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News Break!!! Valuations are very subjective.
They can be one of the most subjective areas of financing a property and they can make or break a property deal.
This is great news for investors because it means there are stacks of things you can do to maximise your chances of getting an awesome valuation. You must have an understanding of how you can make a difference. If you are not prepared, you may be disappointed and will be kicking yourself that you didn’t do more. Of course, being prepared is no guarantee of a good valuation but it definitely works in your favour.
I’m going to talk about valuations when refinancing a property you already own. For example, if you have owned the property for a couple of years and the value has grown, you may be able to revalue the property at the higher value, enabling you to access increased borrowings. This would be the case for a rental property or an owner occupied property.
I’ll start with your relationship with the valuer. This relationship is like any other business relationship. It’s important and plays a role in the deal you get. You may never see them again but for the short time you are together, you had better make a good impression.
Before they even get to the front door, make sure there are no cars parked where they have to squeeze past. Make it easy for them. If your car is old or dirty or both, move it down the street. Borrow a nice car from a neighbour to park in your carport for an hour. They will be flattered you asked. If you have more than one car, move the others down the street for a while. Hook the trailer on while you’re at it and take that too. Trailers are ugly and take up a lot of room. This creates a feeling of space that wouldn’t exist otherwise.
Dress neatly and put shoes on. Shower beforehand. Wash your hair, clean your teeth and have a shave. You only have one chance to make a good first impression. Remember their name. Offer them a coffee or a glass of water. Offer them a guided tour of the property so you can highlight all of the positive aspects. Don’t mention ANY negative aspects. Be positive in everything you say. If you have children, move them out for a while. If you have dogs, move them out for a while. If you have a husband or wife, move them out for a while. The property needs to feel peaceful and spacious. The less living creatures hanging around the better. If you are no good building rapport quickly and effectively, move yourself out for a while and get someone in who is good in that area.
Mow the lawn. A freshly cut lawn looks great. Water the lawn. Turn on all the lights, including bedside lamps, even if you don’t think they need to be on. Every little bit counts. Clean the windows. This can make a huge difference to the feeling of a room. Don’t believe me ? Clean your windows and you will see what I mean. De-clutter everything. In other words, move everything out into the shed or shove it inside the kitchen cupboards or bedroom wardrobes, including toasters, kettles etc. Clear everything out. Get rid of kids toys. Pile them up in the back of the car if you have to but get them out of the house. The rooms need to feel spacious, not cluttered.
Make the valuer’s job as easy as possible. Ensure you are up to speed with all the technical aspects of the property. This includes sizes of sheds, offices, rainwater tanks, tennis courts, pergolas, car spaces, square metres of living space, cost of renovations, size of air conditioners, power outlets, broadband, year built, the list goes on and on and on and on and on.
Then, offer them a pre-prepared copy of a series of nice colour photographs of your property, highlighting all of the positive aspects you want them to remember when back in the office. Many valuers will visit several houses in a day before going back to the office to do further research. How will they remember your property amongst all the others ? Will they remember all the bits that are stuck in their head for whatever reason, or will they remember your property by looking at the nice colour photographs you gave them ? I bet no-one else did that for them today ! It’s all about making their job as easy as possible.
Then, offer them a pre-prepared list of all the features of your property. This would include some of the things I have mentioned above and how new some of the improvements might be. Include everything that will help the value in an upwards direction. For example, if your shed has power, phone and broadband cables, list them. If the tennis court has a new net, list it. No more than one page otherwise it’s too cumbersome for the valuer to use.
You can also include up the top where you record your address, an estimated value. Then add some. “I can’t do that” you say. “Yes you can” I say. The mind works in peculiar ways. If you believe the property is worth $500,000 in the current market, indicate to the valuer that you believe it is nearer $600,000. Use $600,000 in your conversations with the valuer. You must ensure your impression of the value is also discussed with the valuer, not just on the paperwork you give them. Initially the valuer has no idea what your property is worth, possibly having done only preliminary research, if anything, prior to viewing the property, and you can significantly sway them in your favour. They might be inclined to come back to $500,000 which is great because it’s a fair market value, or more, which is awesome.
If you indicate your opinion of value as being $500,000 and your language reflects this, you may get $500,000, which is an OK outcome, or you may get less, which would not be good. This is just another strategy for getting what you want. Start high. You have nothing to lose. It is better that they start with a higher value of $600,000 in their mind and come down, rather than $500,000 and come down even further!
You could also include some information in relation to comparable properties, although this is not absolutely necessary, (but be wary of coming across as though you are trying to do the valuers job!). Valuers will know real estate agents in your area and will generally discuss your property with them after doing their own research on recent sales. It would be worth mentioning a couple of properties for them to look at which reflect the higher valuation.
Finally, make sure that when in discussions with the valuer they are standing where you want them to stand. For example, if it’s a hot day, make sure they are standing in front of the air conditioner. If you have a beautiful outlook from a particular living room window and you want them to have this outlook stick in their mind, make sure they are standing facing the window when in discussion with you. They will remember the outlook. If you have a huge living area, be there for the discussion. Don’t get stuck down a narrow hallway for 10 mins while you chat about your property.
How much does it cost to achieve all of what I have mentioned ? Next to nothing. It’s all about the impression you make and your relationship with the valuer, however short that relationship might be. You don’t need to be doing extensive renovations and spending millions of dollars to potentially get a better valuation than you otherwise would get. So it’s just a bit of hard work. That’s all. So you may as well. You’ve got nothing to lose. You may be amazed at how subjective valuations are and the difference you could make.
Have fun out there and good luck !
Tim Ellis
Property Investor
The information provided in the Talking Property podcast is general in nature and should not be relied upon as a substitute for professional advice. Always consult with a professional advisor before making any investment decisions.
