Understanding bank valuations
Purchasing a property can be an exciting and understanding how bank valuations work is key. As a property buyer, particularly a first-time homebuyer, it's important to grasp how these valuations affect your borrowing capacity and loan terms. At Buyvest, we aim to guide you through the intricacies of property financing and ensure you’re prepared every step of the way.
What Is a bank valuation and why does it matter?
A bank valuation is an essential part of securing a property loan. Understanding how it works will help you make informed decisions and avoid surprises. A bank valuation matters because it tells the bank how much your property is worth. This helps them decide how much they’re willing to lend you - whether you’re buying a home, refinancing, or using your equity. It’s how the bank checks the risk before approving your loan.
What Does a bank valuation involve?
A bank valuation is an independent, professional assessment of a property’s value. It's primarily used by financial institutions to determine the property’s worth for lending purposes.
Purpose: It determines the security value of a property for mortgage lending.
Approach: The valuation is typically more conservative, focusing on risk management.
Time consideration: The bank looks at quick-sale scenarios rather than long-term market conditions.
Who benefits: The valuation is conducted for the bank’s benefit, not the buyer’s.
Impact on borrowing: The outcome directly influences your loan-to-value ratio (LVR), which in turn impacts your borrowing capacity.
In contrast to market appraisals that you might receive from real estate agents, bank valuations tend to be more cautious. Often, they come in below the purchase price or market value.
Why bank valuations matters
A bank valuation affects several important aspects of your property purchase, including the amount you can borrow, your deposit requirements, and whether you'll need to pay Lenders Mortgage Insurance (LMI).
Here’s how:
Loan amount: The maximum loan amount is determined based on the bank’s valuation, not the purchase price.
Deposit requirements: A lower valuation may require a larger deposit from you.
Lenders Mortgage Insurance (LMI): If the bank valuation is lower than the purchase price, you may be required to pay LMI.
Loan approval: A significant difference between the purchase price and the valuation could put your loan approval at risk.
Negotiation leverage: Understanding the valuation process can give you negotiating power, especially in the case of a pre-purchase valuation.
Finance clause protection: Should the bank valuation come in lower than expected, it could justify withdrawing from a contract if finance falls through.
By understanding these factors, you can better prepare for any potential challenges and plan your finances accordingly. At Buyvest, we guide you through these decisions to make sure you’re in the best position possible to succeed.
Difference between bank valuation and market valuation?
One of the most critical aspects of bank valuations is the "valuation gap" - the difference between the bank’s valuation and the market value (or purchase price).
Conservative Approach: Banks use more conservative valuations to protect their investment, considering quick-sale scenarios.
Market Conditions: The bank valuation will reflect potential downturns in the market, which may not always align with current market trends.
Risk Management: In volatile markets or for unique properties, the gap between market value and bank valuation can be larger.
Regional Differences: The gap between the two values can vary based on location, property type, and market conditions.
As a property buyer, especially in competitive markets, it's important to anticipate this gap and plan accordingly. If the bank’s valuation comes in lower than the agreed purchase price, you may need to cover the difference with additional funds.
At Buyvest, we’re here to help you navigate these potential valuation gaps and ensure that your financial strategy aligns with the realities of the property market
Three main valuation types
When purchasing property, it’s important to understand the various valuation methods banks use to assess the value of a property. These methods directly impact your loan approval, borrowing capacity, and deposit requirements. At Buyvest, we’re committed to guiding you through this process and ensuring you make informed decisions that align with your financial goals. In this section, we’ll break down the three main bank valuation methods and explain how each one affects your property purchase.
Automated valuation models (AVM) / Computer valuations
Automated Valuation Models (AVMs) provide a quick and cost-effective way for banks to assess property values. While they are highly efficient, they come with some limitations.
Key features of AVMs
Methodology: AVMs rely on algorithms that analyse historical sales data, property attributes, and market trends.
Data sources: The system pulls data from recent property settlements, median sale prices, and the bank's own internal database.
Timeframe: Results are typically available almost instantly.
Cost: AVMs are the most affordable option for banks, often free.
Accuracy: AVMs are reliable for standard properties in areas with strong sales activity and comparable property data.
Limitations: AVMs cannot account for the condition of the property, recent renovations, or unique features that might affect the value.
Usage scenarios: AVMs are commonly used for lower-risk loans, refinancing, or as preliminary assessments.
AVMs work best for standard properties in well-established suburbs where there’s plenty of sales data. At Buyvest, we can help you understand how an AVM could apply to your property purchase and what it means for your financing options.
Desktop valuations
Desktop valuations offer a more personalised approach compared to AVMs, providing a detailed assessment based on available data.
Key features of desktop valuations
Methodology: This type of valuation is carried out remotely by a qualified valuer without an in-person inspection.
Data sources: The valuer relies on property listings, photos, floor plans, and comparable sales data.
Timeframe: Typically completed within 1-3 business days.
Cost: Generally costs between $100 and $220.
Accuracy: While more nuanced than AVMs, desktop valuations can still miss out on details regarding the property’s condition.
Limitations: The valuation is based on available photos and information, which might not be up to date.
Usage scenarios: Ideal for medium-risk loans, standard properties, or cases where a physical inspection is difficult.
While desktop valuations are useful for many standard properties, they may not capture recent renovations or improvements that could affect the value. If you're considering a property with significant upgrades, we can help you evaluate whether this method is right for you.
Shortform/Full valuations
In-person valuations, often referred to as shortform or full valuations, provide the most accurate and detailed property assessment. These valuations are typically required when the property is high-value, unique, or when other methods are inconclusive.
Key features of Shortform/Full Valuations
Methodology: A qualified property valuer conducts an on-site inspection to assess the property’s external and internal condition, finishes, renovations, and any unique features.
Assessment areas: The valuer evaluates both the property’s physical condition and any special characteristics that might affect its value.
Timeframe: Typically takes between 3-7 business days to complete.
Cost: This is the most expensive valuation method, costing between $300 and $600 depending on the location and type of property.
Accuracy: Offers the most reliable and detailed assessment.
Advantages: This method accounts for property condition, improvements, and unique attributes that may not be reflected in other valuation methods.
Usage scenarios: Often used for high-value loans, unique properties, or when previous valuation methods have not provided a conclusive result.
Shortform and full valuations are ideal when significant money is at stake, or the property has distinctive features that need to be carefully evaluated. At Buyvest, we help ensure that your financing plan accounts for the most accurate valuation method for your needs.
How bank Valuations Impact Your Property Purchase
When buying a property, understanding how bank valuations work can make a significant difference in your financing strategy. The type of valuation used determines how much you can borrow, the deposit required, and whether you might need to pay Lenders Mortgage Insurance (LMI). Here’s how the different valuation methods affect your property purchase.
AVM (Automated Valuation Model): Quick and cost effective
Imagine you’ve purchased a property for $500,000, and the AVM returns $495,000. This valuation method is quick, efficient, and usually accepted by the bank. It gives you an idea of the bank’s likely position without delays, especially useful when you're in competitive situations like auctions. In these cases, using an AVM can give you an edge, allowing you to move quickly and confidently.
Desktop Valuation: More detailed
A Desktop Valuation is a more thorough assessment, but it also carries potential risks. For example, if the Desktop Valuation comes back at $490,000, the bank will base the loan on that lower value, even though your purchase price is $500,000. This could lead to a larger deposit requirement or additional funding. It’s important to know that if you request a Desktop, the AVM value no longer applies.
Shortform Valuation: The most accurate
A Shortform Valuation involves an in-person inspection and gives the most detailed assessment. However, if the valuation comes back lower - say, $480,000 - the bank will only use this value, which could create a significant shortfall. This could lead to higher costs, such as LMI, and force you to contribute more towards the deposit.
How to prepare for a property valuation
Let’s say you’ve found your dream property for $500,000. Before making an offer, you request an AVM, and it returns a valuation of $495,000. This is a great starting point. You’ll have a clear idea of where the bank stands, and if you decide to proceed, the AVM could give you an edge in an auction.
If you choose to go for a Desktop Valuation and it comes back at $490,000, the bank will base your loan on this figure, potentially requiring a larger deposit or extra funds. Escalating to a Shortform Valuation could result in a much lower value, such as $480,000, which could leave you with a $20,000 shortfall. Being strategic with your valuation choices can save you time, money, and stress. With the right approach, you can avoid unexpected surprises and secure your property more confidently.
At Buyvest, we guide you through the valuation process, helping you make the best decision for your unique situation. Our experienced mortgage brokers ensure you choose the right valuation method and provide tailored advice to secure the best financing for your property. Let us help you navigate the complexities of property valuations and financing, so you can move forward with confidence.
How a low property valuation can affect your LVR
Understanding how your bank valuation impacts your loan-to-value ratio (LVR) is crucial for securing the best possible mortgage terms. At Buyvest, we ensure that you understand the relationship between your property’s valuation and your financing, helping you navigate potential challenges with ease. In this section, we’ll explain how LVR works, the implications of different valuation outcomes, and how you can take proactive steps to mitigate risks.
The importance of Loan-to-Value Ratio (LVR) and Its implications
LVR is a critical factor in determining your borrowing capacity and loan terms. It's calculated using the bank's valuation of the property, not the purchase price, and has significant consequences for your financing options.
How LVR is calculated
The LVR formula is simple:
LVR calculation: Loan amount ÷ Bank valuation × 100 = LVR percentage
If you're purchasing a property and the bank's valuation differs from the agreed purchase price, your LVR will change. For example, let’s say you're buying a $500,000 property with a $100,000 deposit, but the bank values it at $480,000. Your LVR would be:
LVR = $400,000 ÷ $480,000 x 100= 83.3%
In this case, the higher LVR could trigger Lenders Mortgage Insurance (LMI) requirements and potentially affect your loan terms.
Key LVR implications
Thresholds: Crossing key LVR thresholds (e.g. 80%, 85%, 90%) can significantly affect your loan conditions, such as interest rates and insurance requirements.
LMI requirements: An LVR above 80% generally triggers LMI, unless you're using a government-backed guarantee such as the First Home Loan Deposit Scheme.
Interest rate: A higher LVR can result in a higher interest rate, as the loan is considered riskier for the lender.
Deposit adjustments: If your bank’s valuation comes in lower than the purchase price, you may need to increase your deposit to maintain your desired LVR.
Understanding these implications helps you plan ahead and ensure you’re in the best possible position to secure your property financing. At Buyvest, we’ll work with you to strategize around these factors and get you the best possible loan terms.
How to deal with a valuation gap on my loan
It's common for different valuation methods to produce varying results. Here's how to manage discrepancies and what they mean for your loan.
When valuation methods differ
Precedence of detailed valuations: If there’s a discrepancy between different valuation methods (e.g. AVM vs. physical valuation), the more detailed valuation method typically takes precedence.
Conservative approach: Banks tend to adopt a conservative approach and may use the lower of the valuations to manage risk.
Impact on borrowing capacity: Lower valuations can reduce your borrowing capacity, requiring you to adjust your loan application or deposit.
Disputing valuations: If you're unhappy with a valuation, disputing it is possible, but your options are limited and success is not guaranteed.
Strategic considerations: It's important to know which valuation method will be used before making an offer. Understanding the potential outcome helps you make realistic decisions.
Requesting a more detailed valuation doesn't necessarily mean it will come in higher than an automated valuation - sometimes, it can result in a lower assessment. This is where our expertise at Buyvest can guide you in the right direction to ensure your financial strategy is aligned with the valuation process.
Mitigating valuation risks during purchase
Valuation discrepancies can pose risks, but there are several strategies you can employ to mitigate these challenges and protect yourself during the property-buying process.
Strategic approaches to mitigating valuation risks
Pre-purchase valuations: Request a valuation before making an offer to get an early indication of the property’s worth.
Subject to finance clauses: Ensure that the contract includes a subject-to-finance clause, allowing you to withdraw if the valuation issues affect your ability to secure financing.
Comparable sales research: Understand the recent sale prices of properties in the area to set realistic expectations for the property’s value.
Buffer planning: Keep additional funds aside to cover potential valuation gaps that may arise between the purchase price and the bank’s valuation.
Lender selection: Different lenders may have different approaches to valuing the same property. At Buyvest, we can help you identify which lender offers the best valuation process for your situation.
For auction purchases, where unconditional bids are required, conducting thorough preliminary valuation research becomes even more critical. This is one area where our expertise as mortgage brokers can help you secure the most reliable financing options.
How to get a better bank valuation
While the bank’s valuation is ultimately out of your control, there are steps you can take to maximise the chances of receiving a favourable outcome. Proper preparation for a physical valuation can make a difference.
Preparing for a physical valuation
When a physical valuation is scheduled, it’s essential to present the property in the best light to ensure that all value-adding aspects are considered. Here’s how you can prepare:
Presentation: Ensure the property is clean, tidy, and well-presented. First impressions matter.
Highlight improvements: Create a list of any recent renovations or upgrades and include approximate costs.
Documentation: Have plans, permits, and certificates on hand for any major works or changes to the property.
Access all areas: Ensure the valuer can access all parts of the property, including any improvements or renovations.
Provide context: Offer details on recent comparable sales in the area to support the valuation outcome you expect.
Professional Interaction: While valuers are professionals, it’s helpful to provide the information they need without pressuring them during the inspection.
While valuers are impartial and won’t be swayed by superficial changes, presenting your property in its best condition helps ensure that all the value-adding features are properly accounted for.
At Buyvest, we’re here to support you through the entire valuation process, ensuring you understand how to manage risks and optimise your chances of a favourable result.
Choosing the right valuation method for your Property
Selecting the correct valuation method is crucial for ensuring that your property purchase goes smoothly. At Buyvest, we work closely with you to choose the most suitable valuation approach, considering your property's unique characteristics and your financial goals. In this section, we will explore key factors to consider when choosing the right valuation method and how it can impact your property financing.
Key considerations in choosing a valuation method
Risk Assessment: Different types of properties and loan sizes benefit from different valuation methods. Understanding these needs helps ensure the most accurate and efficient valuation for your situation.
Timing considerations: If you need a quick valuation, methods like Automated Valuation Models (AVMs) can provide immediate results. However, more detailed valuations take longer but provide a higher level of accuracy.
Cost-benefit analysis: While a detailed valuation may come with a higher price tag, it can provide additional value in terms of accuracy and loan approvals. We help you weigh the benefits of each method against their costs to find the best balance.
Strategic sequencing: It’s often a good idea to start with less expensive methods (like AVMs) before progressing to more detailed physical or desktop valuations. This way, you can assess the property’s value in stages and avoid unnecessary costs.
Lender policies: Different lenders may have their own valuation preferences and requirements. Understanding these preferences helps you anticipate which valuation method will be used and how it may impact your loan approval process.
At Buyvest, we offer personalised advice to help you select the most appropriate valuation method, ensuring the best outcomes for your property purchase.
Challenging unfavorable valuations
If the bank’s valuation comes in lower than expected, it can significantly impact your loan and purchasing power. While it’s challenging to dispute a valuation, there are steps you can take to address any concerns and potentially improve the outcome.
Steps to challenge an unfavourable valuation
Gather evidence: Collect comparable sales data in the area to support your case. This data can help demonstrate that the bank’s valuation may be too conservative.
Formal dispute process: Work with your broker to submit a formal dispute to the bank. While this doesn’t guarantee a change in the valuation, it can sometimes lead to a reassessment.
Provide additional information: Share any details about features or improvements that the valuer may have overlooked. This includes renovations, quality upgrades, or other factors that could increase the property’s value.
Seek a second opinion: Consider requesting a second valuation from a different lender. This can provide a different perspective and potentially yield a higher value.
Explore slternative lenders: Some lenders may offer different valuation approaches, which could result in a more favourable outcome.
Timeframe swareness: Understand that disputing a valuation can take time and may delay settlement. It’s important to be prepared for potential delays in your property purchase process.
Banks have strict policies to ensure there is no conflict of interest between lending decisions and the valuation process, but at Buyvest, we can guide you through challenging situations and work with you to find solutions that support your financial goals.
How property type affects your bank valuation
Certain types of properties, such as off-the-plan purchases, rural properties, or recently renovated homes, can require specialised valuation methods. Understanding these nuances is important for achieving the best possible loan outcome.
Off-the-Plan Purchases
Buying a property before construction is completed introduces unique valuation challenges. Here's what you need to know:
Settlement timing: Valuations typically take place closer to settlement, not at the time of contract signing. Market conditions may change in the interim, affecting the final valuation.
Market fluctuations: The property’s value can fluctuate between purchase and settlement, especially in a changing market.
Limited comparables: New developments may not have sufficient comparable properties, making it more difficult for valuers to accurately assess the value.
Developer premiums: Some developers add premiums to the price, but these may not be fully reflected in the bank’s valuation.
Risk of valuation shortfalls: There is a higher risk of valuation shortfalls, which could require you to contribute additional funds at settlement.
Sunset clause protection: Understand your legal rights, such as the option to back out of the deal if a significant shortfall occurs.
For off-the-plan buyers, maintaining a financial buffer is essential. At Buyvest, we help you prepare for potential valuation challenges and find strategies to mitigate risk.
Unique or rural properties
Non-standard properties, such as those located in rural areas or with unique characteristics, often require more detailed valuations due to their specialized nature. Consider these points:
Fewer comparables: There may be fewer similar properties to compare, making it harder for valuers to determine an accurate value.
Specialised features: Unique attributes, such as heritage features, may not be fully considered in a standard valuation.
Land components: Properties with large land portions, such as rural estates, may be valued differently from urban properties.
Location factors: Properties in remote locations may receive more conservative valuations due to the limited market.
Zoning and highest use: Zoning laws and the most profitable legal use of the land play a significant role in valuation.
For these properties, a detailed physical valuation is often necessary. It’s also beneficial to work with valuers who have expertise in rural or unique properties to ensure the most accurate outcome.
Renovated properties
Renovated homes present their own set of challenges. To ensure that your property’s improvements are reflected in the valuation, take note of the following considerations:
Before-and-after comparison: Valuers look at the added value of renovations, not just the cost of the improvements.
Quality of workmanship: The quality of renovations can significantly impact how much value is added to the property.
Overcapitalisation risk: Not all renovations will add their full cost in value, so it’s important to assess whether your improvements have enhanced the property’s market worth.
documentation: Keep records of permits, warranties, and before-and-after photos of the renovations. These documents can help justify the added value.
Neighbourhood ceiling: In some cases, the value of the area may cap the potential of your property, regardless of the improvements you’ve made.
Functional vs luxury upgrades: Valuers tend to place more value on functional upgrades, such as new bathrooms or kitchens, rather than luxury additions like pools or high-end finishes.
At Buyvest, we can help ensure that your renovations are properly considered and reflected in the bank’s valuation, helping you get the best financing terms possible.
By understanding the various factors involved in property valuations and strategically selecting the best approach, you can enhance your chances of securing the financing you need. Contact Buyvest today, and let us guide you through the valuation process to help you reach your financial goals.
Frequently asked questions about Bank valuations
Why is the bank valuation lower than the price I'm paying?
Bank valuations may be lower than the purchase price due to several reasons:
Purpose difference: Banks value properties to assess security for lending, not to determine market value for sale.
Conservative approach: Banks need a buffer in case they must repossess and sell the property quickly.
Risk management: Valuations include a margin to account for potential market downturns.
Emotional premiums: Buyers often pay more due to emotional factors, which banks don’t factor into their valuations.
Market timing: In fast-moving markets, property prices may rise more quickly than valuation methods can capture.
Information limitations: Valuers may not have access to all relevant information about the property.
In normal market conditions, the gap between purchase price and bank valuation is usually 5-10%, but it can be larger in fast-moving or unique markets.
Can I use a valuation from one bank with another lender?
Generally, no. Bank valuations are specific to the lender and cannot be transferred between institutions:
Proprietary information: The valuation is owned by the lender who commissioned it.
Liability concerns: Valuers' professional indemnity insurance covers only the lender who ordered the valuation.
Different criteria: Each lender uses different guidelines for valuation and lending decisions.
Time restrictions: Most valuations are only valid for 3-6 months.
If you decide to switch lenders, you’ll likely need a new valuation.
How long is a bank valuation valid?
The validity period of a bank valuation typically ranges from 30 days to 3 months, depending on various factors:
Market conditions: In volatile markets, valuations may have a shorter validity period.
Lender policy: Each lender has its own guidelines for how long a valuation is valid.
Property type: Unique or high-risk properties may have shorter validity periods.
Pre-approval vs. final valuation: Valuations for pre-approval may have different timeframes compared to final loan valuations.
If the settlement date is beyond the valuation’s validity period, you may need to request a new valuation.
What happens if the valuation comes in below the purchase price?
If the valuation falls below the agreed purchase price, you have several options:
Increase your deposit: Contribute more funds to make up the difference.
Negotiate the price: Use the valuation to renegotiate with the seller.
Challenge the valuation: Provide additional evidence to support a higher valuation.
Seek alternative lenders: Different lenders may offer different valuations.
Mortgage insurance: If the LVR is too high, you may need to pay for LMI if you meet income requirements.
Family guarantee: Consider a guarantor to cover the shortfall.
Exit the contract: If you have a finance clause, you may have the option to back out of the deal.
The best course of action depends on your financial situation, the size of the shortfall, and the terms of your contract.
How do I prepare for a bank valuation?
Proper preparation can help optimise the valuation outcome:
Research comparable sales: Look for recent sales of similar properties in your area.
Property presentation: Ensure the property is clean and well-maintained.
Documentation: Have details of improvements, renovations, and permits ready.
Access arrangements: Make sure the valuer can access all areas of the property.
Provide relevant information: List features and improvements made to the property.
Professional engagement: Be available to answer any questions the valuer may have but avoid pressuring them.
Set realistic expectations: Remember that valuations are based on facts and market data, not personal preferences.
While these steps can’t guarantee a higher valuation, they help ensure the valuer has all the necessary information to make an accurate assessment.
Can I choose which valuer assesses my property?
Generally, you cannot select the specific valuer:
Independence: Lenders keep the valuation process separate from clients to ensure impartiality.
Panel arrangements: Most banks work with a panel of approved valuation firms.
Random assignment: Valuers are often chosen at random by the lender’s automated systems.
Preventing conflicts of interest: This approach prevents manipulation of the valuation process.
While you can't pick the individual valuer, our experienced mortgage broker can help you navigate the lender’s valuation processes.
Do different banks value properties differently?
Yes, banks can value the same property differently:
Risk appetite: Some lenders may be more conservative in their valuations.
Valuation methods: Lenders may use different methods or valuers for similar properties.
Local market knowledge: Banks may have varying levels of familiarity with specific areas or property types.
Specialized property considerations: Different banks may approach unique properties, such as rural or off-the-plan developments, differently.
It’s a good idea to shop around as valuations can vary from one lender to another.
How much does a bank valuation cost and who pays?
Valuation costs vary depending on the type of valuation and property location:
AVMs/computer-generated valuations: Often free or $0-50.
Desktop valuations: Typically range from $100 to $220.
Shortform/full valuations: Usually cost between $300 and $1200, depending on property complexity.
Who pays?: Most lenders pass the cost of the valuation onto the borrower.
Fee inclusion: Some lenders absorb the valuation fee as part of their loan package.
Refund policies: Generally non-refundable, even if the loan doesn’t proceed.
Package deals: Some loan packages may offer free valuations.
Valuation fees are usually disclosed upfront and can be added to your loan amount if needed.
Can I get a copy of my bank valuation report?
Access to a bank valuation report can vary depending on the lender:
Confidentiality: Many lenders treat valuations as confidential documents.
Consumer rights: In some cases, lenders are required to provide a copy upon request.
Partial disclosure: Some lenders may offer a summary of the valuation, but not the full report.
Administrative fees: Some lenders charge a fee for releasing the report.
Buyvest’s assistance: Our mortgage broker may be able to obtain the valuation details for you.
Five key things to know about property valuation process
Understanding the bank valuation process is essential when buying a property, as it affects your loan terms, LVR, and potentially your deposit requirements. Whether you’re dealing with automated, desktop, or full physical valuations, being prepared can help you avoid surprises and make more informed decisions.
If you find yourself facing valuation discrepancies, it’s important to know your options, whether it’s challenging the valuation, adjusting your deposit, or negotiating with your lender. And when buying off-the-plan, or unique properties, always ensure you have a financial buffer in case of unexpected valuation outcomes. Understanding property valuation process is a crucial aspect of the property purchase and financing journey. Let's explore the five keys things you know about the valuation process:
Bank computer valuation
Some banks have developed their own software for property valuation, which provides an estimate without needing a physical assessment. This automated system draws upon a range of data such as recent settlements, sales, and the bank’s internal data, using median sale prices to determine the property's value.
Desktop valuation
A desktop valuation is conducted remotely, relying on available photos and information about the property. If the property is off the market or has undergone renovations since the last sale, and there are no recent photos to reflect these changes, the valuation might not accurately capture its current state.
Shortform valuation
In a shortform valuation, a professional valuer visits and assesses the property in person. This method offers a more comprehensive and detailed evaluation, taking into account the current condition and any renovations or unique features of the property.
Navigating valuation discrepancies
If a bank's computer valuation and a shortform valuation yield different results, the latter usually takes precedence. This can impact your loan-to-value ratio (LVR) and, subsequently, your loan terms. For instance, if you bought a house for $500,000 and the computer valuation reflects this, but you request a shortform valuation and the shortform valuation comes in lower, the bank will consider the lower value.
Mitigating risks during the purchase process
During the purchase process, especially in scenarios like auctions, requesting a computer valuation can be a strategic move. It gives you a preliminary idea of the property’s value, helping you make informed bidding decisions. However, relying solely on computer valuations might lead to missed opportunities if the system undervalues a property. It’s important to balance this strategy with a detailed understanding of your financial situation and the property market.
What to expect when you work with Buyvest
At Buyvest, we recommend a thorough approach when considering property valuations. We guide you through each valuation method, ensuring you have a clear understanding of your property’s worth and how it affects your financing options. Our expertise in navigating the complexity of property valuation helps you make informed decisions, whether you are buying at an auction or negotiating a sale.
Contact Buyvest today for expert guidance on property valuation and to make your property investment journey a success.
Table of Contents
Real property needs real strategy.
Bank valuations shape your next move - play it smart.
Important stuff:
Please note that the views and opinions expressed in this post are general information only, and this is not financial advice.
Any advice and information is provided by Buyvest Pty Ltd ABN 91 684 841 496, Australia Credit Licence No. 567392 and is general in nature, for educational purposes only and is not intended to constitute specialist or personal advice. This website has been prepared without considering your objectives, financial situation or needs. Therefore, consider the appropriateness of the advice for your situation and needs before taking any action. It should not be relied upon to enter into any legal or financial commitments. Specific investment advice should be obtained from a suitably qualified professional before adopting any investment strategy. If any financial product has been mentioned, you should obtain and read a copy of the relevant Product Disclosure Statement and consider the information contained within that Statement concerning your circumstances before deciding whether to acquire the product. You can obtain a copy of the PDS by emailing hello@buyvest.com.au. If you want to change your financial circumstances, such as applying for a loan, all loan applications are subject to credit approval.
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