Property valuations are an unavoidable part of the home buying process. They’re done by your lender when you purchase a property, refinance or access built-up equity. It’s a safety net for your lender so they don’t loan you more than your property’s worth. Valuations can also give you an indication of the value of the asset you own or are about to purchase.
When refinancing to a lower interest rate or to access equity in your property to put towards a renovation or other property purchase, a valuation can make or break your plans depending on how far above your expectations, or below, it comes in at. To help prepare you for a valuation and its outcome, here are some things to be aware of.
Choosing a valuer
Unfortunately in most cases you don’t get to choose your own valuer. Lenders are likely to have their own internal valuation staff or a preferred valuation company they know and trust. This is because there’s an expectation that if you choose a valuer yourself, the valuer’s working for you so you’re more likely to get a better outcome, whereas if they’re ‘employed’ by the lender then they’ll be more cautious to protect the lender.
Types of valuations
Full, kerbside or desktop valuations each have different benefits. Recently renovated properties or those with features that need to be seen, like unexpectedly amazing views, are better off having a full valuation where a valuer physically visits, enters and inspects the property. Kerbside or drive by valuations involve the valuer sighting the property but not actually go inside, which could benefit older or more rundown properties. These are typically done in combination with a desktop valuation, which involves online research of market values for the area, recent sales and property paperwork.
Align with your mortgage broker
If you’re refinancing through a mortgage broker, they will have discussed with you the potential value of the property and made a recommendation to the lender based on this and their own assessment through using market insights like RP Data. Make sure you know what your mortgage broker has listed, and if the valuer asks what you think your property’s worth is, don’t say lower!
Erring on the side of caution
Accredited valuers are legally responsible for the information they provide and must keep copies of all records and information to do with the property valuation for a minimum of six years. This means they’re naturally more likely to be more conservative in their valuations to protect themselves, rather than get a name as a valuer who overinflates prices.
Do your research
Having a reasonable expectation of what your property is worth will help save a lot of heartache when a valuation comes in well below your expectations. Look at comparable sales in the immediate area, local real estate agents might be happy to give you a list of recent sales for free. Be careful if getting an appraisal from a sales agent’s as they’re trying to get business from you and may give an inflated appraisal to try and win your business. When comparing recent sales, make sure you take note of properties that are most similar to yours in land and/or property size, number of bedrooms/bathrooms, property age, views and any renovations.
Without stalking your poor valuer around your property, being there to point out special features or additions to your property will help ensure things that could add value don’t go unnoticed, such as new wiring, underfloor heating or city ‘glimpses’. For more ways to maximise your valuation read our 6 tips for a top valuation.
What to do if you’re not happy with your loan
Once you’ve received a low valuation it’s hard to erase it from your lender’s records. However, if new sales data and research shows that your valuation is significantly below the market, show them your findings and see if they’ll revise or redo their valuation. If they won’t and you genuinely believe their valuation is unfair (without your rose tinted glasses on) consider another lender who will do their own valuation and hopefully get a better result.
Have you recently had a property valued? What did you find out that you wish you’d known before?
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