The seller of that home you are about to purchase no doubt thought long and hard about how much to ask for it.
She consulted with her real estate agent who spent some time poring over statistics and the prices of recently sold homes in the area to come to an estimate of the home’s value.
You made your offer based on what you felt the home was worth (hopefully based on your research).
When all is said and done, however, if you are getting a mortgage, neither your opinion nor that of the seller matter.
The home is worth, what the Valuer says it’s worth, at least as far as your lender is concerned.
Who is the Valuer?
A professional Valuer is an unbiased, licenced & certified third party that is trained to determine the value of a piece of property.
Like many real estate agents that belong to an industry association that adheres to strict ethics, so do most Valuers.
Are Valuers always accurate in their evaluation of homes? Usually, they are, but not always. It depends on the information available to them at the time.
What affects a home valuation?
Numerous factors can influence a home’s value. Some of these include:
- The national and local economies
- The location of the home
- Nearby foreclosures
- The condition of the home
- The amenities of the home itself: build & land size, bedrooms, living areas, parking etc.
- The value of other, similar homes that were recently sold in the area
- The appearance of the home compared to those that have recently sold
- Upgrades made to the home.
A day in the life of a Valuer
Let’s assume you’ve made a full-price offer on a house that is listed at say $450,000.
The lender will order a valuation of the house before giving you the final decision on your loan application.
The Valuer visits the home and looks at every aspect of its exterior, from the roof to the soil.
Then, he or she inspects the interior, from the ceiling to the floors.
Finally, most Valuers measure the square metre size of both the house and the lot.
Back at the office, the Valuer uses the information she compiled to compare it against comparable sales nearby.
She takes other facts into account as well, such as any problems with the house and any upgrades.
She may also check local planning departments to ascertain if anything is planned in the nearby community that may impact the home’s future value.
Finally, the Valuation is compiled and handed off to the lender.
The best news a buyer can receive is that the house valued for more than he offered.
The next best news, for both buyer and seller, is that it was valued at the offered price.
Then, there’s the worst news
A buyer typically has four choices when a Valuer comes in under the agreed-upon sale price.
Ask the seller to lower the price, increase the cash deposit, negotiate with the seller to pay half of the shortfall and you pay the other half, dispute the valuation or walk away from the deal.
Sellers, on the other hand, have several choices as well.
These include lowering the price of the house to meet the valuation or looking for another buyer.
If you feel the valuation was too low, work with your agent and loan broker to find discrepancies in the report.
Check that it accurately reflects the size, the age of the home (as well as those of comparable homes) and the number of bathrooms and bedrooms.
Check the comps the Valuer used for errors regarding the home’s condition.
If you find errors, have your real estate agent contact the lender for a new valuation.
Most experienced real estate listing agents come close to the figure that the Valuer gives.
Typically, a homeowner or an over-ambitious agent may have set an unreasonably high home price and a buyer that either wants the home so much she is willing to overpay or a buyer that doesn’t do her homework and fails to research the sales prices of nearby homes.
If you are selling, read about Getting Your House Ready For a Property Valuation here.
To find out more, you’re welcome to call 08 83961100 to arrange a chat with people that care.
Alternatively, Book a Free Consultation or Get Your Home Value Here.
Feel free to browse the rest of our Blog for more tips tricks and helpful info you can use.
Not sure of some of the terms & meanings used? Check our comprehensive Glossary and Abbreviations!
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