Valuations are a very important component of the home loan borrowing and approval process.
Most all banks in the market will request for a property valuation to be conducted by an independent valuer.
Banks have an approved panel of accredited valuers to choose from when requesting a valuation. All valuers are qualified and must have professional indemnity insurance cover.
Why do banks need a valuation?
Property prices have experienced unprecedented growth in the past few years. Banks require accurate information for property trends, suburb population, market analysis and appraisal of the security property been offered.
Banks must satisfy themselves that the property they are accepting as security is marketable in its present condition and can be sold relatively quickly in case the property needs to be sold if the borrower defaults on his loan obligations. Banks do not want protracted selling periods which may affect the sale price.
A valuation report will provide all the information needed for the bank to make a final assessment on the property.
What does a valuation report include?
The report will include details of any adverse features of a property such as:
The valuation report will also include the valuer's comments and concerns on the general condition of the property. The report will then be assessed by the bank. Once the bank is satisfied that the report meets with all banking policy requirements it will issue the formal finance approval to the borrower.
Damaged properties - Valuers will factor in the cost of necessary repairs to determine the property value
Is the property over capitalised - The value of all improvement may outweigh the land value content. It could be the most expensive property in the area. Comparable sales in the area may be difficult to find.
Properties affected by flood or environmental hazards - Properties that are in these types of areas may not meet with banking policy.
National trusts and heritage listed properties - Usually these properties have restricted covenants and may be unacceptable security for banking purposes.
Non-compliance with council zoning - Any property that is in non-compliance with council zoning codes will fall outside the banking assessment criteria. Councils have the authority to order the demolition of any dwelling or extension done to a dwelling that is in not in compliance with building codes.
Comparable sales - The property offered as security should be comparable to similar properties in the area whether inferior or superior
Rental appraisal - The valuer will also provide an estimate of the expected rental return on the property if used for investment purposes.
A satisfactory valuation report is also beneficial to the prospective purchaser as it will provide the added comfort of knowing that the property is in compliance with the authorities rules and regulations.