Buying a property or refinancing a mortgage? You’ll need to get a property valuation to determine its market value. Property valuers use various methods and data sources to arrive at a valuation. These vary depending on the property type, location, and market conditions. We’re here to explore how property valuers make valuations and why a reasonable valuation is so important.

Methods Used by Property Valuers

Property valuers use a range of approaches to determine the value of a property, including:

• Comparative Market Analysis – This involves comparing the property to similar properties that have recently sold in the same area. 
• Capitalisation Rate – This involves estimating the net income that the property could generate and applying a capitalisation rate to arrive at a value.
• Cost Approach – This involves estimating the cost to rebuild the property and deducting depreciation to arrive at a value.

Data Sources Used by Property Valuers

Property valuers use a range of data sources to inform their valuations, including:

• Sales Data – This includes data on recent sales of similar properties in the area.
• Building Information – This includes data on the size, age, and condition of the property.
• Market Trends – This includes data on current market conditions, such as the current interest rates as well as general supply and demand.

Why Property Valuations Are Important

Property valuations are important for several reasons. Firstly, they determine the market value of the property. This is essential as it’s used to determine the amount of the mortgage loan. The result of your valuation will directly impact your borrowing power and can also affect the terms and interest rates of the loan.

Secondly, property valuations can help buyers and sellers determine a fair price for the property. This can help prevent overpaying or underselling the property. Without a proper valuation, you could unintentionally pay too much for a home, preventing you from ever gaining equity on that property.

Finally, property valuations can help investors determine the potential return on investment of the property. If you’re considering expanding your investment portfolio with a new property, a valuation is a crucial piece of information to inform your investment.

Value Your Property Today

Property valuers use a range of methods and data sources to arrive at a valuation. All of these factors work together to determine the market value of the property, ensuring a fair price is set and that the potential return on investment is worthwhile. 

Need assistance with property valuations or mortgage loans in Australia? Our mortgage brokers have access to a range of lenders and can help you find the right loan for your needs. Reach out to our team of mortgage brokers today.