anything from a few hundred to a few thousand dollars but according to <Paul H> of a home loans company>, banks and mortgage brokers use valuers in almost all lending situations because “valuers know”. “In 11 years working with these professionals, I’ve only known two cases where the valuer was off the mark.” he says of an actual purchase. “They’re rigorous".