Bank Valuation V Real Estate Appraisal

There are generally two avenues of finding out how much a property is worth – a real estate agent and a valuer; however, the two don’t always agree, with the agent generally taking a more optimistic approach and the valuers a more conservative approach. It’s helpful to understand the differences between an agent’s market appraisal and a valuation conducted on behalf of a lender.

Market Appraisal: This reflects the price an agent believes the property would achieve if you sold in the current property market. It identifies the property’s style and features, including construction type, land size, number of bedrooms, bathrooms etc; and then compares it with similar, recently sold properties in the neighbourhood and surrounding areas.

The agent combines the above information with their market knowledge and estimates a price range they believe can be achieved using their marketing strategy. Most agents will generally be in the same ballpark, with any variations attributed perhaps to their eagerness to win your business and/or their self-belief in their selling skills.

Valuation Report: Whilst most property owners thinking of selling engage the services of a real estate agent for a market appraisal, it is generally lenders (banks and financial institutions) that request the services of a valuer. The property valuer generally inspects the property to determine its condition, or complete a desktop or automated valuation, applying other property and economic data to determine its value, taking into account the lender’s threshold for risk.

It is this risk factor that sometimes generates different valuations from lending institutions; generally though a valuer’s assessment represents the amount a bank might lend against a property based on a 20% deposit.  As a result of this, a valuation report is almost certainly lower than the agents price range. For buyers, it is good to know both the market appraisal and the bank valuation, as the purchase of a property way above the valuation without a plausible explanation, may struggle to retain the support of their lender.

Here at Wright Place we believe our market appraisals reflect what one can realistically achieve in the current market at the time of selling, taking into account, a range of factors.  However, before acting on any information, you should consider whether it is appropriate for your personal circumstance and carry out your own research.

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