Best way to determine fair value of property?

Discussion in 'Loans & Mortgage Brokers' started by bamp, 26th Nov, 2017.

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  1. bamp

    bamp Well-Known Member

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    Hi all,

    I am a part owner of a property and want to sell my share to the other owners. How best to determine a fair price? What complicates this is that the property is relatively unusual (quite a large block size - 2x the average for the suburb, but an old small house) for the area, so not too many comparables.

    I'm thinking get a residex report, a corelogic report and ask the PM agency to give an appraisal (they are the largest REA in this suburb), then average the three.

    Is this the fairest way? Any other suggestions?

    Thanks all!
     
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Suggest u get a couple of full bank vals as well

    ta
    rolf
     
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  3. Scott No Mates

    Scott No Mates Well-Known Member

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    A free val is not worth the paper that it's written on. I would suggest get yourself a valuer to value your interest based on the circumstances.

    Residex computer generated reports will not take into account your particular circumstances nor that you have a larger than normal block, improvements which don't suit and subdivision/development potential.
     
    Last edited: 26th Nov, 2017
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  4. albanga

    albanga Well-Known Member

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    To be accurate you need to rely on a few methods.
    I would start with getting 3 bank valuations. Your broker will be able to arrange these but you need to ensure they are done as full and not desktop as these can be more generous.
    The catch here is valuers do tend to take a more conservative approach which means in an open market you would likely be able to get more.

    To balance this out get 2 Real Estate Agent appraisals. There is again a catch here as the agents tend to oversell to win your business so you need to ensure they understand this. With that in mind it needs to be done in a way that makes them actually want to do it properly. If their is no sale at the end of it a lot of agents won't put in the work to do actual proper comparables.

    Reports are useless in this situation so do not rely on those.

    Once you have your 5 valuations you can either take the average OR do an Olympic scoring and remove the lowest and highest values and then use the average.

    This will leave you with a price and from here you can either agree on that price OR negotiate based upon a sale scenario. For example let's say the price comes in at 500k. That means you could sell to the other owner at 250k and be done. The alternative is to think about it as a sale scenario (10k agents commissions, 2k advertising, 3k staging/cleaning so 15k in total).

    In this scenario by selling direct You both save on selling fees so can consider that in negotiation.
     
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  5. Scott No Mates

    Scott No Mates Well-Known Member

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    The instructions for a bank valuation are different to the instructions for valuing an interest in the land for sale to a related party.

    The bank is only interested in tge mitigation of their risk and would be seeking market value for security purposes across all owner's (jointly & severally liable for the debt) not looking at an individual exit strategy to interested parties vs selling a portion on market.
     
  6. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    OSR will require a property property valuation for duties anyway. Start point may be to mutually agree on the process so the valuation is not in dispute.
     
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  7. Marg4000

    Marg4000 Well-Known Member

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    Are the others willing to buy you out?
    Maybe ask THEM for offers?
    Marg
     
  8. Scott No Mates

    Scott No Mates Well-Known Member

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    @Marg4000 - You still need to be prepared with your own valuation to know If it's a good or bad offer.
     
  9. Marg4000

    Marg4000 Well-Known Member

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    Of course you do!
    Just suggesting a different starting point, as a lot will depend on how much the other partners want the extra share.
    Marg
     
  10. wylie

    wylie Moderator Staff Member

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    Unless things have changed recently, you don't need a valuation for OSR duties.

    When my parents moved houses into a trust, OSR accepted detailed appraisals with comparables. I think they may have had more than one agent give an appraisal, but I cannot remember.

    We could have used this method when I bought a house from the trust more recently, but we did pay a valuer so that it was very fair. And the valuer uses comparables anyway to help ascertain the value, and puts those comparables into his report.
     
  11. albanga

    albanga Well-Known Member

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    Not sure I understand your point here?
    Speak to a broker who will lodge a valuation and simply enter it as a refinance.
    Doesn't have to be anymore complicated than that.

    The point is your leveraging your broker who can leverage their valuation network instead of having the person pay a fee of $500 for a single valuation.
     
  12. albanga

    albanga Well-Known Member

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    In Victoria at least you require either an independent valuation (not bank) OR a market appraisal by a licensed REA and supported with a rates notice. Still grey if you ask me.
     
  13. Scott No Mates

    Scott No Mates Well-Known Member

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    The answer that you get differs with the instructions.

    Getting 10% more on your 1/3 share far outweighs the cost of the valuation.
     
  14. albanga

    albanga Well-Known Member

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    That is why I suggested getting a few and also getting REA valuations.
    The more you get the better chance you have if getting an accurate figure.

    Who is to say a single independent valuation not through the bank is going to yield a better result?
    Regardless if we believe the valuation with instruction from the bank is more conservative.

    I would much rather have 3 separate bank Val's than 1 independent any day of the week.
     
  15. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Each part order their own valuations and then average them.
     
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  16. bamp

    bamp Well-Known Member

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    Thanks all, I have ordered the corelogic and residex individual property reports and am getting a full bank valuation.
    To answer the questions raised:
    - The other owners are happy to pay a "fair value", i.e. whatever is determined. Given they are family, I am not interested in getting top dollar for my share, just a reasonable price.
    - The property is in NSW, so after reading the OSR website I suspect I will need to get a private valuer, but will contact OSR to confirm first.
     
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  17. SOP

    SOP Active Member

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    Reccomend you pay for a full valuation stating the purpose instead of relying on a bank valuation for security purposes.
     
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  18. AlexV_Sydney

    AlexV_Sydney Well-Known Member

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    what about property advertising for sale to get a few real offers, and then cancelling it? (if RE agent is your friend or if you get low cost agreement with RE) - is it legal?
     
  19. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Waste of everyone's time, though legal.
     
  20. Scott No Mates

    Scott No Mates Well-Known Member

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    That'd cost money -:rolleyes:
     
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