So you’ve saved your deposit and you’ve found a property that gets you excited, that you’d like to buy. You think that you’ve saved enough and that you’ll be able to afford the mortgage repayments.
There’s just one final step in the property buying process and that is getting unconditional approval. Unconditional approval is when your bank or other lender has assessed your home loan application and give you a home loan based on the property you intend to purchase.
Before your lender grants you unconditional approval on your home loan they’ll want to have the place valued. A bank valuer is a valuer hired by a bank to establish the value of your property based on the worst case scenario which is that you defaulted on your mortgage and they needed to quickly sell the property to recover bad debts. Essentially a bank valuation is the value that the bank could sell it for, not what you might be able to sell it for.
Bank valuations tend to be conservative because banks are required to hold a minimum security against their loans and they have a responsibility to their shareholders to ensure their investment is secure.
How dos a bank valuation work?
There are three different types of valuation methods that a bank might use when valuing a property.
Full valuation;Kerbside valuation;Desktop valuation.
If the lender wants a full valuation then they will contact one of the valuation firms that they regularly use and their valuer will physically inspect the property. While inspecting the property they will take photographs of the internal and external areas of the property and write a report that includes the full property description and the conditions of the market where the property is based.
Banks will opt for a full market valuation when the LVR will be high, the transaction is more complex, interstate investment properties, other risky properties or postcodes (such as a property that has a low floor space), or when a suburb has had a fast property price increase that is unlikely to be sustainable. Generally smaller lenders will choose a full property valuation in all situations regardless of the value of the transaction or the LVR.
A kerbside valuation is exactly how it sounds. The lender will inspect the property from the street and will base their valuation on their street inspection and sales data from their databases. They will also use information related to sales of neighbouring properties.
Sometimes though a lender will conduct a desktop valuation. A desktop valuation involves reviewing information from their sales databases and then estimating the value of your property. These types of valuations are used when the value of the transaction or the LVR is lower.
How does an independent valuation differ?
Independent valuations are normally completed by valuation companies that have no bias. They have no incentive to give a high property value or a low property value. When an independent valuer values a property you intend to purchase, they are making an independent judgement of what the value of the property is.
What do independent valuers assess?
An independent valuer will assess the following attributes of the property when carrying out a pre mortgage valuation:
When the property was built i.e.// the age;The architectural style such as Victorian, Cottage, Colonial, Federation, Contemporary etc;The property’s condition;The size of the land;Where the property is located – proximity to local facilities such as shops, restaurants and cafes, bars, schools and recreational parks;The number of bedrooms;The number of bathrooms;The property’s potential for renovations such as the ability to add a carport or garage or space for a pool;The kitchen size;Past renovations;Development potential;Supply and demand;Population growth in the area;Amount of vacant land/dwellings in the area;The floor plan;The quality of schools in the area;Employment and wages in the area;Current market trends;Storage space;Parking space.
How can a pre mortgage valuation help?
When you’re applying for finance, the bank will conduct a valuation because they need to confirm that the property can be used as security for the loan. Bank valuations are often conservative whereas an independent is an estimation of what the property is worth on the real estate market.
An independent valuation can give you negotiating power if the bank valuation is lower than the purchase price. If you have a high LVR then you will either need to renegotiate the terms of your loan, the purchase price or find another property. To avoid disappointment it is worth getting an independent valuation before you make an offer on a property or apply for unconditional approval.
Why choose West Coast Valuers?
West Coast Valuers are independent valuers with no interest in giving a high or low valuation. All valuations are completed impartially and without bias by Australian Property Institute (API) ) Certified Practising Valuers so you can be assured that the value in the valuation report you receive is a true reflection of the value of the property.
We have a quick turnaround with us inspecting your property within 48 hours of your enquiry. We will then send your report back to you within 3-5 business days of completing the inspection.