Getting an accurate property valuation, whether you're selling or buying, can be a daunting task. You want to ensure you don't underprice or overpay, and opinions will vary widely.
Below, we discuss the three most common valuation methods, when they might be appropriate, and how they are typically used.
Rateable / Council Valuation
What is it?
The most commonly referred to property valuation, often mentioned in the media or by property owners, is the Rateable or Council Valuation. This value is attributed to your property by the council. It reflects your property's value at a fixed point in time (usually every three years) and is used to allocate your share of rates and other relevant costs.
How is it calculated?
Every three years or so, the council employs an agency like QV to prepare these valuations. QV reviews a wide range of sale and property data, along with some physical inspections, before attributing values to properties.
There is an objection process available if you disagree with the valuation provided.
Some detail of this process is captured here.
Is it accurate?
The property valuation is done using a straightforward method, primarily relying on large datasets. Properties are not often physically inspected; instead, the agency reviews sales data and general land and construction details.
Additionally, because the valuation is based on a specific point in time, which could be up to three years ago, it can become outdated.
For these reasons, we often advise against placing too much reliance on the Council Valuation. While it may be somewhat accurate when issued, it lacks detail and can quickly become obsolete.
How can I find out what the Council or Rateable Value is?
This information is usually easy to find online, and the QV website has a search tool that can provide it.
Real Estate Agent Appraisal or Comparative Market Analysis (CMA)
What is it?
Another method to estimate a property's value is a real estate agent appraisal or a Comparative Market Analysis (CMA). These terms are often used interchangeably, as many agents now use online tools to create a CMA rather than relying solely on their appraisal.
How is it calculated?
A CMA is a report that is created utilising an online platform such as Relab or CoreLogic. hese platforms allow you to easily identify recent sales within a predetermined radius (e.g., 2 km) of similar properties. You can then compile a report including the properties you deem comparable. This enables you to evaluate which properties are superior, inferior, or comparable to get an idea of value.
Tools like Relab are designed to help real estate agents create appraisals and gather details on properties.
Is it accurate?
While this method is more scientific than the Rateable or Council Valuation process, it has some limitations. The ability to directly compare recent sales and control the search radius certainly improves accuracy.
It’s also beneficial that a CMA can be completed at any time, ensuring it is current.
However, it remains a compilation of online data, which can have its drawbacks, and is often not as accurate as a formal property valuation, which we explore next.
How can I secure an appraisal or CMA?
If you are working or speaking with an agent you can simply ask that they give you an appraisal or similar and many will likely present you with a CMA or appraisal using those methods.
However, if you are looking to do this yourself there are plenty of services online that can help to do this. The more prominent are Relab and CoreLogic, however, websites like Homes.co.nz and QV utilise similar algorithms to provide estimates and are free of charge to use.
Registered Valuation
What is it?
A registered valuation is an assessment of a property's market value by a professional valuer. It is an unbiased and independent assessment of the property's market value.
How is it calculated?
The valuer will visit and inspect the property, then conduct market research into the area and recent sales. They may use different valuation methods, with market comparison being the most common.
The valuer will also consider the location, current macroeconomic factors, interest rates, and other economic indicators.
All these elements are combined to form a conclusion on the property's market value.
Is it accurate?
This is the most accurate form of valuation you can obtain. It is carried out in detail by a trained and experienced professional. However, it's important to choose the right valuer for your property, as not all are equal.
The downside is that the valuation is fixed at a certain point in time and cannot be easily updated, unlike a CMA. However, this also speaks to its accuracy.
It should be noted that the best judge of a property's value is ultimately what a willing buyer and seller agree to in a transaction.
How can I secure a Registered ValuationRegistered Valuations must be completed by a Registered Valuer. Finding a valuer local to your area (city, not suburb) and engaging them will secure you a valuation.
It’s important to note that a registered valuation will incur a cost. For a standard property, it typically ranges from $900 to $1,250, though more valuable or complex properties may cost more to value.
If you need a valuation for a bank or lending institution, you may be required to order it through a platform like Valocity to ensure impartiality and unbiased results.
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