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Risk Assessment
Each residential valuation report contains a risk assessment matrix.
This risk rating assesses the impact of a number of specific factors on the current market value and/or present and future marketability of the property. The purpose is to draw the attention of the client or lender to any apparent factor which might influence market value. These are not technical analyses and are at all times subject to our limitations and disclaimers.
It is important to note that the risk rating and the Current Market Value (“CMV”) contained within our report are mutually exclusive. Whereas the CMV is our opinion as to the most likely selling price of the property on the day of inspection, it takes into account all factors including those addressed in the risk assessment. It is not appropriate to further deduct from the CMV to allow for a negative risk score as these matters have already been taken into account as part of the overall picture.
Any significant adverse condition mentioned within our report is highlighted by way of our risk rating.
Underlying Principles:

  1. Risk ratings address the likely adverse impact that specific conditions may have on the Current Market Value and the short term marketability of a property.
  2. A high risk rating is not intended as advice ‘not to lend’, it simply flags an issue that the client and lender need to consider. For example, if there was a serious structural issue, the lender may wish to place a condition on the loan that this matter needs to be rectified within a specified time period of say, 3-6 months of drawing down the loan.
  3. Risk ratings reflect both the micro aspects relating to the specific property and the macro aspects of the broader property market as it impacts on saleability.

Specific Variables Addressed in our report are:
Market Prices
Whereas a stable (flat) market or strengthening market values are an indicator that market values and/or the marketability of the property should remain consistent within the short term, volatile or declining values introduce a greater degree of uncertainty.
Risk Ratings:

  1. Low Risk
    Stable or flat prices
  2. Low to Medium Risk
    Strengthening prices
  3. Medium Risk
    Volatile prices or market showing early signs of decline
  4. High Risk
    Evidence of declining prices or an “Over heated market”

The quality of the neighbourhood is generally reflected in the market price of any property. It is a truism that when you seek purchase a residential house “first look over the back fence”. The value of your property will always be influenced by the type and condition of surrounding properties. Unique properties are always harder to sell and these may include superior or expensively finished dwellings located in lower value neighbourhoods.
Risk Ratings:

  1. Low Risk
    Sought after Residential areas Prestige locations
    Standard suburban location
  2. Low to Medium Risk
    Less preferred parts of suburban areas but still nearby to facilities and amenities
  3. Medium Risk
    House quality not consistent with the location
    Secondary location (limited facilities or amenities); proximity to inferior housing developments
    Proximity to cemeteries, goals, etc
  4. High Risk
    Not sought after
    Close to non-residential uses including Industrial
    Remote or isolated
    Poor market perception of the area or no amenities

This refers the condition or construction issues relating to main dwelling and any major ancillary building on site. Note: where we score a building as 3 or above we highly recommend a building report notwithstanding whether the Valuer highlights a deferred maintenance issue or not.
Risk Ratings:

  1. Low Risk
    New or recently renovated dwelling of standard design
    Existing property having normal wear and tear consistent with age
  2. Low to Medium Risk
    Existing home or ancillary improvements with minor maintenance issues but not of a critical or immediate nature
  3. Medium Risk
    Repairs and maintenance required
    Houses built of materials and design consistent with ‘Leaky Buildings’
    Dwellings of unusual design or layout
    Home handyman construction less than tradesmanlike standard
    Presence of asbestos Weatherside cladding in good repair
    Asbestos cement cladding
  4. High Risk
    Leaking issues or has been subject to ‘Leaky Building Claim’ Damage by fire or flood
    Boundary line encroachments; buildings without council approvals
    Evidence of structural faults
    Weatherside in poor order
    Houses built between 1990-2004 not leaking but with other risk factors present such as flat roofs, no eaves, internal deck over living areas

Market Segment and Saleability
This reflects the extent to which market conditions within the particular market segment might influence the saleability of the subject property.
Risk ratings:

  1. Low Risk
    Owner occupied property with expected selling period of less than three months
    Standard property with selling period of less than three months
  2. Low to Medium Risk
    Strengthening prices
    Standard property with comparable sales within the last six months and normal expected selling period of up to three months
  3. Medium Risk
    Unique property with longer expected selling period of 6 months
    Limited sales evidence within last six months
    Evidence suggests a possible broad value range
    Property over capitalised for the location
    Leasehold property on perpetually renewable lease
  4. High Risk
    Unique property with expected selling period of 12 months or more
    Sale out of line with local market
    Possibly inflated contract price
    Thinly traded market lacking buyers

Site and Site Development
This refers to both the physical aspects of the land and also to access and services.
Risk Ratings:

  1. Low Risk
    Block is freehold, near level and regular shaped
    Title and plan of subdivision sighted
    No apparent adverse issues; residential zoning
  2. Low to Medium Risk
    No title and plan sighted
    Battle axe/narrow fronted block
    Minor encumbrances, easements or encroachments but little effect on current marketability and/or value (e.g. storm water/sewerage access points), perpetual leases
  3. Medium Risk
    Irregular block shape or moderate sloping land causing increased building costs
    Split level blocks
    Poor vehicular access
    Issues with utility services; moderate encumbrances, easements or encroachments that may adversely affect current marketability and/or value (e.g. power line).
  4. High Risk
    Leasehold title where there is relatively poor security of tenure (e.g. a limited lease period tenancy)
    Major zoning restriction (e.g. current use does not comply with planning, zoning)
    Very steep land and costly to build on, possible geotechnical issues, no or extremely difficult access
    Does not comply with planning, zoning etc (e.g. very little chance a house could be built)
    Cultural heritage issues
    Affected adversely by current or known future authority proposals and/or requirements
    Other extreme risk