appropriate valuation standard consists of 5 elements:
- prepare and
edit draft report
- print and
- audit assignment
- deliver report
- respond to
queries on report.
competency standard is covered by considering in detail the
preparation of, and rationale behind the most popular standard
form valuation report; PropertyPro.
PropertyPro has been designed and developed by
the Australian Property Institute (API) for residential mortgage
valuations and is a good example of how a report should be
constructed and the basic parts of valuation report. The form has
flexibility to allow its use for almost all residential valuations.
guidance notes cover extremely well and in detail the preparation and
deliverance of the report to a residential mortgagee. The form and
guidance are reproduced with the kind permission of the API. Note
that the PropertyPro form is copyright.
sample of PropertyPro.
VALUATION AND SECURITY ASSESSMENT PRO FORMA
guidance notes are for the guidance of mortgage clients and related
third parties who rely on such reports, to acquaint them with:
instructions to the Valuer and what information should be provided.
- the information
the Valuer should provide in the report
- the matters the
Valuer may provide restricted comment on
- what the valuer
should do in the event of a departure from any provision.
- matters the
Valuer understands will be checked by the lender and/or its solicitor
(and which may subsequently be referred back to the Valuer for comment).
- the information
and documentation the Valuer could be expected to hold on file.
using this report format certify that the report is made in
accordance with the guidance notes and advise that the report must be
interpreted with it. It should be noted that the format is
specifically designed for the purpose of providing a brief report on
residential property for mortgage purposes only and is not designed
for use for other purposes.
Institute recommends that lenders only request Valuers to provide
more comprehensive reports:
- where the
property has significant potential for redevelopment or where a major
redevelopment project is proposed, or
- if special
circumstances warrant, such as potential for an alternative non
Institute encourages residential mortgage lenders and related third
parties to require Valuers to use the this format. The Institute also
asks its Valuer members to provide the format to residential mortgage
clients who do not specify a particular report format and to
encourage its use in the interests of consistency and quality.
instructions to valuer
WHICH SHOULD BE PROVIDED IN THE REPORT
designed to facilitate easy reading has most of the key information,
the risk analysis, valuation and assessments (and their
certification) on the first page, while supporting information, data
and comments follow. While this is primarily to facilitate easy
checking by the lender and/or trustee and mortgage insurer, it is
recommended that the whole report be read.
risk analysis on the front page with its graphic presentation
particularly serves to draw immediate attention to any risks rated
'Medium to High' or 'High', and to appropriate comments later in the
is particularly intended that the report will contain not just a
current and Market Related value assessment, but also sufficient and
appropriate information to advise the lender and/or trustee and/or
any authorised mortgage insurer of property specific and market
related risks associated with mortgage lending on the property. This
does not merely provide "point in time" information but
also forward looking advice to the client on the
of initial exposure.
the report is a pro forma report, it should present its information
in concise brief pertinent facts, points and statements rather than
detailed statements. Do not include that which is not significant to
the client and the purpose of the valuation. However, inherent and
external features that impact significantly on the property should be
report should not contain generic statements that add little real
worth to the individual report. The format has been designed to suit
a majority of situations. Where required, the "Comments"
section can be expanded to cover less common properties and "one
off” situations. While the first page is fixed in length, some
fields on the second page have the capacity to expand and create an
extra page (or more) if needed.
IN THE REPORT
to be provided in the report under each main section's
is outlined briefly below in those instances where some clarification
may be warranted. There are minor form variants for strata and
proposed dwellings/extensions/renovations, and for properties subject
to long term lease. Some label variations are available to suit
particular situations, eg 'built about'/'year built', while others
only appear if relevant, eg 'actual rent'. A 'vacant land' variation
deletes a number of headings.
lending organisation's name. Where parties other than the lender (eg
lender's mortgage insurers and securitisers) are required to be noted
on the report, these will be inserted at the end of the document.
field labels relevant to those used by the lender.
Address, including state/territory and Postcode.
Description of parcel(s) of land.
extent and location of encumbrances or restrictions.
using convention of frontage/rear then one side/other when the
dimensions are irregular.
of zoning and name of zoning scheme/plan (LEP).
Government Area name where applicable.
type classification eg Dwelling, Residential Unit, Duplex, Vacant
sleepouts or a study if it can be used as a bedroom but at the
discretion of the valuer.
alert the lender to situations where main building is not used for
its designed purpose.
is used more often as the exact year built is often not readily
ascertainable. An alternative label "year built" is
available for selection in instances where the exact year is known.
“Circa” is a useful term for historical buildings.
to alert the lender to the possible need for an updated survey if
addition(s) made since most recent survey available to lender or its
in instances where rent is being paid and is readily ascertainable.
'Until' indicates the expiry date of the current term on the
tenancy/lease. These are inserted in the report only when applicable.
Where a lease is for a term exceeding six months, this detail should
be included. The market value assessed should reflect this lease and
the valuer should also provide a separate Vacant Possession Basis
to one decimal place. Practical use of most measuring systems will
not produce results reflecting any greater accuracy. In many
instances the nearest whole number will be realistic. Outdoor areas
include areas of open verandahs, patios, pergolas, porches, etc.
Their individual areas are aggregated for the purpose of these
any heritage issues, either adverse or beneficial affect the
property? Requires a 'Yes' or 'No' response. If 'Yes', further
comment required over page.
significant items only, which if not attended to, could cause
significant deterioration and loss in value or could have a
significant adverse effect on marketability.
the total cost is significant, say more than $5,000, the lender will
need tc be informed as it could affect the borrower's cashfiow and
ability to meet repayments. (A more detailed list may be included in
the 'Additional Comments' section if necessary).
report is not intended as a structural or building survey report
though the Valuer may report on observed defects or other matters of
concern. 'Indicative Cost Estimate' is a guide or allowance only
pending a qualified builder's or trades person's quote.
'Existing Property' value reflects the current condition. Where there
is an 'Indicative Cost Estimate' shown for Essential Repairs, a
'Value after Repairs' can be provided immediately below the current
(To Be Erected)
will show and applies only where a building project is involved, ie a
new building. A separate heading is available for an extension or
substantial renovation. The valuation provided in each instance will
be on the basis of 'As if Complete'. In each case builder's name and
tender details should be shown.
is the Valuer's estimate of the cost of the project under contract
builder conditions. The purpose is primarily to identify if the
tender is in line with market costs and if any significant items have
not been included. It is not expected that a detailed costing will be
conducted. An overall rate per square metre check weighted for
variable factors will often be adequate for the purpose. Incentives
should be excluded. If the Check Cost is significantly different to
the tender, the possible reasons and risks should be explained in
Valuer should indicate what information has been supplied including
an indication as to whether the plans and specifications sighted have
been "Council” or relevant authority “approved".
valuation and assessments summary
might be noticed that no provision for a security recommendation is
included in the report. The decision as to the suitability of the
security is a commercial decision for the lender. That decision may
not only be based on the content of the report but may also extend to
factors beyond the property itself.
is not normally appropriate for the Valuer to recommend a loan
to valuation ratio (LVR) or percentage to advance.
However, if a lender specifically requires either a security
recommendation or an LVR, it could be included in the additional
DOCUMENTS TO SIGHT
recommendation should only include those certificates and documents
considered essential for the particular property to ensure the value
ascribed to it is confirmed. There should not be an "automatic"
list; only after individual consideration should they be included.
documents (whether nominated by the valuer or not), may reveal
matters not disclosed in the valuer's report. If they might impact on
the value, marketability or risk analysis, they
should be referred back to the valuer for further consideration,
comment and confirmation or otherwise of the valuation.
the report may identify or comment on various aspects to alert the
reader to various issues, it does not substitute for recommended
reports by appropriate experts, specialists or authorities.
certification relates to personal inspection of the property by the
signing valuer, carrying out of the assessments, and disclosure of
conflict of interest and financial interests.
OF VAL UA TION
certification also notes that the date of inspection Is also the date
report includes a standard restriction as to user and purpose. If the
report is passed to other parties, it may not be used or relied upon
by them or used for any purpose. It further notes that the report is
not a structural survey report.
Valuer will be the person who inspects the subject property and makes
the assessments. That person must be appropriately qualified and
experienced in accordance with the current requirements of the
Institute or any higher level requirements of the lender. It is not
acceptable for a valuer who has not personally inspected the property
and carried out the necessary research, enquiry and assessments, to
sign as 'valuer'. (However, a valuer who has not carried out these
tasks may authorise a report for issue see below.)
FOR ISSUE BY
is included to address instances where a director of the valuation
firm is required by the client to also sign the report. A person
signing in this capacity is merely authenticating the report as from
that firm. It should not be construed as endorsing or consigning the
would be inappropriate unless the cosignatory had, at the date of
valuation, also inspected the property and been actively involved in
the research and assessments. As a safeguard, the person authorising
may choose not to include professional qualifications so as to avoid
giving the false impression of being a cosignatory to the valuation.
Firm ID is a unique, pre set, identifier in each copy of the
Propertypro software. The Firm ID number system
could be adopted by the lender as the identifier for that firm. If
adopted widely it would have benefits for firms in being able to
quote a consistent number for each lender.
is also made for a client allocated valuer (or firm) number to cover
instances where the client does not wish to use the preset identifier
and supplies a different number.
land - propro
building - propro
(PRIME COST) ITEMS
list of the Prime Cost Items preferably starting with those in the
kitchen, then laundry, bathroom(s), toilet and others servicing the
whole building such as hot water service, air conditioning and ducted
is not meant to cover all items that might be included in a
specification as 'Provisional Cost' items eg wall and floor tiles,
door furniture, etc. These can, if unusual or particularly expensive,
be included in Fixtures and Features.
list of built in items (such as cupboards and robes) and main feature
finishes (such as non wet area tiled floors and wood panelling).
sales evidence & market - propro
Risk Ratings of '4", or "5" or the existence of three
or more '3' Risk Ratings from Section 2 'RISK ANALYSIS' MUST be
explained here. Additional comments can be made about the content of
other sections of the report but it should be comment that enhances
or elaborates on what has already been provided and not merely
repeats what has already been stated. This section can be expanded on
to another page if necessary. It can also be used to explain any
unusual aspects that the format does not specifically address.
is the Valuer's responsibility to ensure that the client is
adequately informed. A balanced view of the property and market
should be presented. Adverse aspects should not be overemphasised nor
should favourable features be exaggerated.
can be in either narrative or dot point form.
section appears only if selected. It provides brief comment on issues
specifically required by some mortgage securitisers and conveniently
groups them under one heading even though some will have been
addressed elsewhere in the report. Where any of the statements are
adverse, they should be further commented on in section 8 additional
on these issues are based on observations on site and where
necessary, appropriate verbal enquiries without the benefit of
searches, surveys, etc. The valuer reserves the right to review the
valuation and the report if the lender's searches and enquiries
reveal contrary conditions or any matters not addressed therein.
section appears only if it contains information. If the instructing
Organisation/Lender requires the report to nominate additional
parties who may rely on the report, they can be stated in this
CLARIFICATION AMENDED REPORT
parties entitled to rely on a report are unclear on any aspect of its
content, or consider that inadequate information has been provided,
the valuer should be contacted before acting on the report. If
additional information is supplied to clarify or enhance the report,
an amended report should be issued with a note that the original
report is withdrawn and should be returned to the valuer. There
should be no additional fee unless the valuer was incorrectly
instructed in the first instance.
report should be accompanied by a coloured photograph of the front
(or other appropriate) elevation of the property unless the Client
directs that one is not required (in which case a photo should be
taken and retained on file or electronically stored).
significant adverse features are apparent it may be appropriate to
provide additional photos showing relevant detail. These may include
features nearby which impact on the property.
restricted comment – valuation report
TO BE CHECKED BY LENDER AND/OR ITS SOLICITOR
BACK TO VALUER
of the information provided in the report may be obtained by
expedient means or from sources with no evidentiary value, rather
than applying, paying and awaiting receipt of appropriate official
documentation such as a solicitor would request in carrying out a
conveyance or creating a mortgage.
is not only to expedite the Valuer's process, but also to reduce
duplication and save extra expense. Sometimes a report will provide
information, which documentation or certificates subsequently
obtained by the lender or its solicitor reveal to be either incorrect
or incomplete or not commented upon at all in the report. When any of
these occurrences is discovered by subsequent checking, it would be
appropriate to refer the matter back to the Valuer for further
comment and advice as to how it affects the valuation and security
OR SOLICITOR TO CHECK
reported in the Valuation and Security Assessment Report which the
Valuer assumes the lender and/or its solicitor will confirm or
ascertain by checking appropriate documentation or certificates
details including restrictions and
- zoning or
arising from the numerous searches a solicitor may conduct including,
where relevant, searches of body corporate records and amounts held in
arising from any certificates or documents that the report specifically
recommends are obtained.
information held on file
further notes - propro
valuation report 2
report should only answer the client's instructions and the valuer
should not volunteer any extra information unless it can be implied
from the instructions. It should not include other opinion, data, or
values not pertinent to the subject valuation. The report should
include ALL correspondence that has been entered into concerning the
valuation, as this will protect the valuer if a dispute arises over
the type of valuation provided.
instructions become the objectives of the report. It is a good idea
to dissect the instructions into parts, with appropriate headings and
use those headings in the report. In this way the valuer knows that
the report fully covers and meets all of the objectives of the
FOR NON VALUATION INFORMATION
the valuer is asked to provide an investment or land use report
he/she is determining whether or not the existing or proposed use is
the highest and best use. This will require the consideration of a
number of land use options. The first is the "as is" land
use which becomes the "datum" or "benchmark" use.
Other possible land uses are considered against the market value of
the benchmark use.
problems arise when the valuer is asked for information outside the
gambit of market valuation such as whether or not the particular land
use has long term viability.
valuer should be cautious about pontificating about a land use which
he/she does not have expert knowledge. It is better to refer the
client to published trade forecasts or some article written by an
expert in that field. The problem with such forecasts is that the
long term viability of a particular land use is usually a function of
the expected growth of Australia's economy. That is, the client is
asking the valuer to predict Australia's Gross Domestic Product or
preferably, State Domestic Product in the long run. However, the
valuer does not have the expertise to do this.
is better for the valuer not to provide such unnecessary information.
This can be done by explaining to the client that the value arrived
at is "market value" which incorporates (through the
capitalization rate) the market's assessment of the long run
viability of the land use. The market's opinion is far more important
than that of the valuer as it will largely, determine the expected
resale value of the subject property and this is usually, the
client's main concern.