Everything you need to know about property valuations

A person discussing property valuations with a consultant
A property valuation helps buyers and sellers understand the value of a property.

Find out everything you need to know about this important step in the buying process.

Property valuations help establish the value of a property — an important part of the buying process that has benefits for both the buyer and the seller. 

As a buyer, a property valuation will give you an indication of the asking price for the property. This can help you establish a fair offer without overpaying. As a seller, a valuation can help you understand the best aspects of your home.

Perhaps most importantly, banks use property valuations to determine a home’s loan-to-value ratio in the selling process. 

Types of valuations

Property valuations follow a formal process set by the International Valuations Standards Council. They should not be confused with a property appraisal, which is an informal estimate of your property’s value. 

Appraisals are often performed by a real estate agent, who use their industry knowledge and comparative market analysis based on recent sales in the area to estimate how much your home might sell for.

Property valuations are performed by a qualified valuer using established standards to generate a report about your property. There are a couple of different types of valuations, including: 

Bank valuations

Bank valuations are performed by a valuer at the request of the bank. This can be done by an in-house valuer or through an independent valuation company. These reports are used for the sole purpose of determining how much the bank is willing to lend on a home loan application. They should not be used for any other purpose.

Private valuations

These are performed by a valuer at the request of the homeowner. They can’t be used by the bank in loan or mortgage decisions; however, they can help you (as a homeowner) understand the value of your home. 

If you’re thinking about selling, they can help you develop a fair asking price. Or if you’re thinking about renovating, they can help you determine where your reno money will be best spent to add maximum value. 

When do you need a property valuation?

There are a few different reasons why you might consider getting a valuation done on your home, but the most common is because the bank has requested one as part of the selling process.

Before a bank will lend money on a home loan, they must make sure the property’s value will cover the cost of the loan if the buyer is not able to pay their mortgage. The valuation provides that security and helps them determine how much they should lend the buyer.

Other reasons you might consider getting a valuation include:

  • financial reporting
  • tax compliance
  • mediation
  • compensation for easements or land acquisition.

What happens during a property valuation?

Whether undergoing a bank or private valuation, the process will be very similar. The valuer will perform a market analysis and look at sales in the area of comparable properties. This will give them a general idea of where to start. 

Next, the valuer will visit your home and look at different aspects of your property. This includes:

  • appearance, construction and condition
  • property size and number of bedrooms
  • access for pedestrians and vehicles 
  • off-street parking
  • location and amenities
  • planning restrictions
  • local council zoning
  • current market conditions.

The valuer will compile this information and generate a standard three page report that details all of their findings. This can take between two to three days from the date of their visit and cost anywhere from $300 to $600 — keep in mind that time and costs will vary depending on the company you or the bank uses.

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