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Understanding Property Valuations in Australia: A Comprehensive Guide

Understanding Property Valuations in Australia: A Comprehensive Guide

October 5, 2023

What is a property valuation?

In its simplest form, the value of a property is essentially what someone is willing to pay for it. It’s important when entering negotiations to buy a property to have a rough estimate of its value. A property valuation provides a comprehensive report detailing a property’s market value. Usually, a rough valuation guide is done by comparing recent sales of similar properties.

You need to know the property market and local area to ensure that you are comparing apples with apples. There can be a big discrepancy between two houses value on the same street. So, it is important to understand the criteria valuers use. A sworn valuation is essential for lending.

If you are buying at auction particularly it is important to understand how the bank will value the property you are bidding on. As with auctions there is no finance clause for you to end the contract if your finance approval is unsuccessful. Banks lend on Loan to Value Ratio (or LVR) and the value (valuation) has a direct impact on the loan (or how much the bank will lend you).

Why do you need a property valuation?

A property valuation not only benefits buyers by ensuring they don’t overpay but also assists sellers in pinpointing areas of improvement to improve the property’s value. Lenders require property valuations to determine the risk associated with the loan. Banks’ have strict lending criteria and compliance. If you default they want to know that there is sufficient for them to recover their money.

Sometimes these valuations are a “curbside” valuation where they don’t physically inspect the property. Most times however they will view the property.

Property valuations might be necessary for a number of reasons including: refinancing; financial reports; tax purposes; or family law mediation.

How the property valuation process works.

Typically, a property’s value is determined by directly comparing the property with similar properties that have sold recently. The property’s location, size, type and number of rooms, the quality of fixtures and fittings and building condition all play a pivotal role. After gathering this data, valuers consider any differences between the property being valued and the comparable properties sold.
It is important to note that they are looking at recent comparable sales and not what people are asking for with current listings. Some properties with clear comparisons are evidently easier to value and if you are looking at a property that has different characteristics or amenities you need to ensure that those are highlighted in the valuation process.

The criteria used for valuing residential properties and commercial properties differ. Often commercial properties value is intrinsically linked to the financial return (yield) and other planning information.

Valuers are licenced and required to give independent advice. This doesn’t mean you can’t discuss or object to the valuation or provide further information to support the value.

Cost and time required for a valuation

The price for a property valuation varies depending on its size and estimated value. Generally, you can expect to pay between $300 and $600 for a standard residential property. The results, usually a detailed report, can be delivered within two to three days after the site visit. If it is a “curbside” valuation this is done much quicker as there is no site visit. Commercial properties will take longer and cost more.

Appraisals vs. Valuations

It’s crucial to also know the between property appraisals and valuations. Real estate agents often provide free appraisals based on their experience and local sales. These don’t carry weight when it comes to lending. It may be considered but is not relied upon. Appraisals are typically used when you are looking to sell a home and the real estate agent is wanting the listing.
In contrast, licensed valuers have the qualification and are accountable for their assessments. Hence, their reports tend to be more in-depth and reliable. Your bank or lender will have a panel of valuers they work with or have their own in-house team.

Boosting your property value

Looking to enhance your property’s market worth? While location remains static, renovations and other improvements can work wonders. Consider what your target market wants most before starting extensions or adding rooms. This information can be gleaned from talking to real estate agents and checking what properties have the most interest. It is important to focus on what the buyers are looking for.

Always ensure the property is tidy and presentable. Well maintained gardens, accessible parking, and optimised views can elevate a property’s appeal.
They say a kitchen always sells a home and so too does a bathroom, make sure they are not cluttered and presented well. A simple paint job or slight modifications can rejuvenate a property’s aura. Remember, first impressions count. Boost your curb appeal for a positive valuation.

When is the valuation done when buying a house?

Valuations are a part of the finance and mortgage processing when you are borrowing money or selling your house to buy another.

Borrowers should note that a valuation is done BEFORE the loan offer is unconditional. Don’t be confused between unconditional and conditional loan offers. Conditional loan offers come first and are just indicative figures.

The valuation needs to be done to ensure that the bank is complying with the lending rules and laws. They also check that they have sufficient equity in the property to suit their risk profile.

Our conveyancing and property lawyers at Conveyancing Depot are experienced in helping clients buying or selling property. If a valuation falls short, we can help. We work with clients and their brokers to manage any issues that come up and ensure that their property purchase goes smoothly.

Speak to one of our conveyancing experts today on 1300 900 440.

Disclaimer: This article has been prepared for general information purposes and may not apply to your situation. This information should not be relied upon for legal, tax or accounting advice. Your individual circumstances will alter any legal advice given. The views expressed may not reflect the opinions, views or values of Conveyancing Depot and belong solely to the author of the content. © Conveyancing Depot Pty Ltd.

If you require legal advice specific to your situation please speak to one of our team members today.

About The Author

Here at Conveyancing Depot Lorilea is our Marketing Manager. She has a bachelor's degree in...