Understanding Property Valuations: What Really Impacts Your Home's Worth

Understanding Property Valuations: What Really Impacts Your Home's Worth

As a mortgage broker, one of the most common questions I receive is about property valuations and how banks determine a property's worth. Let's explore what really matters when it comes to your property's valuation.

Different Valuation Methods Banks Use

Banks typically employ three main valuation methods:

Desktop valuations rely on statistical data and recent sales in your area. While these are quick and cost-effective, they can sometimes miss unique property features that might affect value.

Kerbside valuations involve a valuer viewing your property from the street. This method provides more accuracy than desktop valuations but still doesn't capture internal features or improvements.

Full valuations are the most comprehensive, where a valuer inspects both the interior and exterior of your property. This method provides the most accurate assessment but is also the most expensive and time-consuming.

How Location Impacts Property Value

Location remains one of the most significant factors affecting your property's worth. Valuers consider:

- Proximity to amenities (schools, shops, public transport)

- Local infrastructure developments

- Flood zones or bushfire risks

- Street appeal and neighbouring properties

- Zoning changes and future development plans

The Impact of Renovations

Not all renovations add equal value to your property. Kitchen and bathroom renovations typically offer the best return on investment. However, overcapitalisation is a real risk - where the cost of improvements exceeds the value they add to the property.

Structural improvements generally add more value than cosmetic updates. However, maintaining documentation of all renovations, including council approvals and warranties, can help support your property's valuation.

Common Reasons for Low Valuations

Several factors can lead to lower-than-expected valuations:

- Limited comparable sales in your area

- Poor property presentation during valuation

- Recent distressed sales in your neighbourhood

- Undisclosed structural issues

- Overcapitalisation on renovations

- Market downturn

What to Do If You Disagree with a Valuation

If you believe your valuation is incorrect:

1. Request a copy of the valuation report

2. Review the comparable sales used

3. Provide evidence of recent similar sales

4. Document any recent improvements

5. Consider requesting a second valuation

6. Speak with your mortgage broker about alternative lenders

Tips for Maximising Your Property's Valuation

To achieve the best possible valuation:

- Ensure your property is well-presented during inspection

- Keep detailed records of all improvements and maintenance

- Research recent comparable sales in your area

- Address any obvious maintenance issues

- Consider timing - market conditions can significantly impact valuations

- Maintain your property's street appeal

Remember, a property valuation for lending purposes may differ from a market appraisal from a real estate agent or what you might achieve in a sale. Banks tend to be more conservative in their valuations as they're focused on managing their lending risk.

Understanding these factors can help you better prepare for a valuation and potentially achieve a better outcome. If you're considering refinancing or purchasing a property, discussing these aspects with your mortgage broker early in the process can help manage expectations and achieve the best possible result.

To know more, we invite you to contact us here:

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General Advice Warning: 

This communication contains general information only and in no way constitutes the provision of professional advice, nor should it be relied on as a substitute for financial, credit, accounting, legal or other professional advice. We have not taken into account your financial situation, investment objectives or particular needs. Before making an investment or financial decision, a person must seek appropriate independent professional advice and also consider whether this information is appropriate to their needs, objectives and circumstances. The author as well as their representatives, agents and employees give no guarantees and make no representations, express or implied, as to the accuracy, currency, completeness or suitability of the information contained in this document. Nor do they accept any liability whatsoever as a result of any information herein being incorrect, incomplete or unsuitable or as a result of a person in any way using or relying on the information herein.