Today’s question is from Mark in Tuart Hill, the question asks – I have recently brought my first home, and the bank I used for my mortgage apparently valued the home I brought. How do banks value property? Do they charge a fee for it?

This is a good question. When you purchase a home, or buy an investment property, the bank will organise a valuation of all the properties that the bank or lender holds as security (a security is the property you are buying, and if you own a current home or homes that you have a mortgage on with the bank, the bank will organise a valuation of those properties as well).

Most banks and lenders generally use external valuation companies to value property they are considering for a mortgage. These companies are separate to the bank or lender and are independent companies. The bank or lender uses the property as security, as when you take a mortgage out, the property is the security used to secure the mortgage or home loan.

When a valuer does a property valuation on a property, they look at many factors, when considering what the property is worth. One of the most important things a valuer will consider is, previous property sales in the suburb you are looking to buy in. The valuer will look at the features of your property, like the number of bedrooms, bathrooms, size of the home, land size, the condition of the property, the types of fittings inside the property and other features, like a pool or air conditioning.

The valuer will then try to compare your property will recent sales in the suburb, and what comparable properties have sold for (generally within the last 3 to 6 months) to get an idea of what your property maybe worth. They will generally try and compare your property with around 4 to 6 recent sales, noting the purchase price of the other properties, and whether they are superior, inferior, or comparable to your property. This will help them with the valuation price of your property.

Other ways a bank or lender may do a valuation is called a desktop valuation. This is basically a computer program that looks at the previous property sales in the suburb you are buying in, and compares those properties and their features, compared to the property you are purchasing. This is a computer generated modelled estimate of the value of your property.