The valuation of a property is a very important step when applying for a home loan in Sydney. Why? Your lender will use this to assess and find out how much your chosen property is worth. They will also decide how much they are willing to lend based on the result. Understanding its role and impact on your loan can help you prepare better and avoid potential issues down the line. Curious to know more? Read on.
Property Valuation Defined
This type of assessment comes into play when you’re looking to buy a house and gives its market value. The valuation is done by a certified valuer who is assigned by your lender. The valuer considers factors, like the propertys size, condition, location and current market conditions to come up with the valuation. The main aim of this process is to confirm that the property’s price aligns, with its value and gives the lender an understanding of its worth.
When lenders conduct this assessment, it influences their decision regarding the loan amount they’re prepared to offer you and aids in evaluating the risks associated with granting you a home loan. In a city, like Sydney where property values can vary, having a valuation done safeguards the lender from financial risk.
The Cost of Lender Valuation
Lenders will complete their own property valuation when you purchase a home. The resulting value is what decides your loan-to-value ratio. You can also hire individual lenders to appraise your home if you already own one.
Valuation fees will often cost anywhere from $0 to $400. But the valuation fee can also be waived when purchasing a home with a loan from that same lender.
Other Types of Property Valuation
Have you heard of market or online valuations? These are from real estate websites giving you an estimate of a property’s value. However, these are not official lender valuations so be wary of using them as accurate appraisals.
You should also be careful of estimates from online tools that use algorithms. These may not match a lender’s more objective property assessment.
What Factors Affect a Property Valuation?
Several elements impact the final valuation of your property, such as:
1. Location
Properties in that are built in popular areas will most likely get higher valuations. This is the opposite of those in less well-known areas or developing suburbs. Their proximity to schools, transportation, parks, and shopping centres also contributes to the property’s final value.
2. Property Condition
A well-maintained property will fetch a higher valuation unlike ones that need massive repairs or renovations. The people making assessments will look at the property’s structural elements. Things like roofing, plumbing, and electrical systems as well as the overall appearance of the property.
3. Market Trends
Current market conditions in Sydney can influence a valuation. Are the property prices rising? Then the valuation might come in higher. Is the market experiencing a downturn? Then valuations may be lower. Lenders are always cautious in fluctuating markets, which can affect your borrowing capacity.
4. Size and Layout
The valuation of the property is also affected by how big the house itself is, the layout and even the land it sits on. More often than not, larger properties or well-designed properties attract higher values compared with smaller or awkwardly designed properties. Things like gardens or pools, anything that gives the perception of a larger outdoor space typically boosts the value of a property.
Lower Valuation Than Anticipated- Now What?
For a borrower, the biggest challenge arrives when the outcome of the property appraisal is lesser than you anticipated. If that does occur, you have other options:
1. Negotiate with the Seller
With the new lower valuation you might be able to negotiate down on your purchase price. Potential buyers can expect bargains or lower prices to reflect current market conditions, especially if the seller has been in the market place for an extended period.
2. Increase Your Deposit
If that is not an option, you are going to have to get a bigger deposit upfront to bridge the difference between purchase price and value. This way, you keep yourself within a suitable LVR range.
3. Explore Other Lenders
Different lenders may value properties differently. If one lender values the property too low, another could be willing to asses it at a higher value.
How to Get Ready for a Property Valuation
Nervous about your property valuation? Here are some steps you can take to prepare for it:
1. Do Your Research
Research comparable properties in the same area before making an offer on a property. Understanding the market value of similar homes can give you a clearer idea of what to expect during the valuation.
2. Present the Property Well
Are you refinancing? Ensure your property is in good condition before it gets appraised. Do simple maintenance tasks like general outdoor yard work and minor repairs. Clean your home as well since this will create a positive impression.
3. Keep Documents Ready
Compile all the necessary documents and be ready to present them. This includes files like your contract of sale and building reports. This helps the valuer get an accurate picture of the property and its condition.
AFMS Group: Helping You Navigate Property Valuations
Our company recognises that the appraisal stage can be a nerve-wracking aspect of applying for a home loan in Sydney. Our seasoned mortgage brokers are here to assist and explain how the appraisal process influences your ability to borrow. Whether you’re a homebuyer or considering refinancing options, we will help you get the perfect loan. Call us today.
