Introduction
The authors have been flooded with queries from concerned citizens asking “what kind of valuation report must I attach to my valuation objection?”. This note attempts to address this issue within the context of the law relating to municipal valuations in South Africa.
What should the municipal valuation be?
It should be ‘market value’ – which is ordinarily the value that you could sell your property for on the open market between an unrelated buyer and seller. There are, however, a number of accepted valuation methods that can be utilized to arrive at what market value is (for example, comparative sales method, cost depreciation method, and the income yield method).
Different types of valuations
There is no law that says that a valuation must be done by a professional, but usually when they are done by people with qualifications in the field of valuation and relevant experience they tend to be much more accurate than when done by lay persons.
- Sworn or professional valuation – this is done by a person with an appropriate academic qualification who is registered as a sworn valuer with the appropriate body, and who uses one or more of a number of acceptable valuation approaches and applies certain scientific calculations to data relating to your property to arrive at a valuation of it. Sworn valuers usually
charge per valuation and commercial properties tend to cost more than residential properties. The “average” charge appears to be around
R 5,500 per residential property (although this will vary from one area to the next and from one valuer to the next). This valuation normally (but does not always) involves a physical inspection of the property.
- Estate agent’s valuations – this is done by a registered estate agent, who uses his or her experience in property sales in the area concerned to estimate how much the property would sell for. The estate agent may or may not use data collected from recent sales in the area to support their valuation. Most estate agents do not charge for their valuations. This valuation often (but does not always) involve a physical inspection of the property.
- Automated valuations – these are done by computer systems without human interaction. They usually pull information from various sources and apply the comparative sales method to arrive at a property value. This method does not involve any physical inspection of the property and is in many cases based on an “area average” – an average price per square meter for property of a similar nature in the same area. The is usually a charge for these types of valuations but the charge can vary from a few rand to a few hundred rand, depending on who the supplier of the automated valuation is.
Which type of valuation is best?
This is very difficult to answer. There are a number of factors that each and every property owner must weigh up when making this decision for themselves.
- The cost – the cost of each type of valuation varies. Some property owners won’t be able to afford to pay a sworn valuer for a valuation, whilst commercial property owners might be able to afford this service more readily.
- The benefit – the more your municipal valuation is inflated, the greater your reduction in your property rates will be at the end of the objection/appeal process. A property owner should do a calculation to work out how much money he or she or it would save, if its objection/appeal is upheld and the property valuation is decreased, and compare this to the cost of getting a valuation that comes with a charge. Of course, sometimes property owners won’t know what they expect their property valuation to be reduced to and so will have difficulty doing this calculation, but in most instances property owners are able to come up with a figure that sits comfortably with them that they can use for this calculation.
- The time it takes – a sworn valuation can take days to weeks, and can require a lot of documentation to exchange hands. It is therefore advisable to arrange these in advance if you can, because sometimes when the deadline for a general roll looms and many sworn valuations are under pressure to assist all of their clients, it can be difficult to find someone available on short notice. An automated valuation is instantaneous. An estate agent’s valuation can also take days to weeks (depending on the availability of that agent). The same comments apply here as in relation to sworn valuations.
- The physical inspection – valuations can be inaccurate if they did not take place after a physical inspection of the property occurred. This is because there might be special or unique features of the property that should be taken into account, which are overlooked, if no physical inspection is carried out.
- The expertise – an expert will know how the different kinds of valuation methods work and which would be most appropriate for your property. They will know what information to use and how to do the complex calculations. These are things that lay persons might (but also might not) get right. Sworn valuations are thus more likely to be more accurate than automated or even estate agent’s valuations.
- The ‘human’ element – a valuer or estate agent might be persuaded to make the valuation on the low side, but a computer cannot be persuaded to do this.
Warning – any type of valuation could be 100% accurate
All things considered, an automated valuation may turn out to be just as accurate as a sworn valuation. Conversely, a sworn valuation could be less accurate than an automated valuation or an estate agent’s valuation.
Best or most evidence rule
By and large, the best way to approach this problem is to acquire as much evidence as to what your market value is as is possible, evaluate it and then decide at what value to object, attaching your evidence. Each property owner will have to make his or her own evaluation of what type of evidence to acquire, and utilize, in each case, because every property objection must be evaluated on its own facts.
Written by Anja van Wijk, Maike Gohl and Chantelle Gladwin-Wood
