Valuations are a necessary step in the home sale process. There is a lot of confusion out there regarding the truth about valuations. Some people are confused about their purpose and often think of them as surveys. Some people think that a low valuation for their home is the kiss of death. People should take the time to learn the facts about property valuations. The more people learn beforehand, the better prepared they will be to tackle this crucial step.
The mortgage approval is contingent upon the results of the property valuation. It is as simple as no valuation…no loan. Since very few people have the ability to pay for a house with cash, the valuation is going to be necessary. A loan is never going to go through without an valuation. The purpose of the valuation is to establish the home’s market value.
The main goal of the valuer is to protect the lender. Lenders don’t want to be stuck with property that is not worth its price tag, so the valuation must be completed before the lender will approve the loan. The information contained in valuation is invaluable to the lender. The lender will study the details of the valuation before reaching a final decision. It makes sense. If they are going to be funding the transaction, they should be aware of the property’s value.
The lender will often dictate the choice of valuer. If you go with your own choice for valuer, they may be subject to final approval from the lender.
Residential properties are normally appraised using either the sales comparison approach or the cost approach. When using the sales comparison approach, an valuer compares the property to similar properties that have sold in the area and bases the market value on the comparables or comps. The cost approach is based on the costs to build, which means it is more appropriate for new properties.
The actual valuation reports are very detailed. They contain information about the subject property along with comparisons of a few similar properties. There is an evaluation of the overall house market within the area. The valuer will then list any issues that he or she feels might diminish the property’s value. The next component is a list of any serious problems like bad roofs or weak foundations.
It is important to note that the property valuation is not the same thing as a survey. The valuer might make note of any problems they see, but they are not responsible for declaring if your home is in good condition or not. They are only responsible for assessing the property and determining the market value for the lender. A survey is a different process altogether.
Property valuations only include the home, the land, and any improvements to the land. It does not cover any personal property that might be sold with the house. The buyers should purchase those items separately.
What all goes into an valuation? Valuers are looking at the condition and size of the house, its proximity to good schools, and the size of the site. Valuers do not look at dirty dishes or overflowing laundry baskets. They do care about chipped paint, broken windows, and appliances that don’t work.
Valuations are not being conducted by just anyone off the street. Real estate valuers are trained licenced, bonded professionals. They are qualified for the work they do by completing exams and continuing education courses. This line of work demands strong critical thinking skills and the ability to interact with different groups of people.
Everyone fears the possibility of a valuation below the agreed price; it can happen. There are some things you can do to remedy this address but stressful situation.
1. Selling online - by clearly demonstrating the interest of others, the valuer has more information upon which to base their report.
2. The buyer can make a larger deposit.
3. If this is not feasible, the seller and buyer can negotiate the price some more.
The valuation can of course be disputed by the buyer but to be honest, this rarely results in any changes. It’s best to head these things off at the pass, which is why transparent and open bidding systems like beagelbid and beagelsold are of great benefit.
Times Have Changed, So Have Property Sales