Property valuations are used to help determine the value of a property, and are carried out for both property buyers and sellers. The reason for them is to make sure the property is worth what is being advertised or paid for, and, for residential properties, this is an important factor in getting the mortgage loan required by a lot of potential homeowners.
How a property valuation works, in terms of what is looked at, reported on, and used to determine the overall value of a property, depends on the type of valuation commissioned. Some are more superficial than other, more in depth reports, and whether the property is residential or commercial also changes things.
The cost of property valuations also change depending on the type chosen and the purpose of the building. They can make sure you’re getting the best value as a buyer and set a realistic price when selling a property, so they are very useful reports.
What Happens During A Property Valuation?
During a property valuation, a qualified surveyor will inspect the property to determine its value. How this is done depends on the purpose of the property, as different things are considered for residential and commercial properties.
As a result, each type of report will focus on different elements of value depending on what’s needed by the buyer. The surveyor will approach a property valuation as if they were the buyer, scrutinising each part of the property to make sure everything is as it should be. Factors that will be considered include:
- Potential development opportunities
- The surrounding area
- Value of similar properties
- Structural condition
Some property valuations, depending on who is asked to carry them out and why, will be more in depth than others, and which level you need depends on the stage of the process of you are, the property in question and what you want to do with it.
Why Do You Need A Property Valuation?
Why you would need a property valuation is, at the most basic level, for your finances. Depending on whether you’re buying or selling, the reason is different, but it boils down to making sure the property is in the best condition and meets the price being asked and paid for.
For property buyers, this is done to make sure that the price being paid matches what the property is worth, and is a big factor in determining mortgage applications. If the value doesn’t match, it could mean that more money is needed from other sources to finish the purchase or a renegotiation of the price is required, if the seller is willing to discuss that option.
For those selling a property, you need a property valuation to make sure the property is listed at the right price. If not, you could severely harm your chances of an offer being made – or potentially undersell it and lose out on any profit accumulated in the building’s value over the years.
Can anyone be a property appraiser?
While anyone can look around a property and form their own opinions, they won’t be recognised as a qualified surveyor no matter how many properties they have inspected, bought and sold. Financial institutions like banks and lenders, insurance companies and estate agents will look for certifiable proof that someone knows what they’re doing and can be trusted to create an accurate report, and this comes in from of a member of the Royal Institution of Chartered Surveyors (RICS).
Courses to become a qualified surveyor take time and require a lot of learning and work to understand all the different elements that can affect a property – including surrounding areas and factors that a buyer might not consider. Property valuations are always needed, though, so there’s never a shortage of work to be done.
How Is A Commercial Property Valuation Different?
With a commercial property valuation, the overall purpose of the report is the same as for residential properties, but how the value is calculated can be different. Not only are there different reports that look at different value outcomes, but the purpose of the building and who would use the space after you buy it also has a role in determining the value.
Different reports can focus on valuation outcomes such as:
- Cost – how much the building cost
- Sales comparison – matching to similar properties
- Value per door – how many individual space can be rented
- Income capitalisation – how much income a building can rent
- Gross rent multiplier – how long it will take to pay off the price of building through rental payments
What To Look For From A Commercial Property Valuation
While many of the factors that are used in a residential property valuation are also used for a commercial property valuation. The location, size, condition, potential for further developments and more all matter, but because there are more types of commercial valuation reports to choose from, there are other factors to consider.
One of the most important is income made from the property, which will be shown through your business plan and reports if it’s a property you plan to use yourself or through rental income. In this instance, the type of tennant will have an impact, too, as some businesses are deemed safer and more reliable than others. This can have a direct impact on a commercial property valuation.
Can A Market Appraisal Help?
A market appraisal is another way to understand how your property will measure up in the market. A full property valuation will go into a lot of detail to make sure the value is accurate, and cover a lot of the factors discussed above, while a market appraisal is more of an estimate, to give you an idea of where your property’s value lies.
This is a less intensive and intrusive evaluation, and takes into account space, surface conditions and the area at large. It’s not a replacement for a full property valuation, but it’s a good way to know where you stand and what you have to do to reach the price you want to sell for.
Find Out More About Property Valuations And How They Can Help You
We know that any decision to do with property can be stressful, and our goal is to make it as simple as possible for you to make the right choices that will help your business grow and be successful. Finding the right one is more than a surface or gut reaction – it has to be the right location, size and price – and understanding everything the valuation report says ensures you know what to expect.
Property valuations and market appraisals are just two of the services our team at Williams Sillitoe can help with, whether you’re looking to find a new commercial property or sell one you already own. To find out more about how we can help with your property search or sale, get in touch with a member of our team today.