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What is a property valuation?
A property valuation is a check of one property's value. It has a stated date and purpose. A lender uses it to consider the home as loan security, meaning the asset backing the loan. A valuer's report, an agent's price estimate and an online estimate use different methods. Each figure has its own purpose and limits.
Updated
Why does the bank assess a property after a price is agreed?
The lender checks the property offered as security, meaning the asset backing the loan. The contract price records what the buyer and seller agreed. That price does not require the lender to accept the same value. Its loan decision depends on the borrower and the home, not the agreed price alone.
NSW guidance explains that conditional loan approval may still need a satisfactory property valuation. A lower accepted value can change the finance calculation. It does not automatically end the sale contract or change the price the seller agreed to. Nor does it automatically let the buyer withdraw. Those rights depend on the contract and its conditions.
How do an appraisal and an online estimate differ from a valuation report?
An appraisal is an agent's view of a possible sale price. An online estimate is produced by a model. Neither label proves that a qualified valuer wrote a report. An agent may use similar sales and market knowledge. The purpose and supporting detail still need to be clear when that figure is read.
The Australian Property Institute lists several forms of report. These include full inspections and limited external inspections. Automated estimates use models, involve no valuer and are not valuation reports. A model may lack details about an unusual layout, internal condition or recent work. A number on a screen has assumptions. It is not a confirmed price someone has paid.
What information makes an assessment easier to interpret?
The date, inspection scope, similar sales and assumptions explain the assessed value. An existing house differs from a report assuming planned work is complete. An old report describes conditions at its date. It does not automatically establish today's value. Knowing what was checked helps explain what the report can support.
A suburb median answers a separate question about a group of sales. It does not inspect the chosen house. A valuation uses details of that asset and relevant evidence. The rules can differ for lending and tax. Victoria's revenue office, for instance, treats agent appraisals and formal valuations as different sources. It can ask for more proof when assessing duty.
Illustrative example5 steps
Separating a purchase price from the lender's accepted value
- A hypothetical purchase contract records a price of $780,000.
- The lender's assessment accepts a security value of $740,000.
- Difference between the two figures: $780,000 minus $740,000 = $40,000.
- The contract price remains $780,000 unless the parties agree to change it.
- The lender assesses the financing using its accepted figure and its lending rules; the $40,000 difference is not an automatic loan entitlement or a negotiated discount.
For investors
An asset estimate needs evidence before it enters a portfolio calculation.
An investor may use values to describe equity or portfolio size. Equity means value less debt secured on the property. Those figures depend on the evidence behind them. A lender's figure, a valuer's report and an online estimate need their own labels. A gain shown by a model is not money ready to spend. Nor does it prove that more borrowing has been approved.
Common questions
Questions about property valuation
Keep learning
Property is a complex world.
Property valuation is one piece of it. Investors judge a market on evidence: supply, demand, rents and growth. Next, read about median price, pre-approval and loan-to-value ratio.
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