RATINGS – PROPERTY PRO
the level of adverse impact each stated aspect has, or (based on
information that is common knowledge and/or readily ascertainable in
the market and reasonably foreseeable events), in the near future,
might have on the property's value and marketability. Each risk
rating is presented in a combined numerical and graphical format
aimed at providing a bold, clear caution indicator to the lender. In
the case of higher level ratings, it also provides an indicator of
the presence of relevant comments in the Additional Comments' section
on the following page .
Ratings under propertypro focus on four property specific aspects and
four market related aspects. Each of these aspects can involve
consideration of a range of elements relative to it. Any other
significant risks identified, which do not come under these aspects,
should also be commented upon in “Additional Comments' .
A HIGHLY TECHNICAL ANALYSIS
not intended that the valuer would conduct a highly technical
analysis. Provided the valuer has adequate experience in the type of
property and the particular market, reliance may be placed on up to
date, broad knowledge of the dynamics of the market in which the
property is situated. Otherwise, a valuer with that experience should
supervise the valuer's work or sufficient research should be carried
out to provide an informed opinion.
OF ADVERSE IMPACT OR RISK
is accepted that each aspect is likely to have some possibility of
adverse impact or risk, however low or nominal. Therefore, low or
nominal adverse impacts or risks are rated as "1" and are
graphically depicted as a short bar.
adverse impacts or high risks are rated as "5" and are
graphically depicted as a long bar. The ratings are approximate only.
It is not intended that ratings be given other than in whole numbers
ratings which are outlined below the bar graphs are:
Low to Medium
Medium to High
Risk Ratings of 4 or 5 or the existence of three or more "3"
Risk Ratings MUST BE EXPLAINED in the "Additional Comments"
section. Ratings of "3' or below may be commented on.
the purpose of these reports, the risk rating reflects:
- the level of adverse impact the stated aspect has upon the
current value and/or marketability of the security property, and/or
- the currently perceived level of
adverse impact the stated aspect could have on the value or
marketability of the security property within the initial 2 3 year
period of the security .
impact in relation to a property can arise from such things as:
- where it is and what it is near or not near
- what it is subject to or does not have the benefit of
- what it does not provide but the market expects
- what defects it has
- what external controls it is subject to its micro and
macro economic environment.
- the dynamics of the local real estate market
- the specific dynamics of its market segment
- the number of possible factors would be extensive, so no
attempt is made to list them all here .
extent of the impact needs to be seen in terms of the local market
and the effects on marketability and value. What may cause a
significant adverse impact in one market may have low impact in
another. The extent of their individual adverse impact can vary
significantly, so no attempt is made in this memorandum to provide a
standard grading for various impacts .
AND FAVOURABLE IMPACTS OFFSET
rating adopted for each of the listed aspects requires a balanced
overview for that aspect. Properties often have many beneficial
features. Adverse impacts need to be weighed against strengths or
favourable impacts under the same aspect.
When considering the aspect 'Location & Neighbourhood', a
significant adverse impact may result from being adjacent a petrol
station. However, across the road is parkland lined with Norfolk
pines and beyond that a surf beach, all of which can be seen from the
subject property. In the local market, the benefits of the latter far
outweigh the adverse impact of the petrol station and the overall
rating adopted is "2" Low to Medium .
ON HIGH INDIVIDUAL ADVERSE IMPACTS
valuer is not required to provide additional comment for overall
ratings below "4". However a comment would be warranted on
a significant adverse impact (that individually would rate "4"
or "5" but is off set by strong beneficial impacts in
the same aspect to produce an overall rating below "4") .
there can be offsets in the overall rating for an aspect heading such
as the above, there may also be cumulative effects from several
adverse impacts. For example, the location may be 10 km from the CBD,
there are no neighbourhood shops nearby and
nearby are generally old and poorly maintained. Individually these
might be rated at "2", but the cumulative effect may
warrant a rating of say "4" for the 'Location &
Neighbourhood' aspect overall .
KNOWLEDGE AND REASONABLY FORESEEABLE EVENTS
basis of any "forward looking" element of a rating is
restricted to information that is currently common knowledge and/or
readily ascertainable in the market and to events that are reasonably
foreseeable. Information which is "privileged" cannot be
reflected in the rating .
OF HIGHER LEVEL RISK RATINGS
level Risk Ratings of 4 or 5 do not necessarily mean that a property
is not suitable security, though they may influence the lenders'
decision on the amount loaned or the LVR
ratings themselves do not reflect the intended level of lending, as
this is a decision for the lender.
VALUE NEXT 2 3 YRS
Risk Rating is an indication of the level of risk of this property
reducing in value over the next 2 3 years. It is a
forward looking summary rating taking into account aspects
affecting, or likely to affect, the value of the property. The
assessment is made on the basis of information that is common
knowledge and/or readily ascertainable in the market and having
regard to reasonably foreseeable events as at the date of the
rating cannot be expected to reflect information that was not common
knowledge, or conditions, events or circumstances that occur
subsequently or unexpectedly.
aspect reflects the risk of the market changing direction rapidly and
having a significant adverse impact on the value of the property.
While this will reflect historical performance, reasonably
foreseeable events should also be taken into account if they are
likely to change the pattern of volatility.
An area has tended to experience moderate "boom bust"
cycles. It may warrant a Risk Rating of 4 if the next "bust"
could happen in the next 2 3 years (which must be explained in
the Comments section). The more severe the likely bust could be and
the sooner it might occur, the higher the risk rating. Prospects of
an imminent, sharp and
bust could be a "5".
aspect reflects the extent to which a significant change in the local
economy is impacting adversely and/or the risk that it may impact
adversely on the value of the property in the 2 3 year time
In a small town, there may be the prospect of a major business or
industry closure or downsizing, though it has not been confirmed or
happened yet. A Risk Rating of 4 may be warranted at this stage
(which must be explained in the Comments section).
and related third parties should note that the global economy impact
on the Australian market generally is not addressed unless it
specifically impacts on the particular local economy. A market with
significant foreign investment could warrant a higher rating and
comment if conditions overseas meant foreign investors were starting
or likely to sell out or withdraw interest in the market.
aspect reflects the extent to which the condition(s) of the market
segment is impacting or may impact adversely on the property.
The market for inner city medium quality residential units may
currently be strong, however a significant over supply is
emerging. A Risk Rating of 4 or even 5 may be appropriate (which must
be explained in the Comments section).