Valuation Questions

Hey guys,

I understand the best way to do a valuation is doing comparable sales in the last 6 months and within 1km ring. A few questions if you don't mind:

1. Would you go even further than 1km, such as doing comparable sales for the whole suburb?
2. If comparing with sales in the last 6-12 months, can you then take into account the average growth for the suburb in the last 6-12 months and adjust the value of the sold property by that amount?
3. If there are very few (or no) recent comparable sales (same block size, number of rooms, bathrooms and garages), how much more would 4/1/1 be worth compared to 3/1/1 (fourth room)?
4. How much more would 3/2/1 be worth compared to 3/1/1 (second bathroom)?
5. How much more would 4/2/1 be worth compared to 4/1/1 (second bathroom)?
6. How about an extra lock-up garage, e.g. 3/1/2 vs 3/1/1?
7. If one property has a block of land that is 100sqm larger, would the expected difference in price be 100sqm x (price of 1sqm)?

Let's assume an average suburb in Brisbane, of a median house price, and also let's assume the two properties are on the same street, as well as typical construction costs for a bedroom/bathroom/garage (nothing fancy).

 

Depends. The only way I know is to know the area. For example, in Heidelberg Heights in Melbourne, houses south of Southern Road are more expensive. In Bayswater WA, houses east of Tonkin Hwy are cheaper.

In some areas, houses on main roads, next to commercial, near high tension power lines etc are cheaper. Houses overlooking a park may be more expensive.

So lots of things affect price, not just 3/2/1 etc.

Lot size only works for a comparison if the properties are the same zoning and there are no different overlays. For example, in Perth you can have houses next to each other. One is R20 with no subdivision potential while the house next door is R20/30 or R20/40 with subdivision potential.

 

Thanks mate, very useful as usual.

Ok, so if two blocks are of a different size and same zoning, the price difference should be proportional to the difference, that is (difference)sqm x (price per 1sqm).

 

No - I don't think he was suggesting that at all. Its nowhere near as mathematical as any of that.

Short answer is find comparable properties (or the closest thing), then make slight adjustments based on how the compared properties are superior or inferior in key aspects like land size, location, bedrooms etc.

 

What you need to do is what most valuers do..... go to uni for 3-6 years then join a industry body and become a registered valuer......Then when you get a property to value, pick up the phone and ask all the local agents what they think it's worth

If I had a dollar for every time a valuer call me, sometimes 3 or 4 per day

 

Not quite. If one is a duplex potential and one is a triplex potential they will likely have different $/sqm rates.

 

Wow that's interesting! Especially since valuers always go on about how not to rely on a real estate agents appraisal!

 

That was exactly my question mate - how to make those adjustments.

 

Lol so they haven't really learnt anything at uni

 

Closer to the mark.

Get 6 darts 3 with a '+' & 3 '-'.
Now the points on the dartboard are %, for each + dart add %, for each - dart subtract %.

Put on a blindfold and throw in the general direction of the board.

Adjust each of the comparables by the individual % adjustments for each dart.

These instructions are on the API Guidelines latest updates.

 

Practice and experience. Even then we get it wrong, so do valuers, so do real estate agents. Sometimes I can get a valuation spot on to the dollar and sometimes I am way off. It's not an exact science. Sometimes the market defies us.

 

Valuers need to find comparable sales.
Naturally the comparison should start as local as possible and then expand from their as required.

My recent valuation took them all the way to a suburb 20km away where the median house price is half of what it's worth in mine.
Y?
Well because I'm constructing and self providing a number of items the valuer assessed the house as incomplete. He had to find another property that did the same thing but was unable to finish and the lender was stuck selling an incomplete house which killed the price.

My valuation got hammered on the basis of this.

 

I should have said that I'm in commercial property, the calls I get are about commercial property I've sold and there isnt all that much info on pricefinder/rpdata/cityscope for commercial property

 

Exactly - how much unknown, shoddy, incomplete, vandalised/spiteful but concealed work is required to put the site into the condition the building should have been had a competent builder/developer?

 

I am looking at the moment in an area with less than 5% growth in the last two years, someone is selling a 4 bedroom for 379000-410,000, however a 4 bed house on the same street sold in oct for 350,000. Agent says it was a distressed sale but that has still put me off offering 390000 for this one.

 

(general comments only)

Comparing the two properties on Collis St - the brick one will be worth more than the timber-clad house just because it is brick. The amount will depend on how much the brick one is "in fashion" at the moment. The timber house is a "common" or typical basic Brisbane home.

Generally -
If one property is elevated it will be worth much more than a nearby one that slopes down from the street.

Age of house - building style, character, quality of finishes, height of ceilings, aspect

If you dont have a subscription to RP Data, you can compare the sold properties on realestate.com.au to a reasonably accurate degree. They use the same photos and details such as land size. Allow for wide-angle lens photography in the photos shown. Assume all rooms are smaller than they appear. One of the houses you linked to yesterday appeared to have an enormous yard. I can assure you that a house on that sized block of land will not really have that much space around it.

 

I don't think you can beat flying to the intended city and driving around yourselves.

When we purchased in another city, we had previously been there and had a good idea of the place. We already knew the nice and the not-so-nice suburbs where tenants like to live. We looked online for six weeks to get more knowledge of individual properties in the suburbs we had narrowed to.

These days you can also get a trusted person to do drive-bys and viewings for you to rule out nasty surprises like the burned out cars in the front yard next door (an exaggeration) or the smell coming from the tip nearby that was labelled as a "park" when you expanded the map around the property. Nothing beats driving around all day getting a feel for a suburb or two.

 

Presumably they are calling you about properties that you are not listing yourself?

 

I don't agree with this rule in most cases.
Very often brick houses go for less. Yes some people prefer them due to more termite resistance and lower maintenance but from an aesthetics point of view and options to add value timber most of the time will beat brick. In Paddington the brick houses sit around (unless super modern architectural block). They look odd and dated amongst the renovated timber and tin.
In Wavell Heights the post war timber houses go for more then the brick houses all other factors held constant. I've seen this.
With the timber houses people open up walls, put decks around, French doors, raise them, build above, shift on the block and so on. And they have that classy look at the end and proper height ceilings A brick house looks like a brick house you have the option to render and that's about it.