One of the most common questions we get asked is about valuations, so today I wanted to share with you what we’ve been doing with our clients.
Now, in the investing world, valuations can make or break a home purchase or your next property aquisition.
There are two main reasons why you would get a valuation;
1: When purchasing a property
The banks need to value what they think it’s worth so it’s safe for them to lend their money to us.
2: When using your equity
A valuation is necessary to determine how much equity you have.
Now, we know that in the evaluation world with lenders, that it can go high or low depending on what day they’re having and what sort of marketing they’re valuing in.
I sat down with a client a few weeks ago and he was looking at extracting some equity from his principal place of residence and he believed that his property was worth around $600K. Now his first valuation came in at around $530K and he definitely thought that was low.
Now at this stage, you have two options. You can accept that valuation and extract what equity there is out of that property. Or you can say no, you’re not happy with that valuation, and go to another lender to get another valuation with the hope of that coming in higher.
The second valuation my client received blew both our minds! It came in at a whopping $120K higher than the first. Which is amazing. Something I’ve rarely seen. But it CAN happen.
Now that was an extra $80-$90K he could use for his next investment purchase. So we were then able to sit down, strategise, and head off to the market to purchase.
So here are my tips for you as a homeowner OR property investor.
Tip 1: Understand what your property is worth in the current market
Do your research around that so you know what you would expect the valuation to come in at. RE.com or Domain are great sites for comparables of what are for sale at the moment but also understanding your median price of the surburb you own your property in. A more advanced version of this is RP Data which has almost every sold property in Australia in it’s searches but unfortunately comes at a price to purchase. There are other sites but the accuracy of them is questionable.
Tip 2: The valuation or valuer can sometimes determine your lender
Most people simply go with the lender they’re most comfortable with. Might be someone they know, or they’ve had dealings with before. Don’t have any alliances. If the valuation comes in with a $50K or $100K difference, then choosing the lender who is associated with the best valuation is sometimes a smart way to go if it means getting equity out or not.
Tip 3: You need a good Mortgage Broker
They need to be great, actually! Solid and sophisticated, in your corner and someone who is going to think outside the square. They should look for different options and different ways for you to get the best result as a property investor. There are 87 lenders in this country, so you need someone to be on top of them all. Preferably they are also property investors themselves or at least deal with investors constantly.
So, if you’re sitting there thinking “I’ve got some equity in my property”, or I MAY have some equity there that I can extract and you’re wondering about the next step and what road you’re going to take in regards to your next purchase, sling me an email at email@example.com