Property valuation: What is it and how much does it cost?

couple talking to a real estate agent about property valuation

Whether you’re looking to buy or sell, getting a property valuation is a step you shouldn’t skip. Above all, it could help with any potential future negotiations, so you need to understand how much your property is worth.

What is a property valuation?

In simple terms, property valuation is a detailed legally binding report of a property’s market value conducted by an accredited valuer. Lenders use this report to understand if the property is suitable enough to be used as security against the loan. 

Buyers also get a valuation done to check that the amount they are paying is fair against the overall market price.

When do you need a property valuation?

You typically need an official property valuation when you apply for a home loan. Many lenders require this step before they approve your home loan application. 

You may also need a property valuation when dealing with a property settlement between a family member or a spouse. 

For example, if you’re getting a divorce, you’ll want to know how much your house is worth to calculate your capital gains tax and ensure the correct settlement amount is reached.

How to get your property valued

You can get a property valuation through an independent valuer. The cost depends entirely on the property value, and it might be anywhere between $200 to $600. However, many lenders offer free property valuations as part of their home loan package. 

Some lenders who offer free property valuation include:

  • NAB
  • AMP
  • ANZ
  • ING

When choosing a lender, double check if they offer free property valuations, that way it’s one less cost to worry about.

How to calculate property valuation

When an accredited valuer looks at a property there are a couple of things they look for:

  • The size of the property and land
  • The number and size of rooms
  • The fixtures and fittings
  • The condition of the property’s building and structures
  • The property’s architectural style
  • The ease of access 
  • Potential planning restrictions and local council zoning
  • Location and level of amenity.

Once the valuer has all this information, they’ll compare it to other properties and land in the area so they can create a report of the property’s value. 

Be mindful that property valuation reports tend to be conservative, so there might be a chance you pay a bit more than valued. When it comes to a property’s final price, competition, market conditions and buyer emotions play a role.

What’s the difference between property valuation and property appraisals?

Now you know what a property valuation is, but try not to confuse it with a property ‘appraisal’. 

Real estate agents typically conduct property appraisals and figure out the estimated value of your property in the current market. Unlike property valuations, an appraisal is not a legally binding report. 

Agents are property market experts and might understand the immediate market better than a valuer because they can see how people react to properties in the area. That’s why a real estate agent’s suggested price tends to be higher than what’s written in the valuation report.

If you’re looking to get into the property market, check out our home loan guides and tips. Alternatively, if you’re ready to buy, start comparing home loans below.

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