19 Apr 2013
This is according to Lew Geffen, chairman of Sotheby’s International Realty in SA, who says incorrect property valuations can have far-reaching financial consequences for homeowners.
He says for a start, when a property valuation is wrong, the rates that the city or town council charges based on that valuation will also be wrong, and that usually means you will have to pay more than you should every single month for at least the next four years, or until you sell the property. And although all councils need rates to provide services, that is unfair by any measure.
Secondly, Geffen says, homeowners with plans to sell need to know that an incorrect valuation could cost them a sale. “These days, most potential buyers want to know what municipal rate charges are applicable to the properties they view, and are easily put off if these are too high.”
Unfortunately, he says, many property owners around the country don’t appear to be aware yet that they could soon be in for a hefty rates increase. National legislation provides for local authorities to prepare a new General Valuation Roll (GVR) of the properties in their areas every four years, and this is what most cities and towns have been doing since about the middle of last year, says Geffen.
However, he says, the property rates increases that will be based on the new valuations contained in these GVRs will, in most cases, not come into effect until July – by which time it will be way too late for property owners to object to the new valuations.
“So ratepayers need to urgently establish what the new valuation placed on their property is, and then, if they believe this is incorrect, take whatever steps are necessary in their municipality to lodge an official objection.”
An incorrect valuation, he notes, is one that is not market-related. He says the valuations contained in the GVRs are supposed to reflect the market value of properties – that is, what a willing buyer would probably have been prepared to pay - as of 1 July 2012, but in many cases do not appear to be at all realistic or based on actual sale prices recorded at the Deeds Office.
Geffen says property values in certain areas actually declined in the four years between July 2008 and July 2012, so the valuations of properties in those areas for rating purposes should actually be lower than in the previous GVR. And in most other areas, market conditions experienced since the 2008 recession suggest that valuations should in fact have moved a little.
“And yet we have come across many instances, especially in upmarket areas, where valuations have been increased, apparently quite arbitrarily, by huge percentages. There are also many examples of increases being inconsistently calculated within the same area.”
There are many possible reasons for these errors, Geffen says, but none of them really matter at the moment for those who believe their properties have been wrongly valued.
“The most important thing for those homeowners to do right now is to contact an experienced, qualified estate agent or valuer and obtain an independent, market-related evaluation to compare with the new municipal valuation, and to use it to substantiate their official objection if the municipal valuation is too high.”
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