How Do Banks Value A Property?

When buying a home, it’s good to know how to accurately estimate the value of the properties you’re interested in.

It’s difficult, however, to find accurate advice and there is a lot of conflicting information from the media and real estate agents.

This page is a quick guide to help you learn the process of valuing a residential property.

The market value of a property is the price that would be negotiated between a willing buyer and willing seller in an arm’s length transaction after proper marketing.

The value isn’t the current listing price nor the amount of the most recent offer on the property.

Here’s a quick and simple guide that will help you find out how to value a property and make the right decision.

Step 1: Find local sales

The most common method of how to value a property is to compare it to properties that have just sold in the local area.

We recommend that you only consider comparing sales with the following attributes:

  • Within 1 km of the property you’re buying (larger areas for country regions).
  • Sold in the last 6 months.
  • Similar to the property you’re trying to value.

You can get a list of sales for any suburb or postcode from CoreLogic RP Data.

For Beyond Loans customers: We can send you a list of sales for properties in most states for free as we subscribe to CoreLogic.

You may also be able to find comparable sales by looking through the sold properties of real estate websites.

Try to search for the suburb you’re interested in and then sort the results so that the most recent results are displayed first.

Step 2: Are they comparable?

In addition to that, keep the following factors in mind when doing the comparison:

  • Quality – Make sure that you are comparing your property with the properties that are built on the same standards
  • Number of rooms – The properties should contain the same number of car parking areas, bathrooms, and rooms.
  • Size of Land – The size of the lands on which the properties are built should be the same as the size of your land.
  • Location – They are located at almost the same distance from facilities and amenities and the residential area has the same look and feel.

Although it may be a little hard to find all this information, it is absolutely critical to do so if you want to figure out the correct valuation.

Step 3: Superior or inferior?

Once you have a list about 5 properties that are similar to the property you’re looking at, try to decide which properties are superior to yours and which are inferior.

Try to be objective.

If this is difficult for you, ask a friend to decide which ones they think are better.

You should consider the location, land size, living area, parking, views and standard of finishes when considering whether properties are superior or inferior.

Bank valuers will normally look at the land and the building separately when doing this.

They may say something like “Superior land size & location, inferior improvements (house), overall the property is slightly superior”.

You should now end up with a range for the value of your property.

Step 4: Adjust for market movements

In a hot market, comparable sales from more than 3 months ago are no longer an indication of current market conditions.

Make small adjustments to your estimate value to take this into account.

If you’ve been going to lots of open homes and auctions, you should have a good feel for what the market is like in your area.

You can also use some of the figures listed at the bottom of this page to help you gauge how hot the market is.

If you think you’ve found “the one”, ask us for a free upfront property valuation by calling 0400 111 986 or by telling us a little about your situation on our online enquiry form.

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