Want to know what your home is worth in today’s market? You’ve landed on the right blog.
Whether you’re thinking of selling, refinancing or want to keep an eye on your equity, knowing your property value is paramount.
The good news is that estimating your property value doesn’t need to be expensive. And in this article, we are going to cover everything you need to make a proper property valuation.
So, let’s get started.
How To Estimate Property Value?
The most common methods to estimate property value in Australia are:
- Online valuation tools (free and instant)
- Real estate agent appraisals
- Bank or lender valuations
- Professional property valuations
Let’s dissect each of these.
Online Valuation
There are a plethora of online tools Aussies can use to perform electronic valuations of a property. The only thing you need is an input address. There are tools that are powered by the Automated Valuation Models, with algorithms advanced enough to deliver relatively accurate results.
Here’s how online valuation works:
- Visit a property valuation site
- Enter the home address
- View the estimated value, data points, and comparable sale
What makes these tools so popular is the convenience. They’re free to use and require zero human contact. But there are limitations.
For instance, if your home has undergone recent renovation, or located in a suburb with few sales, the estimate may not be accurate. So, these tools are great for a quick check. But if you are preparing to buy or sell, use them as initial research.
For our customers: We can send you a property report that includes a list of property sales in most states for free, as we subscribe to CoreLogic.
Real Estate Appraisals
Real Estate agents provide a rough estimate of what your home might sell for in the market. And unlike automated tools, agents bring expertise for a certain area, they have insights and practical experience.
A real estate agent typically assesses the features, condition, location, and appeal of your property. After this, they will compare it to the recent sales of similar properties and then make an estimate.
Agent appraisals are free, non-binding, and offered as a service to the sellers. These estimates can be very accurate especially when the agent knows the area well.
Even then, there are risks of over-quoting if the agent wants to win your listing. Still, an agent appraisal does provide valuable context no algorithm can replicate, such as buyer demand, street appeal, and upcoming infrastructure projects.
Bank/Lender Valuation
Lenders often need bank valuation to determine property’s value for the lending process. This valuation is for risk mitigation purposes and lenders typically use a combination of approaches:
- AVMs (Automated Desktop Valuations)
- Drive-by valuation
- Full in-person valuation by a qualified valuer
In terms of accuracy, bank valuations tend to be conservative as they’re strictly based on comparable recent sales and exclude emotional or speculative factors. This typically means the valuations come in lower than what you’d expect to sell for on the open market.
You should also note that you can’t usually pick the valuer, and the bank may not even share the full report with you. Still, a crucial part of the borrowing process can impact how much deposit or equity is needed.
Professional Property Valuation
A professional property valuation is the most detailed and reliable way to determine your home’s actual value. It is performed by a certified valuer and involves a thorough property inspection and a formal report outlining how the value is calculated.
Professional valuations are carried out in legal, financial or investment situations. They are common in divorce settlements, SMSF property purchase, and are also used to contest a low bank valuation.
As we mentioned, valuers follow methodic processes set by Australian Property Institute (API) to assess factors such as land value, building condition, improvements, location, zoning and other factors.
Three Levels of Estimate
The methods above can give you a correct estimate, banks don’t just look at the numbers, they also want to check how reliable the numbers are.
And this is where confidence estimates come in. Depending on the quality of data and method of valuation used, your property’s value may be categorized as either high, medium, or low.
Let’s break them down.
High Confidence Estimate
An estimate is high confidence when there’s solid recent sales data of similar properties in your area. A high confidence estimate can be generated using accurate models.
For borrowers, this translates to faster approvals and better borrowing terms. It is also the best-case scenario for refinancing, purchasing, or accessing equity.
Medium Confidence Estimate
Medium confidence estimate means the property valuation is somewhat reliable but proceed with caution. There might be some inconsistencies such as comparable sales and other data points.
Lenders might also require additional checks to proceed with such properties. As a result your borrowing power and time to get a loan may take a hit.
Low Confidence Estimate
A low confidence estimate basically means the data is unreliable and the valuations have a wide margin of error, which makes the leaders cautious. Banks will almost always require a full, professional valuation before approving a loan.
This can delay the process and potentially reduce how much you can borrow. If your estimate falls into this category, expect more scrutiny, possible valuation fees, and tighter lending criteria.
Final Words
Property value estimation can be done via online tools, real estate agents, banks, or professional valuators. They all offer different levels of accuracy.
What matters most is how confident lenders are in the estimate. Knowing this can help you plan better and avoid delays. Need clarity? Start with a free property assessment today.