Why Valuing My Property
2016/11/30 By UNIQueCO Property Valuers
I get this question quite frequently.
Let’s focus on say residential property, considering a full title owned house, and or flat apartment or townhouse generally registered as sectional title ownership.
Usually when explaining what I do for a living, someone will ask whether we value residential property as well or whether it is only banks that does.
For the records, a bank does only value property because of their own investment interest in the applicable property, and not yours. And only for security purpose. It is your own responsibility to be concerned about your investment interest. But most people buy with emotion and not with a capitalistic point of view. Or when they do consider investment returns, they rely on their own instincts.
We value any property, and yes we do value residential property. I will ask you for what purpose or reason you desire to know the value of your property? You might say I just want to know the value should I consider to sell or buy?
Well, my advice to you will be to catch up with two or three well-known local estate agents. They know the general trends and their opinions are free. I am not. But they will as well handicap you for potential business. I say respect that.
Remember, the estate agent may legally sell or market your property but their valuation opinion is of no legal value, and they are exempted from any financial loss which may occur afterwards because it was not official.
But with a legal property valuation, there are three benefits. One is clarity on the market and or insurance value of the subject property with motivational criteria and evidential market research. The other is the valid legal document in the valuation report itself, signed by a registered valuer who will stand in court defending his/her own result. And the third is the possibility to identify money savings and or capital gain.
So should your purpose of valuation be for example (1) I am going through a divorce and there are properties involved, or (2) my sister and I inherited a property 50/50 from my mother, or (3) the municipal value seems very high, or (4) am I under insured or over insured?, or (5) how much collateral value do I have?
There can be various reasons where the need for knowing what the property is worth arises. But let us focus on the above five.
When getting a divorce, the financial outcome of the parties involved play a vivid role and can get messy if being handled emotionally, instead of financially and without legal counselling. Where two parties owned property together, both have a legal claim on a cash up value for his/her share. This also occurs in business where partners own property together. Usually it ends up in a negotiation where the parties agree that the property needs to be sold, and the income split accordingly. Or “I will buy you out”, but then the buyer will
hope to pay as little as possible, and the receiver hoping to receive the highest price possible. This can only be resolved by obtaining an independent valuation from a registered valuer. The valuation report alone will be guidance to the court as well as a legal supportive document for dispute only.
With municipal valuations, the legal document could feature a lower value versus the municipal valuation. The valuation report can be submitted along with your objection or you can use the evidential information. Remember a valuation roll is valid for four (4) years, but with implementation and each year with the supplementary valuation rolls thereafter an owner can object to the municipal valuation, should it occur that there was a reduction in the actual market value. This could save you some money on rates and taxes.
With building insurance valuations, you could be over, – or underinsured. With the bank valuation, the bank
does an insurance valuation when the deal was secured, and annually they may increase it maybe with 10%. But if this insurance value is higher than market related, you might end up paying a higher premium although once your house burns down, you will get compensated only for what it will cost to replace. Even if ending up being less than what your dwelling were insured for. And the same goes for being underinsured. You might end up getting less compared to what it will cost to replace your dwelling. It is not your bank’s responsibility to make sure on this. With the recession, contractors for example dropped their tariffs with 20% to 30% in order to get work. Meaning insurance costs should come down and in good times, they will inflate prices again.
Collateral value means, your property is worth double you owe on it maybe by means of a loan. So you might consider buying another property using your collateral as deposit on another property, but not having to sell it. Or for financial planning you can determine the cash up value of your assets, if building up your personal retirement fund plan with income producing property receiving rental income.
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