When you are exploring the market to buy a house for the first time, it is vital for the lender to know what the value of the property is, so that they can determine whether the property value is worth more than the loan sum you need to borrow from them. You also need to know what the correct price is to pay for the property.
What Is The Purpose Of A Property Valuation?
A certified valuer does the valuation of a property or land for a planned transaction, i.e. refinancing, a mortgage or a sale. These real estate transactions require valuations, as every property is unique. Location is a key factor but also any improvements or upgrades and the current condition of the property which will affect the value.
Types Of Valuations
You can either get an appraisal which is the market value, or you can acquire a formal valuation. Appraisals are usually done by a real estate agent and are a guide to pricing determined by obtaining information about recent sales prices in the said area. Appraisals are given free of charge.
A Formal Valuation Is A Paid Service And Will Take Into Consideration The Following Factors:
- The area where the property is located.
- The building structure and the condition it is in.
- Structural or building faults.
- Special features of the home.
- Encumbrances or caveats on the property.
- Local council zoning.
- Additional features of the property which is relevant in rural areas
- Recent sales
What If A Valuation Is Too Low?
If you have a suspicion that your property valuation is incorrect, you can get an understanding from the property valuer or lender as to why your valuation amount is of a lesser value than expected. A written objection can be submitted to government agencies in your state.
However, sometimes it happens that you’ll be faced with a valuation shortfall which means that the valuation is less than what was estimated for the property or the amount that was paid. This can apply to refinance or buying and can result in a lender declining to lend you the full amount that you need to proceed to refinance or buy a property.
There Are Two Options You Can Consider In Case Of A Shortfall:
Look for another lender that is willing to lend you a higher loan to value ratio which means that the amount eligible for borrowing could be covering up to 95% of the value of the property to give you enough resources to cover the shortfall.
Cover the shortfall if you can do so.
What Is The Difference Between Valuation Providers?
Valuations that are carried out by licensed valuers are different to those carried out by estate agents. The reason being that estate agents are taking into consideration the interests of the vendor (seller) and will receive a commission based on the selling price of the property once the property is sold. They may be a bit more optimistic in their assessment of the property’s worth as opposed to a licensed valuer who is legally obliged to provide a valuation based purely on up-to-date data and facts.