Have you ever wondered what the difference is between market value and bank value? Mortgage Choice broker servicing the NSW Hunter Valley region, Lauren Murphy discusses so that the difference is easily understood.
What is Market Value/ Market Opinion
Market value is simply what a purchaser is willing to pay for a property. Often your local real estate agent will provide you with free appraisal of what value they think they could achieve if you were to sell the property in the current market.
If you are researching your area there are now many useful websites you can access for free to get an idea of what your house may sell for in the current market;
Here are a few you may find useful;
RP Data - www.corelogic.com.au/
On the House - www.onthehouse.com.au/
Domain - www.domain.com.au/
Real Estate .com - www.realestate.com.au/
What is Bank Value?
When you apply for mortgage finance with a lender, be it for a purchase, refinance or other purpose. The bank may decide to employ an independent registered valuer to appraise the property they intend to hold as security. This quite often is a more conservative opinion as the bank's valuer must take into consideration many factors that may pose a risk to the property in question.
Why is there a difference between what a Real Estate Agent tells you and what a bank values your property?
A lender's valuation will rarely be higher than market value (i.e. the price agreed to on the Contract of Sale).
A valuer will in most cases, simply be confirming that what has been agreed on between the seller and the purchaser, is a fair market value. There are of course exceptions to this rule.
There are instances however, where the bank's valuation is lower that what two parties have agreed upon in a contract of sale.
There may be impediments over the property which the valuer feels affects the value of the property.
In these instances lenders will only lend against the property based on the valuation amount not the contract of sale amount.
Refinancing/Home Improvement & Construction
This is area of lending and valuation where borrowers are most commonly confused about the difference in Market Opinion and Lender Valuation.
Quite often I will meet with clients who have received an agent's opinion and are disappointed to find a lenders' valuation is well under what the agent has advised.
It is good to remember at this point that an agent it is looking at your property optimistically and assuming all things considered in your favour and "best case scenario" what they expect to achieve if they sold your property today.
A valuer must consider many other risk factors when determining the value of the property (ie Environment Risk Factors, Local Economic and Market Conditions, Recent Comparative Sales, Risks associated with your property such as easements etc)
As your qualified Mortgage Choice broker I am available to work through this process with you and give you hints and tips so you are prepared for lender's valuations to ensure you achieve the best possible outcome.
Call us today and let us do all the work for you. It is as easy as contacting Lauren Murphy on 0408 480 562 or email at email@example.com. Call in and see us at 2/199 Adelaide Street, Raymond Terrace. We service the entire Hunter Valley – and can meet with you at a time and place that suits you.