Why your home could be valued differently by banks and agents

If your home is set to be mortgaged, it will need to be valued by your lender. Indeed, a valuation will assure the lender that your asset acts as a form of security against the amount borrowed if you are unable to pay the mortgage and the lender is required to sell the property. Even if you are sure that the mortgage will be paid, you never know what kind of financial curveballs life might throw at you. For this reason, bank valuations tend to be conservative.

Real estate agents often come up with their own market valuations for properties in order to decide what sort of potential buyers their vendor should be reaching out to.

Indeed, before acting on the behalf of a vendor, an agent will usually conduct a thorough inspection of the property in question. They will research how much other homes have sold for in the local area before producing a detailed comparative market analysis that should include the property’s minimum and maximum likely selling range.

This information will be very valuable to vendors when deciding how much to advertise the property for, particularly if they do not have much knowledge of the market.

The sale price of a property can be affected by a range of different factors such as how many people turn up to an auction, whether the local area is popular when the vendor is attempting to sell, what the market is like at the time of selling etc.

Most property homeowners start the selling process with an ideal selling price in mind. They probably also have an absolute minimum price in their minds that they are prepared to see their home sell for. These figures are likely to be based on factors such as their home’s location, its condition, size and whether it includes any special features.

Of course, the homeowner’s emotions also play a large part in their desired price. This is particularly true for people who are reluctant to move or have a strong attachment to the home and its history.

 Often, homeowners are surprised at the valuations that come out of inspections conducted by professionals within the industry. They tend to be lower or higher than anticipated. Ultimately, a property’s value will be decided by the conditions of the property market. A seller must simply decide how much they are willing to let their beloved home sell for at auction or through a private sale.

Remember that banks tend to be very careful when valuing a property to ensure that they will be able to recover adequate sums from its sale. It is important not to fret as there are a number of actions you can take to protect the deal, including:

If you believe that your valuation is too low, some lenders will allow you to challenge it. You will, however, need to provide supporting evidence for your claims such as details of comparable sales that took place recently in your area.

Remember to check through the valuation report thoroughly to make sure there aren’t any errors. If the valuer did not take a look inside your property, ask for a more thorough valuation. You may be surprised at the extent to which high-quality interiors could add value to your home. If your lender is not open to a second valuation, offer to cover the relevant costs to see if they change their minds.

Applying to another lender may be more effective than obtaining a second valuation.

If your property is valued at less than the purchase price, you should be able to go forward with the deal provided you do not need to lend over 95% of the value established by the lender. If the low valuation means that you are required to borrow over 80% of this value, however, you will need to pay for lender’s mortgage insurance (LMI). If this is the case, you may benefit from switching lenders.

If a second valuation comes back with a disappointing figure, you could try putting forward equity in a different property as security. This could save you from having to pay LMI and could event represent the difference between losing your deposit and securing a new home. First-time buyers could also ask a family member to put forward equity on their behalf.

If you would like more advice on property valuations, I urge you to get in touch with Sparrow Real Estate today. I will be more than happy to discuss everything with you.