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Know the real value - November

30 NOV 1999 • By Phillip Tarrant • 3 min read • Finance

Whether you’re a home buyer or an investor, if you’re contemplating buying a property, understanding its true value is crucial.

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Finding yourself facing a barrier to financing is one of the most serious setbacks you can experience if you pay over and above what your lender believes to be the true worth of the property.

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For example, if you agree to pay $450,000 for a property, but your lender’s valuation comes in at $400,000, they will only finance you based on that amount. And if you haven’t got the cash to cover that shortfall, this could cause you serious problems.

Organising a proper valuation of a property you are serious about buying is a must.

 
 

Several valuation products and services are available to buyers, from instant online varieties to thorough on-site inspections.

Typically, an online valuation is a very useful guide for buyers but should really only be used as a starting point. A more thorough valuation is the best indicator of a property’s true worth.

In addition to providing you with a more accurate price guide, a full valuation can also deliver an assessment of the local area, market trends and the local market conditions’ likely impact on the property’s value at future sale.

It’s a worthwhile investment.

Do keep in mind that a valuation doesn’t prevent you from spending more than you expected on a property, but it will give you an idea about the implications of doing so.

Moreover, with the real estate market so volatile, just because a valuation might indicate a certain price range for a property pre-auction, a valuer may be willing to reassess this subsequently.

Say, for example, that a valuation suggests your target property is worth $520,000 but you agree to pay $550,000 at auction. If there are several other bids over and above $520,000, this demonstrates strength in the market and may see the valuer suggest a new valuation.

Generally speaking, it will be up to the lender’s valuer to assess the situation, taking into account a broader view of the market.

Whether you are willing to commit to a price over and above your own valuation will depend on your financial circumstances. If you know you simply don’t have the cash, it is certainly a wise idea to avoid bidding any higher than the valuation you receive.

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Phillip Tarrant

Phillip Tarrant

AUTHOR

Phillip Tarrant is one of Australia’s leading property commentators, with more than a decade at the forefront of conversations shaping the nation’s property investment market.

As the long-time host of the Smart Property Investment Show and a regular commentator across property, finance and business, Phillip has interviewed thousands of investors, economists, advisers, brokers, agents and industry leaders, giving him a unique perspective on the trends, policies and market forces influencing Australian property.

Beyond property commentary in the media, Phillip is an active property investor himself, with first-hand experience building and managing a diversified property portfolio across multiple markets and cycles. His insights combines this practical investor perspective with deep exposure to the broader property and financial services ecosystem.

Phillip is also CEO and co-founder of Managed, an Australian property payments and technology platform transforming the way property managers, landlords and tenants manage rental payments and property transactions.

Through his writing, podcasts and industry engagements, Phillip focuses on cutting through market noise, challenging conventional thinking and helping investors make more informed, strategic decisions. His commentary regularly explores property markets, lending, taxation, regulation, investment strategy and the changing dynamics of Australia’s housing sector.

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