HOW BANKS VALUE PROPERTIES
Whether you’re looking to tap into some equity to build your property portfolio or looking to buy, a property valuation is extremely important. Banks use it to ascertain the value of the property for lending and to make sure that the property is suitable as security for a home loan.
The big four banks have a panel of valuers that use the Valuation Exchange (Valex) or Valuation Manager process to value property. The majority of smaller lenders use the same, as the rest are not part of the Valex system.
There are a number of things a valuer will look for when inspecting your property, so it is worth knowing what the valuer will be doing and what can bring down the property’s value or what can give it a boost. Ultimately it could determine whether the bank lends you the amount of money you’re after or not.
When putting a price on property, the valuer will:
- Inspect the exterior of the house including cladding, the roof, guttering, and fencing
- Measure the dimensions of the house and rooms
- Note the standard of presentation and fit outs
- Note the standard of fitting, fixtures and facilities
- Estimate or find out the age of the house
- Rate the building construction and condition of the house
- Inspect the interior of the house including looking at walls, floors, ceilings, doors, design features, natural and artificial light, ventilation
- Take into account outstanding maintenance
- Measure garages and note car parking and access
- Inspect the site noting any issues such as flooding, drainage, and subsidence
- Check out the immediate neighbours, the street, and the local area – and will note all the positives and negatives
- Work out the distance to the centre of town and look at the convenience of public transport
- Note zoning and whether planning restrictions apply
- Take into account the type of title
- Collect data about recent sales that can be used to value the property
- Make an assessment of marketability based on their observations
- Take into account the current state of the real estate market for that type of house in that area
- Prepare a written report
To produce a valuation report, the valuer combines these attributes together with photographs and recent comparable sales in the surrounding area and prevailing market conditions.
Remember that you as a buyer can challenge a valuation if it appears too low. Although valuers can utilise a wide range of data and reports, you know your property and area best. If you have comparable sales data of your own (no more than 6 months old) and good knowledge of what surrounding properties sold for, it can really influence the valuers report. Especially if the valuer hasn’t done a thorough job and is not familiar with your area and all it’s glory!
To get an idea of what properties are selling for in your area, why not take advantage of our free Property Report. This will give you valuable information about your suburb including recent sales, rental yields and property price trends over the past couple of years. To access your free property report visit thinkandgrowfinance.com.au
For an honest and unbiased opinion, talk to Think and Grow Finance today on 03 8390 5855 or email mitesh@thinkandgrowfinance.com.au