Wondering where to get a property valuation or who to order it from? When buying a property, or looking to refinance, it is very common that a bank will ask for a valuation to be ordered. Many customers therefore ask, how do you order a valuation?
Why might a valuation be needed?
When you’re buying a property, a valuation is often asked for by the bank. A registered valuation is typically where a qualified valuer physically inspects and drives to the property. They will look at it, take photos, and write a report. This report will include a range of matters that include, an estimate on what the property might be worth, advantages of the property, disadvantages, risks, and more. The valuer usually would also comment on other matters such as problems, environmental factors, etc.
There are many reasons and uses for a valuation which cannot be comprehensively explained in this article, but here is an overview.
Purchasing: A bank uses a valuation as its ‘eyes on the ground’. The bank’s staff members read the valuation and use it to understand what the property looks like, its advantages, disadvantages and so forth. A bank will also read the market value. It usually wants to understand that you are paying a fair price for the property. For example, if you were buying a property for $700,000, but the valuation was for only $600,000 – this would raise questions to the bank to try and understand why you are paying so much for a property that is not worth nearly as much. They may therefore ask you to use a larger deposit, or reconsider their approval.
There are other reasons a bank or lender might use a valuation. For example a particular lender might not allow you to get a mortgage if your house is next to a train track. The valuer would write it is next to a train track, and then the bank could see it is on a train track route then potentially decline it.
Refinancing: In other cases, some lenders might have strict guidelines around LVRs (Loan to value ratios) and need a valuation. For example, you might be refinancing from one lender (“Lender A”) to another lender (“Lender B”). Lender B could be happy to receive you as a client, on the basis that you can show that your property is worth a decent amount. Lender B might ask for example that your debts are not more than say 75% or 80% of the property’s market value, as determined by a registered valuation. If the registered valuation is too low, your LVR could be assumed to be in a weaker position, meaning the home is not worth much. Therefore Lender B could lose its interest or appetite in lending you money and have you as a client, as there isn’t enough of buffer or equity in the home.
There are also other reasons which are not explained in this article. Also, a valuation might help signal issues to a lender around problems with the property.
Remember a valuation isn’t a substitute for a professional building report.