It is not uncommon for expert valuations for legal purposes, to be challenged by a party to a dispute. After all, at least one party will usually be disgruntled with the outcome.
Under these circumstances, one party may choose to source a second opinion.
This will generally result in a joint conference between the two valuers and a joint report written outlining points of agreement and points of contention and agreement or otherwise on a revised valuation figure.
The most common points of contention are the interpretation of the sales evidence and how it compares to the subject property as well as allowing for price growth of the sales evidence to make adjustments to bring them into line with the valuation date.
Some valuers quote anecdotal rates or rates prepared for media statements by researchers and data providers such as Corelogic. While these figures may be accurate and reflective of a capital city or national growth, caution needs to be exercised when dealing with a single suburb.
As stated within the Australian Property Institutes (API) Valuation Guidance Note 1:
“Sales researched should, as far as possible, be recent transactions. Where more than six months has elapsed since a sale (or if the market is changing rapidly, some lesser period), appropriate comments may need to be made about any change in the market since the sale occurred”.
The most obvious and significant change will be price growth and this is the area where most valuers can get it wrong, particularly by either “guesstimating’ or relying on data from an outside source and not understanding how the analysis was done.
A competent and professional expert valuer however, would complete their own analysis based an average and median annual house prices for a particular suburb for the two years preceding the valuation date and the change in average and median prices over that period.
What is particularly important is to analyse the data used and remove any “outliers”, that is to say, transactions which are obviously “out of line”. Examples of transactions that should be removed include $nill transfers, commercial properties, development site sales and multiple reporting of the same property.
Once price growth for a suburb is established, an expert valuer will then determine annual growth and subsequently monthly growth, which is then applied to the sales evidence to bring the sales evidence in-line with the valuation date.
By completing the statistical analysis of sales data within a suburb oneself, a professional expert valuer establishes a stronger evidence base for growth rates used to more accurately establish the current market value of a property. And that provides a more compelling valuation report for a more decisive outcome for clients.
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