The valuation of property plays a key role in the assessment of any transaction, often dictating the level of funding that will be made available by the financier, and the interest rates and fees that they will charge.


The valuation aims to provide investors with comfort, as they consider their investment needs with the benefit of the findings of a third-party professional who, by definition, must remain independent to all parties to the transaction.


Put simply, the valuer must not be influenced by the borrower, vendor, purchaser, real estate agent, or other interested parties in completing their assessment of value.


What is Market Value?


In most cases, a valuation report will include an assessment of ‘Market Value’. Market Value is “the estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion” (source : International Valuations Standards Council IVSC 2017, as adopted by the Australian Property Institute).


Market Value is particularly useful when considering residential property finance (by domestic and non-resident borrowers alike), developer land banks or residual stock transactions. The valuation report should include recent (ie. within 6-months) comparable sales evidence for properties of a similar type, location, age, condition and size to the subject property.


‘As-if Complete’ Value


In the case of Construction finance, the project may also be valued ‘As If Complete’. This provides “the market value of the proposed improvements assessed on the assumption that all construction has been satisfactorily completed in accordance with the plans and specifications provided and final Council Approval obtained. The valuation assumes that the residence will be constructed in accordance with the approved plans, the Building Code of Australia and that all necessary final certificates will be issued on completion” (source : Australian Property Institute, Residential Valuation Standing Instructions Version 2.0).


In addition to the standard considerations, the valuer will also seek to review a copy of the executed building contract (that should be fixed-price in nature), a schedule of the proposed finishes and specifications, and council-approved plans, including site plan, floor plans and elevations (or privately certified plans where applicable).


Importantly, the ‘As If Complete’ valuation reflects the valuer’s opinion of the market conditions at the date of the report and does not purport to predict the market conditions or the market value upon completion of the project.


How to choose a valuer


Before you appoint a valuer, it is important to understand:-


  1. Their experience in valuing property that is similar in nature to the subject site, ensuring that any ‘local attributes’ of the area are fully considered in the valuation process.
  2. The existence of industry accreditations and professional indemnity insurance, so that the valuation report will not only be of the highest possible standard, but also accepted by the intended user, who is often a bank or non-bank financier with specific compliance requirements, and
  3. Confidence in the valuer’s ability to deliver the valuation report within the required timeframes, under agreed commercial terms. 


It is important that the Letter of Instruction to the valuer is very clear, so that the nature of the assignment is fully understood by all parties at the outset, avoiding the possibility for future confusion or delay.


Property valuation is often complex, but Peer Estate has the experience and technical expertise to assist you.


Please don’t hesitate to contact the team if we may be of further assistance.