Blog What is a property valuation and how is it calculated?

What is a property valuation and how is it calculated?

04 June 2020

Find out if you qualify

Before you buy a home, lenders usually do a valuation of your property to determine how much it’s worth and how much they should lend you - so what ingredients go into making a valuation?

A valuer looks at many things when they determine the value of a property. Some aspects they look at include:

  • Property basics such as land size and number of bedrooms/bathrooms.

  • Location, kerb appeal and interior quality.

  • Environmental risks i.e. if in a flood or bushfire zone, plus landslide risk if on a hill.

  • The condition of the property.

  • Recent and comparable sales in the area.

A valuer will also take into account any issues uncovered in the inspection process, such as mould, pest infestations, or broken fixtures and fittings.

The house and property itself

Your house is a big factor in determining your overall property’s worth. A valuer will look at the basics such as number of bedrooms and bathrooms, but also the size of the home. Other factors include:

  • The size of the property: Is it a bigger-than-average block for the area, is it usable land, does it afford more privacy than other homes?

  • If your home has an 'edge': Such as a rumpus room, a study, ample room for cars or large garage, sheds or equipment storage, a bar/entertainment area, a pool or a sizeable verandah/decking area. A great outlook or view can also add some extra appeal to the property.

  • Kerb appeal and presentation: Kerb appeal i.e. how it looks from the street is a major factor. This can be aided by keeping the front yard and everything well-presented and neat, with minimal clutter.

The quality of everything from the construction of the home, to the appliances, will also be a factor. Bringing your home into the 21st century can also add a lot of appeal. For example, carpet everywhere is largely ‘so 30 years ago’, and many older homes still have hardwood floors underneath that can look very appealing with some attention.

What direction your home faces can also be a factor as well. North-facing homes are generally more desirable, as that aspect limits potential lighting and heating issues associated with east/west or south-facing homes.

The area and location

As the old saying goes, “Buy the worst house on the best street”. A bad house can always be fixed up. What has a major influence on your home’s value is its location. This includes the suburb and its perceived prestige, but also the location’s amenity.

  • This includes things like access to major arterial roads, proximity to shops and entertainment, but also a suburb’s crime rate and other favourable data. On the other hand, value could suffer if your home is in a flood or bushfire prone area.

  • If your home is in a catchment area of a desirable school, that can also boost value as parents clamber to get their children into good schools.

  • Recent and comparable sales in the area could also be a factor in your home’s value. If the neighbour’s home sold for 20% more than it did than five years ago, that might be a good indicator of what a valuer will base their judgement off. Similarly, a slide in value on your street or block could also impact your home’s valuation.

Access to public transport for easy commutes into the city, and increasingly, your type of NBN connection can impact a home’s value. While there’s not much you can do regarding your existing home’s location and amenity, when looking for a new home, it could pay to do your research into where the ‘growth suburbs’ are.

Ways to boost a home’s value

It’s common to feel some sense of shock once your home has been valued, especially if it’s lower than you expected. It’s only human to place a higher value on your own home - all the memories you’ve created in it, the blood, sweat and tears poured into the bricks and mortar. However, a valuer tends to look at the hard truth without the emotional attachment. Some easier projects could include:

  • Fixtures and fittings: Bringing your home into the 21st century can go a long way into increasing appeal - this includes getting new cabinets and doors, and even just updating your picture frames to look more modern.

  • Cleaning up the yard or garden: Unkempt lawns and wild gardens can hamper a home’s kerb appeal. If you have a run-down barbecue pit or gazebo, a refresh could go a long way.

  • Re-doing the deck/verandah: You don’t need to totally rip everything up, but a fresh coat of varnish could make everything look cleaner and more modern.

The good news is, you don’t necessarily have to totally redo the kitchen or renovate the house to increase value - a little TLC can go a long way.

How much do home valuations cost?

Valuation fees vary from lender to lender, but are typically anywhere from $300 to $600 and up from there. Valuation costs are typically quoted on application, and can differ based on property type, such as if it’s a prestige property. At the time of writing loans.com.au’s valuation fee is $220, but could be higher for some high-end or rural properties.

Get a free property report

The report will include extensive information about the property you are planning to buy or sell from market-leading property research company Core Logic. Each report includes an estimated price range for the property, recent sale prices for similar properties in the area, details of nearby properties that are on the market, information on the suburb’s performance and a suburb profile.

Request property report