Property Valuation and Property Appraisal - The Differences
New to the property market? Are you buying your first home? Or perhaps looking forward to selling and upgrading to a bigger property? Whether you are selling or buying, jargon such as 'property valuation' and 'property appraisals' always seem to stick around. Such jargon is often used throughout the buying and selling process.
If you are wondering what 'property valuation' and 'property appraisal' means, then this article will explain the meaning behind these terms while pitching the difference between them. If you haven't been through the buying and selling process before, understanding them will help you pave your way through the home buying and selling journey better.
Property valuation is the evaluation of your property based on various aspects giving you a tentative worth. The valuer appointed by a lender performs property valuation. The lender sends in the valuer for a formal valuation after you've decided on the property you like.
Depending on the lender you choose, your lender will either send out a qualified valuer or might even perform an automated desktop valuation. The desktop valuation is quick to measure and gives a tentative market price of the property. For more accurate estimation, a qualified valuer, who not only has training in the field but also is experienced, will conduct the valuation taking all features and issues relating to the property into account.
While performing the property valuation, the valuer considers the following elements:
- Size of the property and structure
- Condition of the property, number of rooms, and other features>/li>
- Quality of the building
- Any improvements needed
- Recent sales in and around the area
Considering these elements, the appointed valuer runs a thorough valuation and presents a qualified assessment. You'll receive a detailed written report, including the property price. Depending on the valuation, the lender puts forward the amount they are willing to lend to you. If the presented price by the valuer is not as you expected it to be, you can always engage with another lender. With another lender comes another valuer, and hence you can see if you can get a higher valuation. Other reasons for obtaining a valuation apart from acquiring your home loan could be for property settlement, to know the value of a deceased estate, or to be ordered by the court to resolve any dispute. For the best indication of the price, engaging with a qualified valuer can give you the actual value of your property.
Property appraisals are slightly different from property valuation. Basically, property appraisals are completed by a real estate agent. The real estate agent gives a tentative value in the current market that you may acquire from the property you are trying to sell.
The agent considers the market trends and, depending on other sales in and around your area, gives you an estimated price of the property. As the appraisals are estimated only depending on the current knowledge, they should only be used as an estimation. Please note that appraisals are not definitive and hence don't have any legal standing. The real estate agent does not usually charge a fee for obtaining appraisals. However, it is recommended to contact an agent who is familiar with and accustomed to the location in which your property is located.
Property Valuation vs. Property Appraisals
While property appraisal is the estimation based only on the current market, property valuation takes into account the value of the home over a longer time as well. When lenders perform the valuation of the property, they do so to use it as a security to the home loan they provide. It means that if, in any case, you fail to make the repayments, the lenders can sell the property and regain the money they lent. After all, no lender would wish to be left out of pocket in case you fail to make the repayments under any unforeseen circumstances. This is why property valuation often tends to be more conservative in regards to appraisals given by real estate agents.
Well, property valuation and property appraisals have their fundamental differences. While proceeding with either of them, it is best to do your research. If you need a hand, you can always speak to one of our Nepali mortgage brokers, and we would be happy to help. Contact us now!