There are many reasons why a property valuation can be of great benefit to you. In fact, a property assessment is necessary for a variety of endeavours, including property financing, sales listings, investment analysis, property insurance, and taxation. So, what is a property valuation? To help you understand how valuations work, here we explain what a property estimate is, who carries it out, and why you might need one.
What is a property valuation?
Let’s start by defining what a property valuation is. A property estimate simply helps establish the value of a property. This means a valuation is a professional opinion (by a certified valuer) of the value of a property. Property assessments are primarily for the purposes of a planned transaction, like a sale, a mortgage or refinancing. As such, a full valuation incorporates an extensive and comprehensive internal and external examination of the property. As well as researching comparable sales and the overall local property market.
Who carries out a property appraisal?
Property estimates are carried out by a certified valuer/ surveyor. You can get an estimate of what your property is worth in two main ways: appraisals (market valuation) or formal valuations. A qualified valuer using established standards to generate a report about your property. There are different types of valuations.
Types of property valuations
1. Bank valuations
To start with, a bank property valuation is carried out at the request of a bank with the sole purpose of determining how much the bank is willing to lend on a home loan application. An in-house property valuer or independent valuation company undertakes the valuation.
2. Private valuations
Secondly, a private valuation is an independent property valuation by a valuer at the request of a homeowner. While they cannot be used for property financing purposes, they can help homeowners understand the value of their homes. If you’re thinking about selling, they can help you develop a fair asking price.
Property valuation vs market valuation
A market valuation is an educated guess from a real estate agent on the value of your property based on their local knowledge. The agent will advise you how much they think you should price your property based on:
- Firstly, trends in the overall property market
- Secondly, property demand in the area
- Also, the prices of similar properties in the local market
- Lastly, the property’s location, size and features
On the other hand, a property assessment is a more formal process to ascertain the value of a property. Besides this, a valuation is performed by a qualified valuer to determine an accurate value of a property in the current market.
When do you need a property valuation?
There are several reasons why you might consider getting a valuation done on your home. However, the most common is because a financial institution has requested one as part of a real estate transaction. Other reasons you might consider getting a valuation include:
- Financial reporting
- Tax compliance
- Compensation for easements or land acquisition
What happens during a property assessment?
Regardless of your motive for undertaking a property appraisement, the property assessment process is generally the same. Firstly, the valuation starts with an analysis of the property market and comparable sales in the area. Next, the valuer will visit your home and look at different aspects of your property. This includes:
- The appearance, construction and condition of your home
- Your property size and the number of bedrooms
- Access for pedestrians and vehicles
- Location and amenities
- Planning restrictions
- Local council zoning
- Current market conditions
Finally, the property valuer will then compile this information and generate a standard report with a valuation of your property.