When it comes to buying a property, especially if you’re seeking a home loan, a registered valuation is an essential step in the process. It provides an accurate assessment of the property’s value, which helps determine the loan amount the bank is willing to approve. However, what happens if the registered valuation falls short of your expectations?
What is a Registered Valuation?
A registered valuation is a thorough assessment of a property’s market value. This is conducted by a certified registered valuer that’s approved by the bank. It involves an onsite inspection, analysis of sales of comparable properties, and a comprehensive report to the bank. This report helps the bank determine the loan-to-value ratio percentage and make a decision on the mortgage amount.
Who Conducts the Registered Valuation?
Previously they could be performed by any valuer. Now, to ensure independence and accuracy, banks now coordinate with local registered valuers. This reduces the risk of biased outcomes influenced by the party paying for the service. While vendors may provide their own valuation reports to prospective buyers, these reports are not considered suitable for the bank’s use.
What are my options?
If you’ve purchased a property at auction and the valuation doesn’t support the amount you need to borrow, you have two options. You can either cover the difference yourself or let the sale fall through, which may result in penalties. If you’ve purchased through negotiation or tender, subject to finance, you can negotiate with the vendor to lower the price based on the registered valuation.
There are certain situations where a registered valuation is required. You’ll need one for a new build or when the purchase price significantly exceeds the estimated property value. If you’re borrowing more than 80% of the property price, or over 65% for private purchases you’ll also need one.
If the amount comes in lower than expected, you may face challenges getting the desired mortgage amount. However, there are strategies you can consider. If purchasing through negotiation or tender, you can negotiate a lower price with the vendor based on the registered valuation. For auction purchases, it’s advisable to obtain a registered valuation beforehand. This is to ensure you bid within the property’s true value. Without one, you may end up paying more than the property’s worth, and the difference won’t be covered by the mortgage.
Investing in property is a significant financial decision, and a registered valuation provides crucial information to make informed choices. By understanding the process and its implications, you can navigate the property market more confidently and secure the right mortgage for your needs.