The Value of Valuations
Valuations are money well spent.
There is little dispute amongst investors that your best deal is the one where you buy equity at the time of purchase. Alternatively, the fastest way to destroy an investment strategy is to pay too much for a property. Paying too much is one of the easiest – and costliest – mistakes to make in real estate. And it’s all too common.
Buyers, especially investors, are prone to under-research and over-emote. In other words they are more influenced by what they feel than by the real numbers. Buyers often don’t take proper steps to ascertain the market value of the property they’re buying. They don’t get an independent valuation before committing to buy.
A refusal to spend as little as $250 to $400 can end up costing an investor $25,000, $50,000 and even more when the price point starts to increase towards the million dollar range.
Buyers are caught out because they over-rate their own knowledge and believe they didn’t need advice; or worse, they rely on the value estimate from the developer or real estate agent. Banks use valuers, developers use valuers, professional property investors working for institutions use valuers yet investors short-change themselves and don’t as a rule use valuers.
Too often real estate agents hold themselves out as experts on value and as reliable providers of “valuations” for investors. If you’re going to become an investor, one of the commitments you have to make is to pay for a valuation that may give you a result you don’t want to hear.
The truth is, in order to predict the market value of any asset be it a share or a commercial building or a residential house is a challenging science. That’s why valuations are supposed to be handled by qualified professionals. Having a professional valuation will give the investor great confidence in buying at the right price.
Filed Under: Investment Strategies • Property Investment
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