Whether you are buying, selling, or planning to apply for a mortgage or remortgage, the property valuation is essential for your lender to know for sure how much the property is worth.

In this article, we will learn how property valuation works from start to finish.

A property valuation is a detailed appraisal of my property's market value based on its condition, geographical location, among other factors. An independent professional valuer is the only person who can perform a credible appraisal of your home. The valuer acts on behalf of the vendor or your lender considering funding the home or property purchase.

A property valuation can also be defined as a detailed appraisal of my property market dollar value for planned transactions like sale, refinancing, mortgage or remortgage.

Whether it's small or huge real estate transactions, you'll need these types of evaluations, which are critical in setting value. Any upgrade or significant improvement within your property can positively impact the property value within that area.

Some of the Non-identical Types of Property Valuation?

As people get richer and more educated, different property valuation types are implemented to settle disputes and improve living standards. These ways include:

Tax valuation

If your transactions are subject to your capital gains, then tax valuation can help you know how much you need to pay.

However, understanding what you owe you owe your capital gains tax can be very complicated. Therefore, I strongly recommend using online tax tools or looking for a professional valuer.

Expert witness valuation

Perhaps you are involved in a property dispute. An expert witness helps provide a credible and reliable survey to present in the court. The valuation includes well-detailed issues with the property and also lease information.

Insurance valuation

The purpose of insurance valuation is to establish the insurance value of your property. It is based on whether your property would cost more than average construction to rebuild if damaged beyond repair.

Building reinstatement valuation

Building reinstatement valuation is part of your insurance valuation that works out the price of rebuilding your property. In the event, if your property gets damaged beyond repair, including any risk involved.

Online valuation

Due to improved science and technology today, it is possible to get a property valuation at the comfort of your home. Online valuation is calculated by an online tool using your computer or smartphone based on your location, the type of property, and current market price.

In addition, online valuation can be used as a rough guide to give additional information when you are selling your home. However, keep in mind that online valuation is not an accurate way to provide a property valuation.

Matrimonial valuation

Matrimonial valuation is a useful procedure during a divorce proceeding. The court uses them to determine how the couple's assets will be divided. A professional valuer jointly selected by the couple does matrimonial valuation and submits the report directly to the court.

Probate valuation

A probate valuation is done after the death of a family member, either a father, mother or an adult grandson who is not married. A probate valuation is necessary to get to know the value of any assets the deceased owned. Also, it helps to calculate the tax applicable to the inheritance. The government recommends using a professional valuer for this.

Mortgage valuation

Mortgage valuation usually involves a quick 30-minute survey of the property, and it covers the apparent issues without getting into detail.

When you apply for the mortgage, your lender will conduct their valuation of the property you want to buy in order to make a provisional decision about whether to finance it or not. Furthermore, the valuation can help you get a rough idea of how much you should pay for the property.

So, whenever you are buying or selling a property, I strongly recommend you complement the mortgage valuation with a proper building survey from a professional surveyor.

Restorative valuation

Restorative valuation establishes the value of your property on a specific date a few years in the past. Restorative valuation is vital if you are involved in any legal proceedings.

When Would I Need a Property Valuation?

A property valuation offers numerous benefits to both the buyer and the seller. Some of these benefits include:

Provides a clear indication of a property market value for the seller
It reduces the risk of paying odds to the buyer

While offering a detailed analysis of a property weakness, it can help you as a seller decide which renovation to do. As a result, this will help increase the value of your home.

One of the typical reasons most people need a property valuation is that their mortgage lender (usually a bank) requests one.

According to real estate advisors, property valuation serves as a risk report for the lending institution. In addition, it acts as insurance that the security value of the property can cover the remaining amount once you fail to clear the debt.

Today, some lenders offer remote property valuation using some internal algorithms or online assessment tools. But, in most cases, property valuation is outsourced from independent valuers found on the lenders' panel.

Property valuation is also necessary for financial reporting, taxation compliance, family law meditation. It is also essential for determining the amount of compensation given to landowners for assessment or land acquisition.

What Should I Prepare Before the Valuation?

When you are selling your home or property, there are several things you'll need to do to prepare for the appointment with your real estate agent or professional valuator.

Here are some of the things you'll have to prepare to get the most out of the meeting. Also, preparation will help make it easy and hassle-free to get an accurate estimate of the value of your home.

Clean up the place

Cleaning up the place doesn't mean steaming the carpets and scrapping the gutters right away. Why? Because it is unlikely the valuator will be talking about those in the photos before the property sales pitch. However, removing unnecessary items in crowded areas and cleaning them helps create and maximize space and highlight the property's key features.

Prepare Any Relevant Paperwork

Documents like building plans, lease or rate reports, and recent maintenance fees will help the valuator speed up getting an accurate valuation.

Ask Questions And Note Them Down

Asking a question like what I can do to increase the value of my home or things you need to repair or upgrade. It can help you create a strategic plan of what to improve and what not to improve.

Noting them down will help you understand the process better and make an informed decision when moving forward. Additionally, this enables you to develop a good relationship with the professional evaluator and the real estate agent.

Numbers you Need to Prepare Before Doing a Property Valuation

Before calculating the property valuation of your home, you'll need to collect some key financial data. This includes:

Mortgage Repayment Report

The mortgage repayment report includes property taxes and insurance coverage.

The Down Payment Amounts

The down payment amount will vary depending on the mortgage plan you applied for and the used investment strategy.

Rental Income

Rental income includes the vacancy allowance, rental cash flow over mortgage payment, and rental income after settling the mortgage debt. Also, the report will consist of the normal operating expenses.

Price to Income Ratio

The price to income ratio is the median comparison between the cost of the property and the market income.
As the ratio decreases, the property value also decreases, making it more affordable for you as the buyer. Additionally, that can also mean a declining number of tenants.

Gross Rental Yield

To measure gross rental yield, you will need to divide the total purchase price of the house, including the closing cost, improvement cost, and other fees, by annual gross rent. Note that the higher the rental yield percentage, the better the investment.

How is Property Valuation Calculated?

A direct comparison with a recent comparable sale helps to create a foundation for most residential property valuation. However, valuers may take other factors into consideration like:

The size of the property
The number of fixtures and fittings
The number and the type of rooms
The condition of the structure and the building
Size of land
Ease of access to the property
Standard of the fittings and architectural style
Planning restriction and local council zoning
The location of the property
The amenities of the property include water supply, security, trash collection, and neighborhood

The first thing valuers do is. They use several recent sales as an estimated figure for the property in question. After doing this, they go ahead and adjust the figure. Of course, this depends on any significant differences found between and above the attributes of the properties.

Note that different types of property require a different approach. For example, a commercial building requires more financial analysis, while a development site requires more planning and consultancy.

Valuers can visit the property in uncertainty to check the environmental and structural state. They also make note of any structural faults and refinements that can affect the property market value.

If you plan to buy the property, the valuer will give you at least three pages of their findings. You will receive the report within three days after their visit.

The Valuation Cost

The exact price of a property valuation depends on the size and the value of the property. However, each valuer may have a slightly increased or decreased charge or rate for their services, depending on their location and repetition. With that said, most property valuers charge somewhere between $350 to $700.

Difference Between Property Appraisal and Property Valuation?

Unlike property valuation, which qualified valuers can only do, appraisals do not have any legal standing. That means a real estate agent or I can appraise my home. For this reason, appraisals are considered as a guide for pricing.

Real estate can appraise my home when trying to win my customers. They usually base their appraisal on their recent sales in that area and their experience. Also, they do not charge for their service.

On the other hand, licensed valuers charge fees for their services. In addition to this, they're legally accountable for any information they give. Therefore, their appraisal must include facts and be more comprehensive than a real estate agent appraisal.

Difference Between a Property Valuation and a Red Book Valuation?

Any type of property valuation that RICS has approved is said to have a Red Book valuation. Similar to Chartered Surveyors accredited to the royal institute of Chartered Surveyors. They follow a particular code regarding what is in the homebuyers' report and building surveys.

Therefore, this means you can trust any property valuer who is RICS certified to follow the best procedures according to international standards.

Deal with Your Money Step By Step.

Join Accury.

get member key

Is the Property Valuation Similar to My Mortgage Lender's Valuation?

No, property valuation is not the same as mortgage lender valuation. This is because the property valuation aims to determine the property's market value based on its size, condition and location, among other factors. On the other hand, a mortgage valuation does not include in-depth assessment details of the property's worth and is usually 2-3 pages.

The primary objective of a mortgage lender valuation is to check that the property is worth what you say. For example, if your house price is $500000, the mortgage valuation puts the house's value at $400000. Your mortgage lender will only give you $400000.

As a result, you will have to go back to the seller and negotiate the price or find another mortgage lender who can give you a higher loan amount to match your financial needs.

In addition to this, a mortgage lender valuation ensures it is in the best interest to give you a mortgage lender for that property.

Note that there are specific properties your mortgage lender can decline to finance depending on its structural state. Some of these properties include properties above flat stops and properties made with certain weak materials.

A professional surveyor who works at the banks, society, or mortgage lender conducts a mortgage lender's valuation. You will pay the cost of valuation for it as a part of your mortgage fees.

What can I do if the value of my home is too low?

If you think the value of your home is not correct, you can try and understand from the real estate agent or lender why the valuations are lower than you expected.

Writing a formal objection letter to the federal government agencies is another excellent way to determine why your property value is low. Sometimes, you may face an undervaluation, which means that the valuation is lower than the price paid for the property.

This applies to purchases and refinancing, and it may cause the lender to refuse to provide full financing for the house or the loan amount you need, thus leaving you with a shortage of funds.

If you are currently facing a shortage of funds, you can consider the following options:

Ask for a friend to lend you some money to cover the deficit or pay cash if you have enough savings in your account
Find another lender who is willing to lend you a loan with a higher ratio of property value

So, what if you are considering selling your property or house? What can you do to raise the value of your home?

How Can I Increase the Value of My Home?

Let somebody else do my house appraisal

When buying or selling a property for the first time, the process can be very stressful and confusing since there are many admins you will have to go through.

To make the process easier, I highly recommend hiring a professional to do the job for you. First, however, you have to stick closer to learning how the process goes and what you need to look at when buying or selling a home.

Conclusion

Although the process may sound complicated, it is an essential step. It can give you a clue about how much you'll need to pay or the price of your property. It may also give you an idea of how much your lender can let you borrow.

How Property Valuation Works from Start to Finish