What is the difference between a property appraisal, estimated property value and property valuation?

What is a property appraisal?

A property or home appraisal is the process of determining how much your property is worth based on the current market conditions.This is typically used to give you an idea of what price a property could fetch if sold at auction or via a private sale.

It’s usually conducted by a real estate agent or professional appraiser who provides an estimate of the value of your home. During an appraisal, the real estate agent will look at a number of different factors, including:

• Property and block size
• The number of bedrooms and bathrooms,  
• Fixtures and fittings,
• Property age and condition,
• Location,
• Access to local facilities and amenities (for eg: schools, public transport and shopping centres)
• Recent sales data,
• Market conditions, and
• Economic environment

They also look at subjective aspects of the property such as its appearance, natural light levels and other factors that may encourage buyers to consider paying more for the property.  

What is estimated property value?

Also known as a market value estimate, estimated property value is the approximate worth of a property based on public data, often provided for free by property websites. It is based on factors such as the property’s known characteristics and local sales data.

Occasionally, the reliability of this estimate is indicated by a confidence score, which reflects the amount and recency of data available. A high confidence score suggests that there’s likely to be an array of current data on the property and recent comparable sales. On the other hand, a low confidence score shows that there’s a lack of information available and similar recent sales, which makes it more challenging to estimate the property’s market value.

Learn more about how to estimate your property’s current value.‍

‍What is a property valuation?

This is a formal assessment of a property's value, usually conducted by a Certified PracticingValuer (CPV). There are commonly two types of valuations that are conducted – desktop assessment and physical valuations. A desktop assessment involves estimating a property’s value remotely using data, they are generally quicker and inexpensive compared to physical valuations. However, if there is a requirement for a more detailed analysis of the property, property valuers can conduct a physical valuation that sets out a definitive value for the property.As part of the physical valuation process, a property valuer will usually consider various points, including:

• Location,
• Size and type,
• Accessibility,
• Condition and damage,
• Home features,
• Structural faults,
• Caveats or encumbrances, and
• Planning restrictions and local council zoning.

So, what is the difference between a property appraisal and a property valuation?

Unlike aproperty or home appraisal, property valuations are not about potential saleprices, but rather about the value for lending purposes. If a property valuation indicates a high Loan-To-Value Ratio (LVR) it may require you to purchase lenders mortgage insurance (LMI), increase the funds you are putting towards deposit, or seek alternative financing. Please note that Unloan does not offer LMI.

Property valuations begin as desktop assessments based on data and can progress to physical inspections such as a kerbside or full valuation, if needed. They may seem conservative as they focus on facts without the emotional appeal that is typically considered in appraisals.

While appraisals and estimated values provide an indicative price that could influence seller expectations or buyer offers, a property valuation provides an indicative value for a lender to use when deciding whether to lend you money. It’s important to understand these differences when purchasing property as they can influence your decisions and outcomes when securing a home loan.

Interested in buying a home? Learn six tips to help you start your home buying journey with confidence.

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This article is intended to provide general information only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Please consider seeking financial advice before making any decision based on this information.‍

Unloan is a division of Commonwealth Bank of Australia.

Applications are subject to credit approval, satisfactory security and you must have a minimum 20% equity in the property. Minimum loan amount $10,000, maximum loan amount $10,000,000, and total borrowings per customer across all Unloan loans is $10,000,000. (For purchase loans a minimum 10% equity is required - however a Lenders Mortgage Insurance (LMI) premium and higher interest rate apply. In some cases, depending on the property’s location or type, an LMI premium may also be required for LVR between 70.01% to 80%). For loans with Lenders Mortgage Insurance (LMI) the minimum loan amount is $10,000, maximum loan amount is $3,000,000 and total borrowings per customer across all Unloan loans is limited to $3,000,000).

Unloan offers a 0.01% per annum discount on the Unloan Live-In rate or Unloan Invest rate upon settlement. On each anniversary of your loan’s settlement date (or the day prior to the anniversary of your loan’s settlement date if your loan settled on 29th February and it is a leap year) the margin discount will increase by a further 0.01% per annum up to a maximum discount of 0.30% per annum. Unloan may withdraw this discount at any time. The discount is applied for each loan you have with Unloan.

*At Unloan, we do not charge any annual, application, banking, account, transaction, late or exit fees. In certain circumstances you may be required to pay a Lenders Mortgage Insurance (LMI) premium. Learn more about why this is applied and how it works. Government fees may also apply. Learn more about government fees here. Your current lender may charge an exit fee when refinancing.