A property valuation is a
formal, detailed report undertaken by a certified practicing valuer (CPV) that
determines a property’s market value and examines the property beyond its size
After a valuer inspects
the property in person, they’ll compile a valuation report with details of the
zoning, the condition of the property, a review of the property’s land title
and identify easements or encumbrances, highlight the highest and best use of
the property and address any adverse features about that property which might
affect its value.
A big part of the valuation process includes risk ratings, which the bank relies on as part of its
Even if you get a good
valuation figure, you may still not be approved for the loan if the risk rating
is too high for the bank’s appetite.
Simply put, risk ratings
are how the bank determines the level of risk attached to lending against a
It might even surprise you
to know that being located opposite a school can trigger a risk rating.
Risk ratings are ranked
from 1 (low) through to 5 (high risk).
Depending on how
risk-averse your lender is, a rating of 4 or 5 is unlikely to result in getting
a green light on your loan application.
These risk ratings include
anything from the location, land, environmental issues, the market for the
area, predicted future value, and even market segment conditions and
As valuations are
undertaken by professionals, this is a paid service that usually costs between
$500 and $800, usually determined by the value and complexity of the report.
When do you need a property valuation?
A property valuation is
usually done in a situation where a definitive value is needed.
For example, things like
property settlements, applying for finance, land tax objection, or dispute
Banks and lenders will
also use valuers to get a clear and legally-sound estimate of a home’s worth
prior to approving a loan or refinancing.
But a formal valuation can
also benefit both buyers and sellers in a usual translation.
A valuation helps buyers
reduce the risk of overpaying for a property whereas the detailed property
analysis can also help sellers decide which renovations would increase a
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Tuesday, 12 April 2022