Home Loan Experts

Getting an accurate price quote for your property can be difficult. And with home loans, you need to understand how to obtain the right property valuation to satisfy your obligations and the lender’s requirements. Here’s what you need to know.

Property Appraisal Vs Property Valuation: The Difference

A property appraisal gives you an estimate for your property’s value based on current market trends. The appraisal is usually done by a real-estate agent who is well acquainted with the neighborhood. Although done by a property market expert, lenders do not consider it a legal value for giving loans.

A property valuation is a detailed assessment that gives you an accurate legal value for your property. Multiple determinants, such as location, size, condition, etc., are factored in for valuing your property.

A lender generates a property valuation report by appointing a valuer of their own.

Why Is Property Valuation Important?

Lenders conduct a valuation to determine the legal value of the property to be regarded as security for your mortgage. They decide on whether to finance the mortgage based on the valuation report. So, valuation is of utmost importance.

When Can We Order A Valuation?

You can order a valuation from your lender of choice either upfront or after receiving the Approval in Principle (AIP).

Upfront Valuation

When you’ve found a property and have submitted a mortgage application for the same, you may request an upfront valuation with the lender. The same applies when refinancing.

Valuation After Approval In Principle

You receive an AIP after the lender has assessed your application and has decided it is willing to proceed with the mortgage. If you have not yet found a property, the AIP will include a condition to find one and apply for valuation.

How Does A Valuer Value A Property?

Once you apply for the valuation report, the lender assigns a valuer for your property.

Generally, there are four different valuation methods a valuer chooses from. They are:

Desktop Valuation

Desktop valuation is an automated type of valuation that does not require a physical inspection of the property. The valuer completes the required assessment through a comparative study of properties in the locality.
Lenders use desktop valuation for low-risk loans or loans under 80% Loan-to-Value Ratio (LVR). A few lenders may accept this type of valuation for loans up to 90% LVR. (Calculate your LVR here.)

Kerbside Valuation

Kerbside valuation is where the valuer does not step inside the property but inspects it from the street. It helps in estimating the legal worth of the property by taking the exterior and location into account.

A valuer visits the property location, takes pictures from outside, and has a cursory look at the property and neighbourhood. The valuer will also look at the zoning, listings, recent property sales, and the property’s condition compared with others in the area.

Lenders use kerbside valuation for refinancing and cash-out loans with an LVR up to 80%.

Full Valuation

A full or short-form valuation is where the valuer steps inside the property and does a thorough inspection. Every nook and corner of the house gets inspected to calculate the property’s most accurate legal value. Of all the valuation methods, full valuation produces the most descriptive valuation report.

This type of valuation is conducted for home loan cases that are riskier than most.

As If Valuation

In construction loans, you buy a piece of land and build a house on it later. You are getting a loan for buying the land and also for building the property. Your home loan is never approved without a valuation, but there is also no house to value. In such a case, a valuer conducts an ‘as if’ valuation.

In an as if valuation, the valuer values the land and goes through the construction plan to estimate the legal property price. The bank gives you a home loan based on that estimate.

Documents Required For Property Valuation

When applying for a property valuation, in addition to the basic information on your home loan, you must also submit a property-related document. The sort of document needed depends on your home loan’s purpose.

Home Loan PurposeDocument Type
  • Contract of Sale
  • Refinance
  • Rates Notice
  • Construction
  • Contract of Sale (for Land)
  • Building Contract
  • Building Plans/Specifications
  • What To Do When The Valuation Is Less Than The Offer

    Suppose you have signed a contract of sale that has the property price set at $500,000 and you are seeking $400,000 in a home loan, which is 80% of the property price, but the valuation report shows the legal price estimate as $450,000. In this situation, you can challenge the valuation.

    Usually, people use a property report to challenge a valuation when it places the value of the house lower than anticipated (based on the contract of sale or the estimated value). You may need evidence of comparable sales to challenge a valuation. After you gather all these, you may send them to the valuer to challenge the valuation.

    Why Get A Valuation Through a Mortgage Broker?

    Applying for your home loan through a mortgage broker makes the valuation process easier. Below are the reasons why ordering valuation through a broker is the best option available.

    • It’s free: Some banks conduct a free property valuation, while some might charge you a fee. A mortgage broker can order you a cost-free valuation with any bank.
    • Free property report estimate: Mortgage brokers generate a free property report before ordering valuation. The property report gives you the market value estimate, which will be close to the legal value. If you apply for a home loan amount by referring to the property report estimate, you’ll rarely have to worry about undervaluation.
    • Can challenge valuation: A mortgage broker has the experience and the authority to challenge valuations on your behalf. So, you can only challenge a property valuation report through mortgage brokers.
    • Helps save time: A mortgage broker will look after following all the procedures, from applying right through to following up This will save you a lot of time.

    If you are looking for a home loan and desire a hassle-free valuation process, we are always here to help.

    Contact us on 1300 889 743 or enquire online today!

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