When you buy a house or property, chances are the bank or lender will require you to get a registered valuation.
What is a registered valuation?
A registered valuation (commonly referred to as a valuation’) is where a qualified valuer goes to the property and inspects it. They will usually examine the interior and exterior of the house. They will also review market statistics, and comparable properties that are for sale, or previously sold in the area. They will then produce a report.
Where do you order a valuation from?
You should check with your mortgage broker, financial adviser or bank as to where to order the valuation from, and from who do they accept valuations from. Many banks are now using systems such as CoreLogic or Valocity to arrange their valuations. This is where a customer needs to pay via a website for the cost of a valuation. However the customer cannot choose the valuer. The valuer is randomly or blindly allocated. These websites such as CoreLogic or Valocity help manage the process. Once the valuation has been ordered, they will usually make contact and arrange a time to view the property. When the valuation has been completed, they will email it.
Some lenders may allow you to organise your own valuer and not require the user of CoreLogic or Valocity. You should still check as to whether the valuer that you intend to use is acceptable. Some lenders have lists of panel valuers, or preferred valuers.
What happens if the value on the valuation is too low?
Sometimes, valuers can value a property lower than what you are paying for it. For example if you are paying $700,000 for a property, and the valuer values it at $680,000, this means that you might be overpaying for the property by $20,000. Your bank or lender may need to assess the application and reconsider if you can still borrow for this property. It may mean that you can, however the equity of the deal can differ. In situations where you have a very low deposit, this could present a greater problem.
Why are valuations required?
Lenders and banks can require a valuation for a variety of reasons. One of the main reasons is to ascertain what is the likely market value of the property. A lender would not exactly be too enthusiastic about lending on a property where you are paying far more than what it is worth. There are different reasons, but one reason in particular would be that it may mean that it is not a great security to them. It could mean that if some financial issue happened to you, and they had to sell the property e.g. at mortgagee sale, the property would not be worth very much.
Valuations can also help lenders understand some of the possible issues around a property. A valuation is not as comprehensive as a professional building inspection, however it can help alert lenders as to possible issues around the property. Examples of this may be matters such as an unconsented part of the house.
It can also help the lender to understand possible risks in the market and the property. Be mindful that a valuation can raise issues or risks about your desired property and may cause the deal to fall over.
How much does a valuation cost?
The price of valuations does vary, but can generally range from $650 – $900. It can also cost more if you have a more complex valuation required, or the valuation relates to a property that is not in a main city area and the valuer has to travel or drive further to value the property. You also may need to pay more if you require the valuation to be delivered urgently. In any case, it can take a lot of time for valuations to be ordered, so it helps to plan in advance.
Who normally pays for the valuation?
It is common for the valuation to be paid for by the buyer/purchaser of the property.
What are other types of valuations?
There are also other types of valuations, such as electronic valuations (Sometimes also called an eVal or iVal) and also a desktop valuation. These are other types of valuations that can sometimes be used. They are generally used where the purchaser has a greater level of equity in the house, e.g. the property has a lower level of LVR. They also come at a cheaper cost because they do not require a physical inspection of the home. The theory is that at a lower LVR, such as 50%, using this type of valuation is more tolerable or acceptable. However, check with the lender and/or mortgage broker if they are willing to accept this type of valuation.