When it comes to getting to know the value of your property, you need to know the difference between property appraisal with property valuation. This article will give you some guidance and information that differentiate property appraisal and property valuation in terms of what they are, who can conduct them when you usually have them and problems buyers and sellers encountered with property valuation.
What is property appraisal?
A property appraisal is essentially an opinion of a property's current market value based on market conditions and other considerations.
What is property valuation?
A property valuation is a legal document of detailed assessment on the market value of a property.
Who and when to do property appraisal?
Property appraisal usually conducted by professional and licensed real estate agents. You typically get a property appraisal if you want to sell your property before putting the property on the market. As you may be aware, real estate agents have a solid motivation to over quote the selling price to get your business. Not all of them do this. In fact, the better ones don’t, but they have to be much respected or dealing with a well-informed seller (you, I hope) to be 100% honest on the pricing. Few real estate agents also do not know how to come up with the correct pricing; they might be new to the business or lack the necessary knowledge.
If you want to get a property appraisal with 100% honesty, you can start book your free property appraisal here.
Who and why do property valuation?
A formal valuation in Australia can only be performed by a qualified individual who has completed the requisite training and education, referred to as a "valuer." You're assured that the amount you're given is accurate, dependable, and will hold up in court if you hire a competent and experienced appraiser. Property valuation is used in purchase-and-sale transactions, refinance transactions, deceased estates, marriage splits or legal disputes.
A property valuation is used in a purchase-and-sale transaction by the lender (e.g. the bank) to assess whether the contract price is reasonable given the property's condition, location, and property market. A valuation ensures that the lender isn't giving the borrower more money than the property is worth.
How much money does a property appraisal cost?
Property Appraisal is generally offered for free by professional and licensed real estate agents.
How Much Money Does a Property Valuation Cost?
Property valuation typically cost around $300-$600AUD; however, they might cost more depending on how many details required in the report. A property valuation required for lawsuits will likely need to be in more detail, resulting in more cost than a valuation to provide to a potential lender.
The Appraisal and Valuation Process
Both property valuation and property appraisal are done in a variety of ways by different companies.
Appraisal or Valuations can be done by doing research using online data, sometimes referred to as “desktop or online appraisal/valuation”.
In certain circumstances, a drive-by inspection of the property is sufficient for a value called “kerbside appraisal/valuation”.
In other cases, a property inspection is needed by the agent or valuer before an accurate appraisal or valuation can be obtained, also called “full appraisal/valuation”.
What Homebuyers Need to Know about property valuation
The valuation conducted by the lender will be one of the steps needed if you are buying a house and are under contract. The purchase will proceed as expected if the valuation comes in at or above the purchase price. Nevertheless, if the appraisal comes in below the contract price, the deal may be delayed or derailed.
If the valuation price comes below the contract price, you as a buyer has few options. You can re-negotiate the price with the seller for a lower price as the lender will not lend you or anyone else more money than the house is worth. If you think a poor valuation price prevents you from purchasing a property, consider getting a second assessment from a different lender that will assign a different valuation company. This option might result in a different valuation price, hopefully at or above the contract price. However, the risk is that you need to extend the cooling-off period from the seller, which sometimes would not be agreed upon by the seller.
What Home Sellers Need to Know about property valuation
If true, a low valuation may force you to cut your property's selling price to sell it. Suppose the buyer comes with a valuation from the lender that is lower than the contract price. In that case, you can ask the buyer to get a new valuation from a different lender or negotiate with the buyer for a lower price. If both is not an option for this buyer, you might need to find a different buyer for your property. It is doubtful that waiting for an all-cash buyer who doesn't need a lender's valuation is a valid option. Nobody wants to pay too much for a property, so if the next buyer also has difficulty with the price valuation, you might need to consider lowering the selling price.
In Summary
It is essential to differentiate the difference between property appraisal and property valuation. There is a misconception that property appraisal is the same as property valuation. This information will be crucial, especially if you are planning to sell your property and need to get an idea about the value of your property. As mentioned, you need to be aware and selective of the appraisal price conducted by real estate agents as they have a strong motivation to over quote the selling price to get your business. Having a basic knowledge of how property appraisal and valuation works can only help you, particularly if you are looking to buy or sell a property for the first time.
If you want to get a property appraisal with 100% honesty, you can start book your free property appraisal here.