If valuers get it so wrong then really how helpful is a $50 report?

I read an interesting article from the Sydney Morning Herald this week titled Billions at stake as land valuation system comes under fire. The article stated that there were "more than 170 cases where there was a variation of more than $5 million between the initial valuation (by the NSW Valuer General) and the valuation after landowners objected or took court action" over a decade. This discrepancy is particularly important at the high end of the market with property values determining costs such as land tax.

While the properties that were discussed in the article were at the upper end of the market, having 170 properties with a valuation discrepancy of more than $5 million is extraordinary particularly when these valuations were based on the un-improved land value alone. Imagine how far out they would have been if they took into consideration the homes on the land as well?

Don't think for a second that this doesn't happen in the $500,000 to $5 million price brackets (where the majority of the Sydney inner ring property market sits) because it does. I have seen valuation reports from different valuers on the same property which was viewed in the same month where the results were 5, 10 and even as much as 20% apart. In fact I have had significant spreads on a couple of my own investment properties in recent years.

Property valuation is not an exact science so discrepancies are expected however if an appropriate amount of research is put in each time a valuation is done then the valuations shouldn't be more than a few precent apart. I know from experience that if three of my team all put a price on a property and follow the same detailed systems we have in place then each time they will all come up with a figure that is within a few percentage points of each other.

This is a timely reminder as to why buyers shouldn't simply rely on property valuation reports. There are several reason why these discrepancies happen but I believe the main reason is because most valuations on residential property are based on a "drive by" or "desk top" inspection where the valuers don't even step inside the front door. Floor plans, the state of the interior, the position of the property on the block, size of bedrooms, usable space in the back yard, privacy, views or outlooks from different rooms etc are all often ignored. All these important factors impact significantly on price often by as much as 20%.

If you don't have the time to do the necessary research and inspections to fully understand the unemotional value then don’t rely on a valuation done by someone that hasn't even been inside the property or the neighbouring ones they are using as a guide in their report. An even worse outcome would be relying on a historical sales report you purchased for $50 to supplement your personal lack of inspections. Instead you’re far better off employing an experienced buyer's agent who can and will assess value for you and even better they will have the skills and experience to negotiate a much better price than your likely to achieve yourself.

For those interested, here is a link to the full article. Billions at stake as land valuation system comes under fire.