How to tickle the banks fancy – Andrew Mirams

Finance broker Andrew Mirams tells us what valuers look for in a property and his thoughts may just help you get your next investment property over the line with the lender.


Kevin:  Earlier in the show, we were talking to Gavin Hulcombe from Herron Todd White, who was talking about what improvements to a property actually add value. There is another aspect about values, and I want to ask this question of a financier, and that is what, in his opinion, do valuers look for in a property, and what are the key things that he’ll look at.
Andrew Mirams from Intuitive Finance joins us.
Andrew, thanks again for your time.
Andrew:  My pleasure Kevin. Thanks for having me.
Kevin:  In your experience, what is it that valuers look for? What’s going to impact the valuation of a residential property?
Andrew:  There are a couple things that a valuer would look at. Probably the first key is the way it’s presented, it’s aspect, is it neat and tidy, is it in a good state of repair, or is it run down, does it need work? All that sort of things a valuer will look at.
If instructed from a bank, they’re looking at how do they get out? If the client can’t meet their payments and they have to sell it, what’s their get out? How do they realize the property to get their funds back?
The first thing to get a great valuation is present your property really well. Tart it up. Make it neat and tidy, as if you’re almost preparing it for sale. So that’s probably the first tip: when someone’s having a valuer come around present the property as if you’re going to go sell it.
Kevin:  That’s a very good point. I just pick you up on that, too, I think valuers will look at it very, very commercially so you take the emotion out of it and they’ll look at it as a buyer will look at it.
Andrew:  Absolutely – and/or an agent would want to sell it to attract the best possible price. If you’re trying to get a premium for your property, please present it in a great manner. Also, it doesn’t hurt to have some evidence with you of how you might have arrived at that sales figure.
Kevin:  Yes.
Andrew:  I guess in terms of getting to a figure, just what do they look at? There are a couple of methods they’ll use. The first one’s called a comparable or comparison method. The second one is called a summation method.
With the first one, really what they’re looking at is your property might be a three-bedroom, two-bathroom, two-car-space in a suburb in Melbourne, Brisbane, Sydney, wherever it is. They look at like properties that are selling as yours, with a similar aspect, similar finishes, and what sort of market or what sort of salability they’re going for in your market. That’s pretty much how they get to a comparable.
On occasion when we get a difference of opinion, I guess it always comes down to a valuer’s opinion of what a comparable is and what a client and/or financier’s opinion of what a comparable might be.
The second method I said was a summation method. Really, that takes into effect the value of your land, the value of the improvements – it’s the house, pool, garage, landscaping, anything that might be in nature architecturally or anything else like that in relation to the property.
For example, in Melbourne, you can often get a great premium for your Edwardian, Victorian places with the beautiful lattice and things like that, if they’re presented really well because they’re unique and they have a rarity or scarcity factor.
They’re the two methods that people look at, Kevin, when all the value they look at when they’re looking to make a decision.
Kevin:  Do they use a combination of both of those methods or is it one and/or the other?
Andrew:  It’s probably fair to say a combination, but that’s really property specific, then. It’s probably fair to say they’ll use the summation to look at what they think it would cost you to buy that land and put those improvements on it.
I think that needs to be supported by “Does that stack up in the market in terms of what other places that are similar to these level of improvements and features that are getting in the market, as well?” It will generally be a combination.
Kevin:  Yes. That second one that you mentioned is something you can have very little influence over is. The size, the shape, the location, the views – all of those are built into the property, you can’t change them. But you certainly can have some impact on that comparison method.
Andrew:  Absolutely. The level of your improvements and how you maintain them, as I said earlier, is probably the real key that you can have an impact over.
Just because you’ve had your first and second child there, and that’s emotional for you, that doesn’t matter to the valuer. People aren’t going pay a premium for your memories; they’re going to pay a premium for the level of features and what the market is dictating at the time.
When a valuer does go in, if you said, “Well, how then does a valuer arrive at this decision?”
often before they even go to a property, in terms of a residential property, they’ll do some research on the land, what size, and they’ll have an idea of what like properties are doing.
Then they’ll generally visit a property, if they’re doing a full valuation, go around take some photos. That’s where I have plenty of examples of valuers, if they think it’s a bit short of what a client’s opinion is, they’ll take a photo of a crack in the wall or the dishes lined up on the sink, mate. So that’s why I’m saying, have it cleaned up.
Kevin:  Yes. Good stuff.
Andrew:  They’ll measure the allotment of the land, they’ll look at other physical improvements, and the level of the finish, and then they’ll generally prepare and provide their report on their assessment. That’s how they arrive at a residential valuation.
Kevin:  Very good insight there from Andrew Mirams at Intuitive Finance; and a great website, too. You can always link to that through Real Estate Talk, the website there. Andrew, of course, has his own channel and that will take you through to Intuitive Finance where you’ll find a lot more blogs and articles, as well.
Andrew, thank you so much for your time.
Andrew:  My pleasure, Kevin. Thank you.

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