Bank valuations vs Market valuations. In majority of cases, people looking to purchase a property to invest or occupy will acquire it with the help of borrowing funds. If this is the case, the loan application process will require a bank valuation in the lead up of offering you an unconditional loan approval.
Many people receive a variety of market valuations in advance to obtaining a loan approval, but what is the difference between a bank valuations and a market valuation. In this market insight, we discuss the differences.
Bank valuations vs market valuations
A market valuation is the amount a property would sell for on the open market. This is dependent on the amount a buyer and seller are happy to agree upon. A market valuation is often provided with guidance from a real estate sales agent to help both parties commence negotiations to transact. It is important to note that this is not a legally binding valuation. It only represents the opinion of a professional. It should be an objective opinion that is still backed my some research, but it does not hold any weight towards a loan application assessment.
A bank valuation is a formal valuation assessment of a property. The lender will take this valuation into high consideration as it can influence a bank’s appetite to borrow you the money or not. The bank valuation is used by the bank or lender to mitigate their risk and ensure they have enough equity in the property to recover the loan offered. It is a report that is independent and unbiased which increases its validity for the bank to use in their loan application assessment.
What is the process in completing a bank valuation
There are a few steps that are conducted to complete a bank valuation. Here is a summary:
- Property inspection – A valuer will need to inspect your property in person to review the asset in detail. They will review the land, the dwelling/property and site improvements.
- Reviewing comparable sales – Once the valuer has assessed the property, the next step is to compare it with other properties available within the area. They have access to various databases that help compare and review your property. Valuers look to identify if the property is bigger/smaller, more superior in its design or even better placed in the suburb or street.
- Property Valuation Report – Once a valuer has completed their findings, they produce a property valuation report for the bank. In the report, it will outline the risks associated to the property, the security of the market and confirm its property valuation.
Preparing for property valuations
Presenting your property in advance will help the valuer assess the property for space, lighting and functionality. Keeping the property clean, decluttered and a neat landscape will influence a more positive result.
What to do next?
When sourcing a property to purchase, a valuation may help you in your decision making, but there are many other important factors that should be considered. This applies to both property investors and owner occupiers.
If you’d like to learn more about property investment, please don’t hesitate to contact us. We would welcome the opportunity to help source a great opportunity for you. Our YouTube channel and Market Insights also provide a wealth of information to assist you with many areas relating to property.
While we have taken care to ensure the information above is true and correct at the time of publication, changes in circumstances and legislation after the displayed date may impact the accuracy of this article. If you want to learn more please contact us. We welcome the opportunity to assist you.
November 2023
