Why is a Property Valuation so Important?
So you’re ready to make your next step on the property ladder. You might have one property or you might have an owner occupier home and were looking to release equity out. Or you might have a portfolio of properties already and is looking to potentially release that equity. Enter the valuer, they are the most important person in the conversation because they are the people who is going to go out and independently value you properties.
Now why are they so important?
Well, let’s say they come back with a poor result. So you are banking with one of the major banks or you’ve got a professional package and you’re really happy with the discounts that you’ve got off your interest rates and the flexibility and the offset accounts and that type of things but all of a sudden, you get a poor valuation. That poor valuation can mean that you get less equity out and by getting less equity out, it means you might have to have a Lenders Mortgage Insurance in the next purchase you’re making or it might limit you in terms of the value that you buy your next property for. So just because you think that you’ve got a good lender and everything is going well from a banking point of view, there could be a reason and there could be justification to get a second bank to go off and value your portfolio or your property. I’ve seen times and times again where it’s not just $5,000 or $10,000 differences. Its potentially $50,000 – $80,000 and that makes all the difference when we are talking about releasing that value out.
If the valuer is coming out to see your property, make sure you’ve done your own homework. Make sure you can show them some comparative sales of properties that you think are relevant to yours as justification for why you are putting your property at the level that you are. And engage with that valuer. Have a conversation with them. Now, I’ve got plenty of my properties valued over the years and I’ve even experienced a difference of $50,000 several years ago on one of my properties. One valuer valued it at $500,000 and the other valued it at $550,000. Naturally, I went with the lender who gave me the $550,000 because it allows me to build my portfolio up. So don’t get fixated on the fact that you got a really great interest rate with one lender. At the end of the day, wealth creation is going to be done through sensible management, make sure you can afford the money that you about to borrow but also being able to leverage that money and taking ownership of that so you can move forward in your acquisition phase. Now once you’ve built up that portfolio, the concentration is obviously about getting rid of that debt. And that’s why the valuer is so important in this process. They can eliminate LMI if they give you a good property valuation.
So don’t get fixated on interest rates. Focus on giving them comparables, making sure you engage with them and get the best result for that valuation which could mean that you do refinance to a new lender. In some cases, in our business, used up to 3 different valuers to get the best result for our clients because it was absolutely critical that we needed to get that valuation level to move forward with the build of their strategy.
Thanks for watching.