Finance
Whether you’re wondering how much your home is worth or you’re about to buy a property, you’ve probably heard about property valuations.
In this article, we’ll explain what a property valuation is, when and why valuations are needed and who does them. We’ll also explore how much valuations cost, how long they take and how they differ from property appraisals.
A property valuation identifies the estimated market value of a property – that is, what it’s likely to sell for in the current property market. This doesn’t mean a property will definitely sell for what it’s valued at – it’s pretty common for properties to sell for above their value, especially in a hot property market.
Property valuations are based on a number of factors including:
There are a few situations in which you might need a property valuation. These include:
When a lender wants your property (or a property you plan to buy) valued for a new loan or a refinance, they will typically organise this process. You may not be charged a distinct valuation fee, but it could be factored into your standard home loan fees or interest rate.
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While valuations are typically a lender requirement for obtaining a home loan, they can still provide helpful information for both buyers and sellers.
If you’re selling your home, having it professionally valued first can help you set a fair asking price. Although properties can often sell for more or less than the asking price, having a formal valuation can give you a solid starting point.
If you’re a buyer, having a property valued before you purchase can help you negotiate a price with a real estate agent, as well as prevent underinsurance, because you know how much the property is worth.
For home buyers, arranging a property valuation on a property you want to buy can help ensure you don’t pay more than what the property is worth. It can also give you an idea of how much a lender will allow you to borrow for the property.
Property valuations are carried out by a qualified and certified property valuer. Property valuers can work independently or for banks and lenders.
If you’re searching for an independent valuer, make sure you check if they're registered as a Certified Practising Valuer (CPV) and see if they’re a member of the Australian Property Institute.
The price you’ll pay for a valuation of a property will vary, but it can range from around $300-$600 for an independent valuation.
If your lender requires a valuation when you purchase a property or refinance your home loan, it’s likely they’ll provide this service for free and factor this cost into your home loan fees or interest rate.
Property valuations can take up to a week in total to complete. It will typically take around a day to complete a full property inspection, then several days after that to complete a full valuation report.
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As we’ve mentioned, lenders will require a property valuation when you want to take out a home loan for a property you’re purchasing, or when you want to refinance your loan.
A property valuation ensures that the property is of equivalent value or greater than the money you’re borrowing. This is because your property will act as security for the loan.
A valuation also might differ slightly from the purchase price of a property, so it can help lenders determine a borrower’s Loan to Value Ratio (LVR).
If you’re on the hunt for a house, or you’re looking at selling, you might have heard of property appraisals.
Property appraisals are different from property valuations. They are completed by real estate agents to find an estimate of a home’s value.
They are typically free and are based on other properties in the area, recent sales data and the property’s features to come up with an estimate.
It’s important to note that unlike property valuations, property appraisals don’t have any legal standing and are just an approximation of a property’s value.
Check out our handy table outlining the differences between an appraisal and a valuation.
Property valuations | Property appraisals |
---|---|
An assessment of a property's value in the current market | An estimate of a property's value in the market |
Conducted by a qualified property valuer | Conducted by a real estate agent |
Can cost $300-$600, but a lender may pay for a valuation on your behalf | Free |
Can have legal standing | No legal standing |
Needed for legal disputes and deceased estates, to secure a loan from a lender, for property settlement, and to calculate equity when refinancing | Typically used by sellers to get an idea of what their home could sell for in the property market |
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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.
Tags: property, refinance, home loan, valuation, valuation fee, bank valuation, appraisal
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