When buying a property or refinancing your current home loan, a valuation is required by the bank to determine the market value of the property. This valuation must be completed before the bank will provide you with their Unconditional Loan Approval.
The ‘bank valuation’ (as opposed to a ‘real estate valuation’) is completed not by a member of the banks staff but via an independent property valuation company.
An independent valuation firm is used for the bank valuation in unfortunate event the purchaser of the property defaults on their mortgage, the property is repossessed by the bank, and then sold by the bank to recoup as much of the loan amount leant to the purchaser as possible.
In this situation, if the property is then sold for less than the valuation provided to the bank by the independent valuer the bank has the ability to sue the valuer for any shortfall of funds the bank incurs.
The type of valuation completed by the valuer is determined by the bank based on the specifics of the loan application and security property being purchased.
There are three different types of valuation that can be completed; desktop, kerbside and full valuation but what’s the difference between them all?
Desktop valuations
Desktop valuations are done by the lender themselves using the median price of the suburb combined with median security. No inspection of the property is done. Generally this type of valuation is usually only utilised for properties in capital cities where the LVR is low.
Kerbside valuations
Kerbside valuations involve someone inspecting the property from the kerb on the street. Generally speaking when the property and estimated value amount is median to the suburb, no lenders mortgage insurance is required and there is a contract of sale a kerbside valuation may be used to confirm the property value.
Full Valuations
Full valuations are just that, an independent qualified valuer from a third party valuation company is engaged by the lender to inspect the property and issue a written report complete with pictures and measurements. The written report will reference comparable properties that have sold in the area and are comparable to the property being valued. This is the most common and widely used form of valuation but it does take time to be completed and can be delayed depending on how difficult it is for the valuer to gain access to the property.