Loan Tip: Different Types of Valuations that Lenders Use

Lenders use different types of valuations. I think this must be to save money.

1. Full Valuation

The full val is the most comprehensive and involves a valuer walking through the property. They often measure things too for some reason. I had one measure my double car garage for some reason once.

1. Kerbside

This is where the valuer does all of their usual checks and drives past the property to make sure it actually exists and there is a house on the land.

1. Desktop

This is where the valuer doesn’t leave their office. They will do it all on their computer, possibly looking at google street view to see the house (it could have been knocked down since google drove past though).

1. Computer generated

Some of the big banks sometimes use computer generated valuations. The address is loaded up with the client estimate and out pops a number – often appearing random.

1. Contract of Sale

In some cases, the lender will go on a contract of sale for a purchase if certain criteria are met – such as being a sale through an agent, less than 80% LVR, less than a certain price level etc.


Which one is best? It will depend on the circumstances. Generally clients will want a valuation as high as possible. We recently ordered a valuation for a client and it came in at $600,000 when the client estimated $900,000. It turned out the house had been knocked down and rebuilt a few years ago so the desktop or automated valuation didn’t take this into account. We got the lender to do a full val and it come back at $900,000.

If there are tenants in the property often a valuation where the valuer doesn’t need access is preferred. This is to avoid disruptions to the tenant and to avoid the valuer seeing their mess. A full valuation might be preferred if work has been done to the property, rooms added or converted etc. A desktop might be preferred so the valuer doesn’t see things that reduce the value.

 

Thanks for the useful post Terry.

Any insights from brokers into how the bank determines which methodology to use?

Is it asset being purchased, loan amount, LVR, risk or combination of all?

It appears you can request to go up the scale (from less comprehensive i.e computer generated to full valuation) if you are not satisfied with the valuation.

Equally, can you go the other way and ask for a desktop rather than full valuation as an example?

Different properties will benefit from the different approaches.

 

It can vary from lender to lender. Generally where over 80% a full val is required. Some banks will just use a Contract of Sale where it is a sale through a real estate agent and LVR is less than 80%.

I had a client who bought a property and immediately removed the kitchen for some reason and then the valuation come back saying there was not kitchen so the lender wouldn't lend. The vendors refused access to install a new one. In situations like this the borrowers need a lender that just does a desktop or drive by.

 

Some lenders also might allow a desktop, but the assessor might override that and insist on a full valuation.
We had this happen recently.