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What's the difference between a property valuation and appraisal?

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Knowing a property’s value is essential when you’re buying or selling a home, or if you’re thinking of refinancing your loan. In this guide, you’ll have the answers to questions you’ve always wondered like ‘what’s the difference between a property valuation and appraisal?’, ‘what is a property appraisal?’, ‘how much is my house worth?’, and other burning questions! 

What is property valuation? 

Property valuation identifies the value of the property based on factors such as location, condition, and amenities. It is the definitive value of a property and property valuation reports are legally binding documents. Property valuations are done by qualified and certified property valuers. 

Always check if a property valuer is a Certified Practising Valuer (CPV) or if they’re a member of the Australian Property Institute. These property values can work for lenders or be independent contractors. 

Getting a property valuation is standard procedure when you’re applying for a new loan or want to refinance your current one. Lenders may also perform their own valuations of the property called lender valuation

If you’re a buyer, knowing a property’s exact value will give you a much better idea on how much your lender will let you borrow. Plus, getting a property valuation can help you negotiate for a better price and make sure you've insured your home properly. 

How is property valuation calculated? 

A formal property valuation takes into consideration these key factors: 

  • Location or neighbourhood 
  • Layout of the block, aspect, and topography 
  • Size of the property (land size and house size) 
  • Property features and fittings 
  • Building condition 
  • Structure 
  • Damages and faults 
  • Heritage status 
  • Ease of access to the property 
  • Local zoning 
  • Planning restrictions 

A property valuer will take all of these into consideration and create a formal property valuation report with their official findings. 

What is property appraisal? 

A property appraisal is an estimate of a property’s value done by a real estate agent. A real estate agent will conduct a property appraisal by comparing a property with similar properties in the area. Real estate agents will consider recent sales data of the past 90 days which includes how much properties sold for, the price range of properties available on the market, and a property’s features. 

For property appraisals, it is essential that the real estate agent conducting it has in depth knowledge of the locale. With the right property appraisal, sellers could have a good idea on how much their property is worth. 

Appraisal vs Valuation: What’s the difference? 

Both property appraisals and valuations look at a property’s value. However, they are two very different things. The value from your property appraisal may not match your property valuation because they calculate the value of a home in different ways.  

A property appraisal is usually done for free by real estate agents as part of their services. An appraisal isn’t legally binding and only provides a snapshot of the local market. When conducting property appraisals real estate agents take into consideration buyer demand, market trends, and street appeal. 

You can request your local real estate agent for a property appraisal if: 

  • You’re looking to buy a new home and want to know more about a neighbourhood.  
  • You’re a seller who wants to see where the local market is at. 

Meanwhile, a property valuation is legally binding and provides a conclusive value of the property. A property valuation report is a much more formal document that takes into consideration various tangible factors that determine the value of a property. Property valuers don’t consider buyer demand or the state of the real estate market. 

You may need to get a property valuation when: 

  • Buying a property and you want to make sure you’re not overpaying. 
  • Selling a property and you want to set a fair market value price. 
  • Your lender requires a valuation so they can determine your borrowing capacity and LVR (loan-to-value ratio). 
  • Refinancing your home loan and your lender needs a valuation to find out the current value of your home. 
  • You need to settle a legal dispute. 
  • You need to take care of a deceased estate. 

Property valuations and property appraisals each serve a different purpose. Finding the right value of a property can be a challenge. If you’re looking at a place to start, download a property report to know more about properties that you’re interested in. 

About the article

As Australia's leading online lender, loans.com.au has been helping people into their dream homes and cars for more than 10 years. Our content is written and reviewed by experienced financial experts. The information we provide is general in nature and does not take into account your personal objectives or needs. If you'd like to chat to one of our lending specialists about a home or car loan, contact us on Live Chat or by calling 13 10 90.

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