Property valuation, inspection important before you move in

Buying a house is a daunting task and sometimes prospective buyers avoid to hire professionals to conduct property inspections in order to cut costs.  

Sowetan Consumer spoke to three property experts who emphasised the importance of property valuations and inspections before one can commit themselves to buying property, which is a long-term financial liability.

What is property valuation and how does it differ from an inspection?

Angela Glover, head of product at FNB Home and Structured Lending, said valuations are conducted by professional valuers registered with the SA Council of Property Valuers Profession, who act on instruction from the bank.

Inspections are done by professionals such as engineers registered with the Engineering Council of SA.

“Valuers will often inspect a property before a bond can be registered to assess property value related risk. Valuers are not expected to confirm structural integrity of properties as they do not have expertise to do so but merely to comment on what they visually see at the time of inspection, so the bank can make an informed decision before a bond can be registered,” said Glover, adding that banks absorb the expenses for valuations.

“This can also be performed using information such as aerial photography and historical valuation and market trends for a property or area, which means it’s based on the sale prices of similar properties in the area.”

She said a buyer would typically pay for property inspection costs because they are doing due diligence on their side before a bond can be registered. “Property inspectors normally assess the structural integrity of the house such as roof, damp, cracks, etcetera,” she said.

The buyer incurs costs for this services and, sometimes, these costs would put off the buyer, leading to them not having their house inspected.

“The price paid for the property could be too high and the investment made when purchasing the property could possibly even exceed the future value of the property – in other words, the buyer runs the risk of not earning a return on their investment.

“The owner could also face high maintenance and remedial costs should they have been ignorant of serious defects at the time of their purchase,” said Nondumiso Ncapai, managing executive at Absa Home Loans. 

Glover warned buyers not to be intimidated by the amount of work needed when purchasing a house. 

“The amount of paperwork and administration involved in a big transaction like buying a house can be overwhelming, but we strongly encourage you to read the fine print on any agreement. This includes your agreements with the bank and your insurance providers, as well as any other service providers you may retain,” said Glover.

Property valuations impact the cost of municipal rates and taxes, which means once the new owner has settled into their new pad, they’d have to face a new reality of paying for these rates which are determined by property valuations done by government every three to four years. 

Property price valuations by municipalities tend to be a topic of controversy with homeowners accusing municipalities of overvaluing their homes despite lack of service delivery in their neighbourhoods. 

This controversy played out last year in Joburg when the city released its 2023 General Valuation Roll of the city’s 934,652 private residences with a total value of R1.5-trillion, a property-based increase of 12% since 2018. The roll received 40,000 objections, which is 6% of homeowners whose properties were assessed. 

Toni Anderson, head of home services at Standard Bank, explained that banks are expected to comply with banking laws and regulations which set out the requirements of valuations.

“These requirements may differ from the government requirements, potentially creating discrepancies in valuations,” she said. “Aggrieved property owners should follow the well-defined appeal process and the appeal should be based on evidence of similar properties [comparable valuation method] and not based on the amount of tax that is raised.

“Please ensure that you are aware of the valuation roll update dates because there is a limited window during this time in which appeals can be lodged,” said Anderson.