In the world of property investing, and the finance that comes along with it, one of the most challenging aspects is ensuring you get the best possible figure when valuations are completed on your holdings.
Experienced investors might think they’ve heard it all before, but when it comes to getting maximum dollars in a valuation report, I have an approach that’s proven successful time and again.
Why it matters
There are a number of reasons why it pays to see your valuation come in at the upper reaches of your property’s value range. Property valuations are a line-in-the-sand for lenders. Valuations define the equity pool against which a financier can comfortably lend you money.
First and foremost, a higher assessment provides you with more options. It means increased equity, which is ultimately attractive to lenders. This sort of position might even give you a little more bargaining power when it comes to financing. In addition, a higher valuation means a lower loan-to-value ratio (LVR) when borrowing. Ask anyone whose LVR flipped into ‘mortgage insurance territory’ because their LVR went over 80 per cent. All it did was increase the costs and the stress.
So, when it comes to preparing your property to meet its peak figure, what are some practical steps?
1 – Don’t be a smart alec
Valuers are experienced, well-drilled professionals who know what they’re doing. They know when a borrower is providing a screamingly unrealistic estimate of value.
Make certain you’re keeping your estimate realistically arguable. By that, I mean rely on all available evidence to support your estimated figure.
If you do this, the valuer will take your expectations into account and double check their assessment. The psychology may even persuade them to come up and meet your estimate if they were close to your figure in the first place.
If you are too ambitious, a valuer will totally ignore your thoughts and plough on with their own findings. You want to have some say in the outcome – don’t blow it by being too outrageous in your expectations.
2 – Make a great first impression
I don’t care what they say about ‘ignoring superficial factors’, valuers will pay attention to how a property is presented.
A holding that’s in excellent condition demonstrates pride in place which communicates things like repairs and maintenance are being kept in check.
After all, you don’t get a second chance to make a great first impression.
Ask the managing agent to ensure the property is immaculate before the valuer arrives. Make sure the grass is mowed, the bins are away, cars are off the lawn, the house smells nice, all clothes are off the floor, it’s vacuumed, kitchen and bathroom are clean, there are no dishes in the sink and all the lights are on.
3 – Prepare a Valuer’s Pack
There’s every chance you won’t be present at the valuation inspection of your investment.
Regardless, you must put together a Valuer’s Pack that puts forward an argument on why your property is worth the best possible price. Prior to compiling the pack, get hold of an old valuation report and see what it includes. This will guide you on what to research.
The pack must include:
- An opening statement of what you think the property is worth right from the get go. And it must be realistic – as I’ve already mentioned, don’t go insupportably high.
- A comprehensive list of all recent sales that prove your figure. These should be collated from a variety of sources – SQM Research, Pricefinder, Realestate.com.au and CoreLogic. Also, ensure you’re comparing ‘apples with apples’. Don’t use four-bedroom sales as comparisons for a three-bedroom house. It looks desperate and wrong.
- Recent unreported sales. Seek any sales you can from local agents and via your managing agents. Some won’t have registered on the different data collection sources yet. Up to date sales are the foundation of improving your outcome, particularly in a market that’s rising.
- Renovation photos and numbers. This is absolutely essential if you only recently bought the property and are now seeking a post-renovation assessment. Use photos – lots of photos – to show what work you’ve completed. If the property looked dodgy and overgrown from the street when you bought it, show that. Your ‘after’ photos should look absolutely stellar too. In addition, include a comprehensive list of costs for the work completed. You must demonstrate just how wide-ranging the work you completed was and how different the home now looks, so the valuer won’t rely on your pre-renovation purchase price as a guide to current market value.
- Market appraisals from three local agents on their letterhead. This shows you’ve sort a wide range of opinion from other local professionals. Also, by using their letterhead the valuer has a reference for giving the agency a call and checking on how they came to their assessed value. It’s like having your own panel of experts helping do the work too.
- My final Valuer’s Pack tip? Present it as a professional document – don’t just pop the papers in a shoe box.
- Bind it into a decent quality folder and have your property manager deliver to the valuer at the inspection. This again demonstrates you’re a serious investor who is staying on top of your property’s important elements.
Put simply, try and remove any doubt about your own appraisal of value.
Maximising your valuation is a low-cost way of improving your equity position. Don’t leave it to chance. Be a pro-active investor and help guide the valuer toward the right outcome, so you can reap all the rewards and build upon your successes.
Written By STEVE WATERS