Whether you’re exploring refinance options or want to release equity to purchase an investment property, a property valuation is a vital part of the finance application process. And just sometimes, the result of this property valuation can stop the process from progressing altogether.
Here we look at the different types of valuations a lender may request and suggest a few ways you can prepare for one.
Why does the lender need to do a valuation on my house?
A lender is taking security over your property to lend you a sum of money, so it makes sense they need to check that the value of the property is sufficient to lend the amount you require. Lenders will generally allow you to borrow up to 80% of the value of the property without incurring mortgage insurance. To verify the value of your property, the lender often requires a valuation to be conducted as part of the application process.
What type of property valuation will be conducted?
The two main types of residential property valuations are an ‘Automated Valuation Model’ or a ‘Full Valuation’.
An Automated Valuation Model (or AVM) relies on a purpose built valuation system to generate an assessment of a property’s value. The result takes into account property data, comparable sales figures and information specific to the property being valued (i.e. block size, number of bedrooms/ bathrooms, garage etc).
Alternatively, a Full Valuation includes a physical inspection of your property as part of the assessment. In addition to analysing comparable sales and market data, an individual valuer will take photos and internal measurements of rooms, as well as make notes on the quality and condition of the property.
Each lender has their own valuation system, as well as their own panel of independent valuers. The lender’s valuation system will dictate what type of valuation is required. It will also allocate the job to a specific valuation firm on their panel. Sometimes different valuers will value the same property differently, meaning that if an existing lender has come back saying the value of your property is not high enough to release equity for example, it can be beneficial to explore your options.
What can I do to increase the valuation of my property (if a Full Valuation is conducted)?
Aside from completing renovations/ making additions or significant improvements to your home, there’s not much you can do to dramatically improve the valuation result. This is because the property valuation is largely based on how much the land is worth, how many bed/ bathrooms you have and how your property stacks up against comparable sales.
However, in addition adequately maintaining your property over time, there are some things you can do to make the valuation process smoother, which may also help to improve your chances of a favourable valuation.
Here they are:
1. Clean and de-clutter
If your property is tidy and appears to be well-maintained, it can make a big difference when being valued.
Inside, you’ll want to make sure your kitchen and bathrooms are spotless, and rooms aren’t cluttered. The cleanliness of the kitchen and bathroom can have a significant impact on the overall impression of the house. And cluttered rooms will look much smaller than they actually are. We’re not suggesting a renovation before the valuer comes in, you just want to present your house in the best possible light.
Outside, mow the lawn, weed the gardens, rake the leaves, clean the deck, and pick up those dog toys scattered around the yard.
2. Get your documentation in order
If you have a copy of the building plans, you can give them to the valuer to help speed up their process.
Valuers sometimes also request council rates notices and/or land tax valuations, so it doesn’t hurt to have all relevant paperwork ready in case the valuer requests it.
3. Be available
The valuer will need easy access to each room in your house – not to mention the house itself.
Whilst we know it’s not always easy to fit another thing into your day, valuers are pretty efficient at doing their job! If you can manage to get into the office a little bit later than usual one morning, you can speed up the finance application process by booking in the valuation as soon as practical.
4. Compile a list of your property’s features
The plan is not to ‘sell’ your house to the valuer, but it doesn’t hurt to highlight its features – especially if they’re not immediately apparent.
You could prepare a list of features to give to the valuer – things like a newly-installed reverse-cycle air conditioner, insulation, solar panels, or details of any recent renovations and how much they cost.
Also something to keep in mind: it’s not uncommon to see our homes through rose coloured glasses. The valuer is an expert at assessing the value of a property and does so using rigorous methodology. Sometimes, it’s best to get out of their way and let them do just that.
5. Secure your pets
We all love our own furry friends, but not everybody may feel the same way about them.
Therefore it’s always best to err on the side of caution and either secure your dog and/or cat, or ask a friend to look after them for a few hours.
The last thing you want is the valuer rushing their job to get away from your pet or accidentally letting them out of the house when leaving to inspect the garage.
