Both buyers and sellers need property valuations and homeowners can also find them very helpful.

But what are property valuations and why are they important?

Read on to find out more.

What are property valuations and why are they important?

Property valuations enable buyers, sellers, and owners to discover the financial value of their homes in the current marketplace.

Sellers will therefore know what they should expect their home to sell for while buyers will know whether the house is correctly priced, and also, what the lender believes it is worth (more on this point a little later).

Homeowners should organise property valuations too - especially if their location's nearby infrastructure and amenities have improved or if they've just renovated their house.

A property valuation will help owners understand how their home's value has changed since they first bought it and give them a good idea of their equity point.

Lender valuations vs market valuations

This is an important, but often confused or forgotten, point amidst property valuation possibilities.

But it's important to know the difference between the two types of valuations as you can end up with two contradictory value figures for your property.

Put simply, lender valuations and buyers go hand-in-hand while market valuations and sellers are BFFs.

Lender valuations

When buyers apply for a home loan, lenders will undertake a valuation of the buyer's potential new property.

Why?

If a buyer's financial security collapses, lenders need to know they can recoup the cost of such debts by selling your property - for the amount that it's worth.

Ideally, a lender's property valuation should equal - or be very close to - a buyer's property purchase price.

But bear in mind: a lender valuation will be conservative and veer towards the lower end of the property's purchase price.

As well, lenders will assess their risk based on loan-to-value ratios (LVR) and this figure should be 80% or under.

If it's not, buyers will need to up their game on finding extra funds or take out Lender’s Mortgage Insurance (LMI).

Market valuations

A market valuation, also known as an appraisal, is organised by a sales agent, keen to sell a property; however, they may also undergo market valuations for buyers too.

Either way, market valuations will reflect the current market value of a home, as compared with recent property sales in your area. 

Market valuations tend to be higher than those of a lender valuation as sellers want the best price possible for their home while still at a price that buyers are willing to pay.

NB: Market valuations have no legal standing and should only be considered a general guide to the price of a home.

What is a desktop valuation?

As the name suggests, desktop valuations are organised from a valuer's desk, as opposed to the valuer physically viewing and inspecting a property.

Also known as electronic valuations or automated valuation models (AVMs), these valuations are fairly common, particularly amidst and beyond the COVID years.

These valuations can often indicate the lender isn't worried about the property's value with newer homes and homes that have recently sold often undergoing a desktop valuation.

Borrowers with smaller home loan applications may also find their potential new home will receive a desktop valuation, as will those aiming to buy a property that's difficult to reach.

So, don't be worried if your lender decides on a desktop valuation especially as they are still very thorough.

The valuer will inspect comparable sales data publicly available online, as well as data from surveyors, Land Titles and Registry offices, and similar details about the property and its location.

What do valuers look for when valuing a property?

Lenders will most often engage independent valuers to ensure they receive an unbiased estimate for your home loan application.

Either way, property valuers will consider the following in a property:

• its quality, age, size, and structure, including faults, repairs, and upgrades
• the land site's size, aspect, topography, and layout
• its location, including surrounding amenities, planning restrictions, government zoning, and environmental factors
• market changes including recent sales in the area, particularly for comparable properties

In comparison, a market valuation or appraisal will generally only be based on current, or short-term, issues with the property and its location, and recent or current market trends. 

Sales agents will also utilise their own experience of similar properties in nearby areas.

How much do valuations cost?

Often, nothing at all.

Several lenders, including at least one of the Big 4 Banks, don't charge anything for their valuations.

However, larger home loans may incur a valuation fee so buyers should check this point with their lender before signing on the bottom line.

Real estate agents too generally don't charge for their valuations, or appraisals, largely due to their hope that sellers will engage their services.

But again, it's important to check this point with them.

We're here to help

We're always happy to help with all the dramas and stressors of house buying and selling.

And if you're particularly tired of house-hunting, we've even partnered with buyer advocates who can check out homes for you and organise sales assessments and negotiations.

Our off-market and pre-market marketplace gives you VIP access to properties so you can get in first.

Just sign up at Listing Loop or download our app.