Property valuation vs appraisal

August 17, 2017
Mimi Sananikone

Property valuation vs appraisal

Are you looking at purchasing a property? Perhaps you are wanting to sell your property?

Whatever your situation, you may have heard terms like ‘property valuations’ and ‘property appraisals’ used often. If you have not been through the buy/sell process before, you may be wondering what these terms mean.

So what are the differences? We will explain what these two terms mean and how they will affect you in your home buying journey.

Property Valuations:

A property valuation is the price a valuer appointed by a lender says the property is worth.

Your chosen lender will organise a formal property valuation to be completed. This will be organised after you have found a property you are happy with and before settlement.

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

A quick way to find out a property’s estimated market price can be easily completed via an automated valuation. If you require a more detailed estimate of a property’s value, a qualified valuer can take a look at your property and note the following:

  • The size the property;
  • The location;
  • Any recent sales that have happened in the area; 
  • The number and type of rooms;
  • The fit out of the property and if it needs improvements; 
  • The quality of the building.

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

The lender will then use this valuation to help establish how much it is willing to lend you. If the valuation from the qualified valuer comes back short, you can either engage another lender (and 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 is slightly different from a property valuation. A property appraisal is normally performed by a real estate agent who looks at how much the property you are trying to sell would be worth in the current market.

Property appraisals take into consideration market trends and other recent sales that have occurred in the same or surrounding 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 the property is used to secure the loan. So, if something should happen and you can no longer keep up with your repayments, the lender can sell the property to recover the outstanding debt.

Your lender will never wish to be left out of pocket if any unforeseen events arise (lose your job, no longer able to work due to sickness or injury etc and can no longer pay your mortgage) the valuation will likely be more conservative than a real estate agent market appraisal.

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

It is crucial to do your research and seek the right advice. Speak to us today to see how we can help you! (03) 9681 8182

Posted in: Property market

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