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Understanding property valuations

Understanding property valuations

A property valuation is an important step in your home buying journey. We explain how it typically works and what to look out for.

A property valuation can be useful for buyers, sellers and those somewhere in between. In the home buying journey it’s usually done after you’ve found a property you wish to purchase, or to determine the value of your existing property when wanting to top up or refinance your loan.

Having this information on hand can help you with important decisions. If you’re buying, it can help you figure out what the right price may be to pay for a property. And for an existing property, it can help you decide whether now is the right time to sell or how much equity you may have to unlock – to pay for renovations, for example.

Your prospective lender will likely ask you to obtain a valuation so they can be sure the value of the property is greater than the loan amount you’re wanting them to provide.

How does a property valuation work?

There are a couple of different types of valuations, including:

  1. An automated valuation
  2. Using a qualified valuer to make an appraisal of the property

An automated valuation is a great way to quickly gauge a property’s estimated market price. It’s useful to estimate the price of a property you are interested in purchasing or determine the current value of your existing property. You can arrange for one at any time by speaking to a CommBank lending specialist.

To get a more accurate estimate of a property’s value, a qualified valuer is usually required. When you apply for a loan, and assuming a valuation is required, typically a valuer working on behalf of your bank or lender will visit the property you either own or are interested in buying, to look at the following:

  • Size of the property
  • Number and type of rooms
  • Fixtures and fittings
  • Areas for improvement
  • Location
  • Building structure and condition (including faults)
  • Standard of presentation and fit-out
  • Ease of access, such as good vehicle access and a garage
  • Planning and restrictions and local council zoning
  • Recent sales in the area and other market conditions.

They’ll then provide an estimate of the property’s value to your lender based on their assessment. The lender may or may not share that estimation with you – if they don’t, you can always choose to engage a valuer yourself for a separate valuation.

How is a property valuation different to a market valuation?

A market valuation or appraisal, which is typically done by a real estate agent, looks at how much a property would sell for in the current market. It takes into account any current trends, even if they may be short lasting.

By contrast, a property valuation takes into account a home’s value over the longer term as well as current trends. This is because as part of a secured home loan, the property itself is used to secure the loan. This means that should something go wrong with your repayments, the lender can sell the property in order to recoup the outstanding debt.

Because the lender wants to be sure that they won’t be left out of pocket no matter what might happen, their valuation may be more cautious compared with an agent’s market valuation. But it’s important to understand the amount they’re willing to lend you will always be based on their own valuation, regardless of what an agent or other external expert might say.

Do you always have to get a property valuation?

If you’re applying for a home loan or finance with CommBank, we’ll let you know if the property requires a valuation and what details you’ll need to provide.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice.