Dave hosts this episode and opens by suggesting that appraising property requires a delicate balance of art and science.

Appraising a property: How do we discount or add on a premium when something noteworthy is impacting the property positively or negatively?

How do we apportion a premium or a discount when a feature is a stand out or a significant detractor? And how do we know how much to apply to the premium or discount? Dave quizzes both Mike and Cate how they tackle this very question.

Dave delves into positive attributes first.

• Notable designers or architects, and Cate shares a reference to Eltham’s Alistair Knox
• New works/extension/renovation

Mike shares the different methods of valuing, from recent comparable sales analyses to the summation method. Cate discusses the importance of comparing apples with apples when it comes to attributes, such as isolating specific zones when selecting recent sales.

• Quiet court
• Train station within 200-500m
• Attractive zoning (ie. growth zone vs standard, residential zoning)
• North facing rear
• Great views
• Ultra wide block (from a development point of view)
• Ideal floorplan (let’s use cottages as an example)
• Heritage signfiicance

Dave then moves to the detractors.

• Properties in serious need of repair
• South facing rear
• Challenging zoning

Dave sheds light on some of the lending challenges that buyers will face with some of these negative attributes, in particular, challenging planning zones and tight internal floor areas.

• Main roads
• High voltage power lines
• Train lines
• Ugly surrounds (ie. industrial buildings)
• Tough overlays (ie flood, bushfire)
• Bank lending policy issues, ie. floor area
• Significant strata fees or high special levies
• Brick cracking
• Obvious problematic neighbours
• Flight paths
• Development sites next door/over the back fence that could threaten privacy and natural light
• Restrictive covenants
• Houses with sordid histories
• Compulsory acquisition possibility
• Easements in awkward spots

How do the Trio suggest buyers can apply a discount or a premium when a property is impacted by any of these? 

Should buyers a rule of thumb percentage value-change for any of these?

Cate’s answer may surprise our listeners… tune in to find out.

Mike discusses the difference between Quantity Surveyor due diligence and Buyers Agent due diligence, but he does need to take into account some attributes such as poor quality soil, flood or fire overlays, and restrictive covenants when generating reports.

And lastly, Cate shares how buyers tend to approach compromised properties and the risks of selecting bad quality off-markets. Not forgetting Pete’s famous analogy, Cate cites his bad bag of apples quote.

And our gold nuggets……

Mike Mortlock’s gold nugget: Mike is struck by the exhaustive list that Cate shared in this episode and he implores buyers to catalogue the list each time they check out a property.

Cate Bakos’s gold nugget: “When you buy a bargain, you sell a bargain.”

Resources:

If you enjoyed this episode, you may also enjoy these:

7 – How to select and assess property like an A-grade Buyers Agent

8 – Interpreting data to uncover an outstanding property and location, and how to sort the gold from the lies, damn lies and statistics

102 – How to determine property market values by using comparable sales analysis

125 – Does size matter?