How Does A Bank Determine The Value Of A Property?

When you purchase a property or if you are considering refinancing or increasing your current home loan, we will need to know what the property is worth, that is what the property is valued at in the current market.

The property for a bank, is the security for your home loan and the bank needs to know what the property is valued at or worth in the current real estate market. Banks lend against the security value (the property value), so it is important we know what the property is worth, so we know what you maybe able to borrow against the property.

The bank or mortgage broker will organise a valuation of the property you may want to purchase, or if you are refinancing or increasing your current home loan, the property you already own.

Most banks and lenders generally use external valuation companies to value property they are considering for a mortgage. These companies are separate to the bank or lender and are independent companies. The bank or lender uses the property as security, as when you take a mortgage out, the property is the security used to secure the mortgage or home loan.

When a valuer does a property valuation on a property, they look at many factors, when considering what the property is worth. One of the most important things a valuer will consider is, previous property sales in the suburb you are looking to buy in. The valuer will look at the features of your property, like the number of bedrooms, bathrooms, size of the home, land size, the condition of the property, the types of fittings inside the property and other features, like a pool or air conditioning.

The valuer will then try to compare your property with recent sales in the suburb or area that the property is located, and what comparable properties have sold for (generally within the last 3 to 6 months) to get an idea of what your property maybe worth. They will generally try and compare your property with around 4 to 6 recent sales, noting the purchase price of the other properties, and whether they are superior, inferior, or comparable to your property. This will help them with the valuation price of your property.

The valuation can also protect the consumer as well. As the valuation may give you peace of mind, that you haven’t paid too much for the property that you have purchased in the current real estate market.

With a lot of banks the valuation can be ordered upfront, before a loan application is needed. This way it can be determined what the property is worth, and what options you may have when buying a new home or refinancing or increasing your current home loan.

With a lot of banks, generally there is no cost to have a residential property valuation completed. Some banks and lenders do charge for the valuation, so it is important to discuss with your mortgage broker, if there is a fee for a valuation, and what the fee may cost.

If you have any questions at all, please contact Perth Mortgage Broker Group, or call Troy on 0411 229 602, 7 days a week