“I think the public lose sight of valuations when the market just continues to perform.”
Way back in 1999, David and Heath completed the Property Valuators course together at university. David admits to not being the best student, but after the course Heath worked as a property valuer for some time, quickly becoming one of the best and most thorough valuers in the business. On this episode of Property Insiders, Heath shares some of his insights with host, David McMillan.
Property valuation is done to determine the correct market value of an asset. “Market Value” is defined as the estimated amount at the date of valuation, and after proper marketing, that an asset should exchange for between a willing buyer and a willing seller, who have each acted knowledgeably, prudently, and without compulsion.
In order to arrive at this market value, a number of factors have to be taken into account. The first, and most important, is a comparison to previous sales of similar properties is needed. The vital point here, though, is to ensure that these previous sales also met the proper definition of “market value”.
Heath says that at Performance Property Advisory they typically use between six and eight previous sales as a comparison. The more sales used, the greater the accuracy in the valuation.
An alternative, and potential threat, to the work of valuers is the advent of so-called “big data” and an increasing automation of valuation methodologies. The abundance of similar properties in the same area has increased the attraction to automation, and their accuracy is indicated by the prices featured on sites like realestate.com.au.
David comments that valuing two properties that are virtually the same is rather easy. Challenges arise when valuing properties where there doesn’t exist similar stock in the area, or there has been very little precedent of like sales.
Heath tells of a recent experience valuing a property in Richmond. It was a parcel of land unlike anything else around. This is a common experience for valuers in city areas, where much of the land already has houses on it. In this instance, there had not been any recent comparable sales in the area, so Heath needed to look further back. Ideally a valuer will want sales in the most recent 3 months, but in this case, Heath still was not able to find a like sale in the past 12 months. So he was forced to look in adjoining suburbs.
Once he found the sales, they were quite varied, and many adjustments needed to be made. This is also common for valuers, who must take many factors into account when valuing a property. Some of the factors include (but are not limited to) size, location, property orientation, proximity to public transport and amenities, and the quality of the street and local area.
David acknowledges how much work is involved in Heath’s valuation methods, and asks why they should bother with it all. To Heath, it is about being perceived as experts, especially in the eyes of the courts. If a sale instigates court proceedings, the valuer is protected against any accusations of negligence or incompetence if they have carried out a thorough valuation.
For property advisors, it is in their best interest to go into this level of detail because otherwise they may overpay or undersell, which could see them libel for negligence if their client sees an unexpected and unusual loss.
About David’s guest, Heath Bedford
Heath leverages 15+ years experience as a Certified Practising Valuer (CPV) and property consultant to source, negotiate and acquire blue chip residential, commercial and industrial properties on behalf of clients looking to create or expand their property investment portfolios and maximise their return on investment.
Using a research driven methodology and an extensive network of contacts in real estate, Heath works with professional clients and their financial advisers to establish long-term strategies for wealth creation with property as the primary vehicle. Heath has a thorough knowledge of the Australian property markets, focusing on acquiring undervalued properties with genuine strong capital growth and rental return potential.
About the host, David McMillan
During his 16 years in the property industry David has worked as a property valuer and property adviser to private clients, financial planners, accountants, finance brokers, major banks and governments. He has been involved in more than $500M worth of transactions across Victoria, New South Wales, South Australia & Queensland.
Since 2009, David has been specifically focused on helping medical professionals, expats, business owners and busy executives build effective property portfolios.
David is a fully licensed real estate agent in Victoria, South Australia and Queensland (CEA), Certified Practicing property Valuer (CPV), Qualified Property Investment Advisor (QPIA) and most importantly is an active property investor. David joined the Australian Property Institute in 2001 and is now an Associate (AAPI) and in 2009 became a member of the Real Estate Institute. David currently sits on the board of Property Investment Professionals of Australia (PIPA) to promote ethics in the property investment industry.
‘Property Insiders’ is one of three segments you will hear on the Performance Property Data podcast. Released fortnightly, they are conversations between David McMillan (Director Acquisitions - Performance Property Advisory) and industry leaders offering knowledge and expertise.
‘The Property Pineapple’ is released monthly and is hosted by Sharon Taylor (Research Analyst - Performance Property Advisory). The show presents listeners with stories from real investors, discussing their wins, and admitting their losses.
And ‘Performance Insights’ are released every Wednesday and Friday, giving you technical information and the lowdown on key property markets around Australia. These episodes are also available as short videos at our youtube channel.
For more information about how Performance Property Data can help you maximise your investment dollar, head to www.performancedata.com.au
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