You’ve found your dream home or a great investment, but before you move forward, there’s one crucial step that could make or break your property journey – the property valuation. In Australia’s fast-moving real estate market, where prices fluctuate and lending rules tighten, understanding property valuations is more important than ever. With over 70% of home loans now involving mortgage brokers, expert guidance is key to navigating this process.
Whether buying, selling, or refinancing, a property valuation determines how much you can borrow, ensures you’re paying a fair price, and can even help with negotiations. With rising property prices and stricter lending conditions, a proper valuation could save you thousands. In this guide, we’ll explain why valuations matter, how they work, and the vital role mortgage brokers play in getting you the best result.
What is a Property Valuation?
A property valuation is a professional assessment of a property’s value. It’s different from a real estate agent’s appraisal, which is more of an estimate based on market trends. A property valuation, in contrast, is carried out by a qualified valuer and offers an official, legally recognised assessment of a property’s worth.
Property valuations are used by lenders to determine how much they’re willing to lend and ensure that they’re making a safe investment. They help both buyers and lenders make well-informed financial decisions.
Types of Property Valuations
There are several types of property valuations used in Australia, depending on the situation and the loan type:
Desktop Valuations
- No physical inspection; conducted online using available data.
- Typically used for low-risk loans (loan-to-value ratio or LVR under 80%).
- Quick and cost-effective, but might miss recent renovations or improvements.
Kerbside Valuations
- The valuer inspects only the property’s exterior (no internal inspection).
- Suitable for refinancing, especially for loans with an LVR of up to 80%.
- Focuses on the condition of the exterior, street appeal, and surrounding area.
Full Valuations
- A detailed inspection of both the interior and exterior of the property.
- Required for higher-risk loans or when the LVR exceeds 80%.
- The most thorough and accurate method of valuation.
‘As If Complete’ Valuations
- Used for construction loans, estimating the value of a property once the planned construction is completed.
- Takes into account both the land’s value and the projected value of any planned construction.
- Useful when building a new home or adding major renovations.
Why Property Valuations Matter
Property valuations play a key role in many property transactions, whether you’re the buyer, seller, or lender:
For Lenders
- Determine the loan amount: A valuation helps lenders decide how much to lend based on the property’s value.
- Assess risk: Lenders use valuations to determine if the property is worth the loan amount and to manage their financial risk.
- Establish Loan-to-Value Ratio (LVR): The LVR is the loan amount compared to the property value, and valuations help ensure it stays within acceptable limits.
For Buyers
- Ensure fair pricing: A valuation ensures you aren’t overpaying for the property.
- Support your loan application: Lenders use valuations to decide whether to approve your loan.
- Guide negotiations: If the property is valued lower than the asking price, it can help you negotiate a better deal.
For Sellers
- Set a realistic asking price: A valuation gives you a solid starting point when listing your property for sale.
- Support marketing efforts: A professional valuation can help justify your asking price and attract buyers.
- Facilitate faster sales: Well-priced properties based on accurate valuations often sell quicker.
The Property Valuation Process
Valuers look at various factors when determining a property’s value. These include:
Internal Factors
- Size and layout: The number of rooms, bathrooms, and overall living space.
- Construction quality: The type of materials used and the build quality.
- Renovations and improvements: Any recent upgrades that could add value.
- Overall condition: How well the property has been maintained.
External Factors
- Location and accessibility: Proximity to public transport, schools, and shops.
- Local amenities: Parks, restaurants, and other facilities nearby.
- Comparable sales: The sale prices of similar properties in the area.
- Zoning restrictions: Local council rules that might affect future development.
- Future development plans: Potential for growth or changes in the area.
Market Valuations vs. Bank Valuations: What’s the Difference?
Understanding the difference between market valuations and bank valuations is crucial, as each serves a different purpose in the property process.
Market Valuation
- Represents the price buyers are likely to pay based on current market trends.
- Often higher than the bank’s valuation because it takes into account emotional factors like buyer competition.
- Useful for price negotiations but not used by lenders for loan decisions.
Bank Valuation
- A more conservative approach to determine how much money a bank is willing to lend.
- Focuses on security for the lender, which often leads to a lower valuation than the market value.
- Used by lenders to determine the loan amount and Loan-to-Value Ratio (LVR).
The Role of Mortgage Brokers in Property Valuations
Mortgage brokers are essential in the property valuation process, offering support, expertise, and advocacy:
- Valuation Advocacy: Brokers can negotiate with lenders if the valuation comes in low, providing evidence and leveraging local market knowledge.
- Strategic Timing: They coordinate the timing of the valuation to ensure it aligns with your loan application and maximise your chances of a positive outcome.
- Documentation Support: Brokers help prepare the necessary paperwork and ensure all documents are in order, preventing delays.
- Cost Management: They assist in finding free or discounted valuations and work to minimise costs, ensuring you get the best value from the process.
Overcoming Common Valuation Challenges
Valuation challenges can arise, but here’s how to handle them:
Undervaluation
- Provide comparable sales data and evidence of improvements.
- Request an independent valuation or explore alternative lenders who may accept a higher value.
Market Volatility
- Monitor market trends and time your application strategically.
- Get multiple valuations to ensure accuracy.
Documentation Issues
- Ensure all paperwork is complete and up to date.
- Clearly document any renovations or upgrades to highlight their value.
Maximising Your Valuation Outcome
To optimise your valuation, try these strategies:
- Property Presentation: Keep your property in good condition and highlight recent improvements.
- Market Research: Study comparable sales and local trends to understand the market better.
- Professional Support: Work with an experienced valuer and mortgage broker to navigate the process smoothly.
The Future of Property Valuation
Technology is making property valuations faster and more accurate:
- Automated Valuations: More precise, quicker, and data-driven.
- Digital Integration: Streamlined processes and improved data access.
- Market Intelligence: Realtime analytics help valuers make informed decisions.
Working with Your Mortgage Broker for the Best Results
For optimal valuation outcomes:
- Clear Communication: Share all relevant information with your broker and address concerns early.
- Prepare Documents: Keep your paperwork organised and up to date.
- Strategic Planning: Work with your broker to set realistic expectations and plan for potential challenges.
We can help
Property valuations are a critical step in the home loan process, whether you’re buying, selling, or refinancing. Understanding how they work and the role mortgage brokers play can make a big difference in securing the best financial outcome. With expert guidance, you can avoid costly mistakes and set yourself up for long-term success.
If you’re looking to navigate the property valuation process with confidence, Unlocked Finance is here to help. Our expert brokers will support you throughout, ensuring you secure the best valuation and optimal loan outcomes. Contact us today to discuss your property goals and find the best solution.
