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5 Things you should know about property valuations

Property valuations are an important part of every real estate purchase, so for potential buyers and sellers it’s worth knowing how they work and the way they can affect investments.

When people contact some property valuations companies they often ask about bank and market valuations.


In this article, we would like to tell you about five most important things when it comes to market and bank valuations to give you a proper understanding of its essential meaning in every real estate purchase.


1.The difference between market and bank valuation.

Market value is the estimated amount of which an asset should be exchanged on the valuation date between a buyer and a seller in an arm’s length transaction.

A bank valuation is an amount that the bank is ready to lend against for the particular property.


2. Are they usually the same?

Yes, but not always. We did manage to see the same property valued by exactly the same valuer, within a month of each other with a significant difference in figures.

The only difference in the process was the buyer had instructed the first valuation and the bank instructed the second.


Banks are always conservative because of the need for their own protection which is understandable. The have to be covered in case they need to sell the plot quickly in the event of a foreclosure. It lets them quickly recover the selling costs and potential downward movements in the property market.


Also, bank valuations can be significantly lower if the investor is borrowing over 90%, because of the greater risk.


3. Established properties and new properties

Especially when the potentially valued property is within a new subdivision or development and is purchased from a developer or sales from other comparable investments. Property valuers usually compare sales or use comparisons of the sales of established plots. Sometimes it doesn’t exactly reflect the added value of the property being new.


4. Why are property valuers conservative when it comes to bank valuations?

They have potential liabilities in case a bank suffers financial losses. There were situations where valuation companies were sued. This situation doesn’t help purchasers if they are dependent on the valuation being at the purchase price.


The best result is when the bank valuations come at the purchase price. However, at the end of the day, a bank can reject certain valuation and doesn’t need to explain its decision.


5. How to find out how much a bank will lend?

The best way is to submit a finance form with a bank. Some of them might give you the value figures up front. However, if you are buying a property off-plan, a bank valuation can be significantly lower than the purchase price once it is getting close to the settlement.


Circumstances can often change from when you buy to when you are ready to settle on the property. The longer the property is off-plan for completion, the more chances are there for this to happen.


For more information contact IP Valuations

 We are here for you to give you the better understanding of the property market and valuations.

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