Talking valuations is a bit like text speak. Unless you're in the know you probably haven't got a clue what RV, GV, CV, or LV means. Or even that RV means two different things: rating/rateable valuation or registered valuation.
Valuations are important if you're buying or selling, or insuring your house. But they come in different flavours.
The first to get your head around is the GV. That's the government valuation, which can also be called the rating valuation, rateable valuation (RV) or capital value (CV). This is the value of your property according to the local council and is used to set your rates.
It doesn't tell you how much the property is worth on the open market.
What's more, says valuer Rene McLean of Property InDepth, homeowners can object to the council's valuation within a certain timeframe and apply to have it increased or decreased.
They may have done work on the property, think it's worth more now, and want the market to know. Or they may apply to have it downgraded to reduce their rates bill.
If either scenario happens, it puts the value of that property out of sync with neighbouring properties.
Twenty years down the track when the renovation or decoration are old, tired and dated, the property still has a government valuation that could peg it above the value of newly renovated local properties and vice versa for those that the owners had downgraded, says McLean.
GVs are revalued every three years. The next revaluation in Auckland will be in November this year and be based on recent sales.
As Auckland Council points out, the exercise is not to provide property owners with valuations for use in marketing their properties.
Nonetheless, it gives an indication of where the property is pegged in its neighbourhood.
To find out the market value of your property you need to get a valuation from a valuer registered with the Valuers Registration Board and holding a current Annual Practising Certificate.
A registered valuation takes into account the property type, location, land size, zoning, floor area, consented work and so on, and is an assessment of the market value.
It can be useful in setting a sale or purchase price. Banks and other lenders always require a registered valuation before they will lend on a property.
Be careful, says McLean, if you do need a mortgage to check that the valuer has been assigned through Core Logic or Valocity, which makes it bank approved, or you might end up having to pay for a second valuation to satisfy the banks.
That's because a new system called the Valuation Ordering System means that banks require that the valuer is assigned by Core Logic or Valocity. The system is independent and removes a lot of risk involved in the valuation process.
Vendors who don't want to pay for a full valuation can get an eValuer report from QV or iVal from Valocity.
These instant electronic valuations cost between $45 and $50 and use recent sales of similar properties in the area and look at the individual property attributes to model its valuation as at today along with key data including the details of comparable sales.
The results are tested regularly against actual property sales from the past six months to ensure they don't fall outside a standard deviation.
But it isn't going to be as accurate as a valuation from a trained valuer who visits the property in person and evaluates it warts and all. For that you'll pay around $625 including GST for a standard property says McLean. It can be money very well invested if it stops you paying over the odds.
For vendors, a registered valuation obtained and paid for by yourself or an evaluation is a bit of an insurance policy against being taken to the cleaners by less reputable buyers.
Several such cases have hit the news pages of the Herald where vulnerable vendors were offered much less than their properties were worth.
The other main type of valuation, says McLean, is an insurance valuation. This is a valuation that shows the cost of rebuilding your house should it be destroyed.
The cost of rebuilding can be very different to a GV or RV. For example, a property where the "improvements" involve a leaky home may not be worth much more than land value (LV). If the house was destroyed by fire, for example, it could cost a couple of hundred thousand dollars to rebuild.
Some people rely on online calculators provided by insurance companies for their insurance valuation. These calculators are not as reliable as an insurance replacement valuation by a quantity surveyor (QS).
If you have to fight your insurance company over the cost of rebuilding, the valuation from a quantity surveyor will have more weight than one from a former real estate agent or builder or an online estimate.