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Property valuation vs appraisal

Are you in the process of selling your home? Perhaps you are looking to buy a property?


Are you in the process of selling your home? Perhaps you are looking to buy a property?

Whatever your situation, it's likely you have heard jargon like ‘property valuations' and ‘property appraisals' bandied around. And if you haven't been through the buy/sell process before, you may be wondering what these terms mean.

It's important to note that property valuations are different from property appraisals.

In this article, we will explain what these two terms mean and how they will affect you in your home buying journey.

Property Valuations:

A property valuation in its truest form is the price a valuer appointed by a lender says the property is worth.

After you have found a property you like, and before settlement, your chosen lender will arrange for a formal property valuation to be completed.

A lender will either complete this process automatically (via a desktop valuation) or send out a qualified valuer to complete a detailed valaution of the property.

An automated valuation is a great way to quickly gauge a property's estimated market price. If you need a more accurate estimate of a property's value, a qualified valuer will visit your property and take note of the following:

  • The size the property;
  • The number and type of rooms;
  • The location;
  • Any recent sales that have happened in the area; 
  • The fitout of the property and whether or not it needs improvements; 
  • The quality of the building.

By taking these elements into consideration, the valuer will then present a qualified assessment of the property price.

The lender will then use this valuation to help determine how much it is willing to lend to you. If the valuation from the qualified valuer comes back short, you can either engage another lender (and hence another valuer) to see if you get a higher valuation, or you can try and fund the shortfall through your savings.

Property Appraisals:

A property appraisal differs slightly from a property valuation. In the first instance, a property appraisal is typically completed by a real estate agent who looks at how much the property you are trying to sell would be likely to achieve in the current market.

Property appraisals take into consideration market trends and other recent sales that have occurred in the same or neighbouring areas.

A property valuation on the other hand, takes into account a home's value over the longer term as well as current trends. This is because as part of a secured home loan, the property itself is used to secure the loan. This means that should something go wrong with your repayments, the lender can sell the property in order to recoup the outstanding debt.

Because your lender will never wish to be left out of pocket if unforeseen circumstances arise (you lose your job, fall ill etc and cannot repay your mortgage), its valuation is likely to be more conservative than any market appraisal a real estate agent may give.

As you can see, there are some fundamental differences between a property valuation and a property appraisal.

If you don't want to be caught short, it is imperative you do your research and speak to a qualified mortgage broker.

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Posted in: Property market

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