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  • Self Valuing Properties

    Hi,

    I'm wondering how people come up with a valuation for places you're looking? Obviously if you're looking for a place for yourself you may pay a little more if it ticks all the boxes for what you're after. And if it's an investment, then the numbers need to stack up. But regardless of why you're buying, how do you come up with a value that you think the market would normally pay (so then you can work out what's a good deal etc).

    For example, I was given a valuation for a place in an area I'm trying to be an expert in. The valuer had taken ten sales from around the area, worked out the percentage difference from RV (which happened to be 7-29% over RV) and then applied a percentage to the RV to come up with a value for this place, I guess taking into account the current state. Is this the way most people do it? Relative to RV? I appreciate this can be a trap if the RV is current where as the others are a bit older for example. Or are R.V's rubbish?

    I've been to a few open homes now and tried to value the places myself and then followed up what they sold for, but it's hard to get it exact.

    What method do you use?

    Cheers,
    Sapio

  • #2
    It's a good question and i hope some valuers on the site can chip in.

    With rv's (cv, gv, whatever its called, the figure the councils have and base rates on) a recent trend, which I am not sure was around 10+ years ago, is people updating the rv, often to increase it after installing a new kitchen or other minor reno etc prior to selling the place.

    In places like pn council rates only apply to land value so it's common for people to get rv updated after relatively minor reno's as it doesn't mean more rates to pay (its only the improvement portion of the rv that increases not land value).

    It's up to an individual qv valuer as to how much it goes up if at all. And it can be very subjective.

    The problem is, things like comparing sales to rv's , which e-valuers tend to do and valuers also do, don't know if the rv has been updated to reflect reno's or not. If no one updated their rvs after reno's (I'd imagine common in regions where rates depend on full capital value not just land value) then you'll get e-values or the QV index and reinz index showing higher % gains.

    I'd like to see stats on the number of rv updates qv do per region to see if there is a trend. I think either update everyones at sale time (only 250 ish) or don't update any. Unless it's consistent it can just add top confusion and be a tool for some to manipulate the system.

    What I try to do is look at recent sales then search for the online listing to see exact state of a house when sold - unless you have an accurate idea of the condition of the place then just relying on sale price v. RV can be not very useful.

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    • #3
      Look a local valuer is your best bet - real estate agents would have a good idea, however not so independent. In a market that is moving up - your valuation may tend to be lower than the actual value, as valuer look backwards and base it on sales over the past 3 - 6 months.
      Hamish Patel | ph: 09 625 4693 | mob: 021 625 693
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      • #4
        Originally posted by mortgage broker View Post
        Look a local valuer is your best bet - real estate agents would have a good idea, however not so independent. In a market that is moving up - your valuation may tend to be lower than the actual value, as valuer look backwards and base it on sales over the past 3 - 6 months.
        It's not practical to get a valuer to go to every place I'm interested in though. It would be an expensive task getting a valuation done on every property you were looking at when it's going to auction for example! Therefore I need to be able to do it myself to a large extent. Cheers.

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        • #5
          Most of us do a CMA in RPNZ or property guru, plus we know the areas we buy in so already know what it is worth.
          CMA uses all recent sales in area of similar sized sections and houses and current listings. This is exactly what a valuer does so you can get pretty close to a valuers number with that tool.

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          • #6
            Originally posted by Bobsyouruncle View Post
            Most of us do a CMA in RPNZ or property guru, plus we know the areas we buy in so already know what it is worth.
            CMA uses all recent sales in area of similar sized sections and houses and current listings. This is exactly what a valuer does so you can get pretty close to a valuers number with that tool.
            Thanks. What would be the difference between this and getting all the recent sales from an R.E agent, working out a percentage difference from RV and then applying that percentage difference to a given property in the area, and adjusting up for new renovations or down for a tired, unkept place or any faults etc.

            I'm trying to work out the price a place I've looked at might sell for (and what I'd pay), R.V is $570k and most in the area are going for a reasonable percentage above R.V, generally it's tidy, well laid out and has a few things like an HRV etc, however it is only 3 bed (hard to easily add another) and is dated inside, no front fence etc. I guess that's why valuers put a range on them!

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            • #7
              You can do as you suggest. They just get all that from RPNZ or Guru so it's the same data. A range is all anybody can do as there is no "valuation" that is set in stone. It'll sell for what someone will pay as you know. Recent sales give you a pretty good idea on the areas averages and ceiling.

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              • #8
                If it's a competitive area, you can almost bet someone will pay for around 5-5.5% yield if it's ready to let, goid condition.
                Get a realistic rental assessment and that gives you the ceiling.
                In most Wellington suburbs this is the trend nowadays.

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                • #9
                  Depending on what it is I usually look at cap rate based on gross yield. GY isn't the best number but it's constant. Then I look at upside and improvements. Lastly I check out what properties are selling for.
                  Free online Property Investment Course from iFindProperty, a residential investment property agency.

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                  • #10
                    This one's actually not strictly an investment, we're upgrading the family home which makes it a bit different. But the original thread topic is still the same, how do you work out the price any property may sell for? In this case yield isn't so important for me and probably 80% of the potential buyers!

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                    • #11
                      Property-guru should have recent sale prices. Or you could just ask a good local agent for an appraisal but if you don't actually plan to sell that's a bit mean.
                      Free online Property Investment Course from iFindProperty, a residential investment property agency.

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                      • #12
                        You van not put a figure on a first time buyers love and determination, or a wealthy ceo paying for his next residence.

                        You can only rely on some form of strategy and the already mentioned researches (yield, reno costs, cma, sold prices)

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                        • #13
                          Originally posted by Sapio View Post
                          This one's actually not strictly an investment, we're upgrading the family home which makes it a bit different. But the original thread topic is still the same, how do you work out the price any property may sell for? In this case yield isn't so important for me and probably 80% of the potential buyers!
                          No one knows for sure - even a valuer. You just need to study a given area and learn values. I use property guru for info but even that is outdated in the current market. I talk to REA's about recent sale prices for up to the minute comparisons.

                          All the ideas suggested should be combined - i.e. recent sales, property guru/rpnz, GY, improvements, upside/downside potential etc. But ultimately it comes down to your familiarity with a market.
                          “Our favorite holding period is forever.”

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                          • #14
                            You would never ever use yield for value in Auckland anyway. Our market isn't yield driven at all. Never has been since I started.

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                            • #15
                              Originally posted by Bobsyouruncle View Post
                              You would never ever use yield for value in Auckland anyway. Our market isn't yield driven at all. Never has been since I started.
                              I often calculate yield to get a quick idea of whether the property seems priced in the right ball park or not. It is quite a useful tool when looking at a given area/suburb and comparable properties in that area. E.g. if a property in a certain area has a yield below a certain level I know it's priced higher than most other rental properties in the area. From there, I can investigate why it is outside the norm and whether it has some unique features or is just over-priced.

                              Lots of people in Auckland do use yield as one of many measures to compare.
                              “Our favorite holding period is forever.”

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