With all the different valuations: market valuation, appraised valuation, replacement valuation, insurance valuation, municipal valuation and index valuation involved in property it is easy to get confused. So I am going to quickly layout what each one means and why it may or may not be important to you.
Market Valuation:
Is simply the predicted value of what your home would sell for if it was placed on the market today. It is really important to calculate this not just on the automated data available but by using multiple databases to examine all the market related factors that can influence the value of your home.
Appraised valuation:
Is the value placed on your property by a sworn valuator after conducting and inspection most likely before a bank will issue finance for a bond.
Replacement valuation:
What it would cost to buy the land and build your home in the present building conditions.
Insurance valuation:
This number will exclude the cost of your land but will include not just what it would cost to rebuild your home but also costs like demolition and removal of all the debris that may remain if your home was destroyed by a fire or other disaster. This like the replacement value above are not good indicators of market value. Most older properties will sell for less than their insured or replacement values. It is also extremely important to ensure that this number is as up to date as possible to prevent any conflict in the case of a claim
Municipal valuation:
Is the value attached to your property for the calculation of municipal rates and taxes. It often has no real inference to the actual market value of a property, but a low one can be extremely beneficial as it can result in significant savings on the rates bill attached to the property.
Indexed valuation:
Is calculated by taking your properties last sales price – what you paid for it and then calculating its predicted increase in value by adjusting for the property price increases due to inflation. This can then be compared to a current market valuation to see whether or not your property has performed well as an investment.
