If one were to use finance to purchase a property, the lender will conduct a valuation for that property. When using a loan to purchase a property, that property becomes collateral for the loan. In the instance that the borrower defaults on the loan, the bank can sell the property to recoup as much or all the loan as possible. A property valuation in Canberra or elsewhere in the ACT or NSW helps the bank determine how much the bank can recoup from the sale of the property, in the event the borrower defaults on the loan. As a bank valuation is useful only to the bank, oftentimes they will not make the valuation available to the borrower.
To protect their investment, banks will tend to value a property conservatively. In the event of an economic downturn, a conservative valuation on a property will increase the likelihood that most or all of a loan can be repaid through the sale of the property, taking into account the possibility of deteriorating property prices or deteriorating economic conditions. A conservative property valuation in Canberra or other regional areas of the ACT and Sydney on a property minimises the risk exposure of the bank. When selling a property to recoup a loan amount, banks are not concerned about getting the best price possible for the property. Instead there is an urgency of selling a property to recoup potential losses.
A market valuation determines the best value for a property based on existing market conditions. When conducting a market valuation, a valuer will consider sales of comparable properties and existing market trends to determine the property value. A market valuation does not assume a level of urgency to sell the property, unlike a bank valuation.
As bank valuations tend to side towards a conservative value of a property, the situation may arise where the bank valuation is lower than the purchase price. Consequently, the bank may not lend you enough money for the property you wish to purchase. This puts at risk any deposit you have placed on the property.
If the bank property valuation in Canberra is lower than the purchase price, these are some of the options available to you:
A good distinction is this: Bank valuations are useful for banks, not for the borrower. Independent valuations are helpful for buyers and sellers, allowing you to decide on whether you would like to purchase or sell a property. For property valuations in Canberra and around the ACT, you can be confident in Vanguard Valuations as an independent valuation company.