WHAT IS BETTER? A BANK VALUATION OR SALES APPRAISAL?
How much is your property worth?
Why a bank valuation is more reliable than a sales appraisal
We’re often asked, “what’s the best way to determine the value of a property”? There are two common approaches that come to mind: a bank valuation and a sales appraisal. Both provide insights into a property’s worth. However, a bank valuation and a sales appraisal serve different purposes and can yield varying results. In this blog post we’ll discuss why we believe a bank valuation is the more accurate, reliable and practical option to determine your property’s value.
Want to know your property’s true value? We’ll help you understand when and how to get the best appraisal – and show you how to use it to your advantage.
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On the go? Here’s 30 seconds of take outs:
- A bank valuation is a formal assessment that determines a property’s value using data, e.g.: comparable sales, market conditions & risks
- Bank valuations are used for legal reasons e.g. wills, divorce settlements, property disputes & tax assessments.
- A sales appraisal is performed by a real estate agent to estimate a potential selling price.
- Sales appraisals consider the property’s features (number of rooms etc), appeal & liveability.
- A sales appraisal will tell you what your property ‘could’sell for, but a bank valuation will offer a more accurate valuation.
- In the current market, refinancing is the main driver of valuations.
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Understanding bank valuations
A bank valuation is a formal assessment conducted by an independent, licensed valuer. The goal of a bank valuation is to assess the property’s true market value based on tangible data like recent comparable sales, current market conditions, and potential risks.
It’s usually requested by a financial institution like a bank, credit union or building society. The primary objective is to provide these lenders with an accurate and legally recognised understanding of the property’s worth in order to minimise financial exposure.
The bank valuation is presented as a formal, written assessment and it includes a precise estimate of a property’s value. Because the valuation is impartial – it’s usually very accurate. Hence, bank valuations are often used for legal requirements such as for wills and deceased estates, divorce settlements, property disputes, and tax assessments.
Our previous blog post “Desktop, Kerbside & Full Property Valuations – What’s what?” explains the different types of valuations in greater detail.
The role of sales appraisals
A sales appraisal is usually performed by a real estate agent. Their aim is to estimate the property’s potential selling price in the current market.
When a real estate agent appraises a property, they consider the property’s features, appeal, and liveability. They’ll typically compare it to other recent sales in the area and suggest a comparative cost based on location, the number and size of bedrooms and bathrooms, property condition, land size, outdoor spaces, special features like a pool, and potential for future development or renovations.
These appraisals often present a more optimistic figure to attract sellers, but they may not always align with actual sale prices. That’s because they are susceptible to agent bias, market fluctuations, or seller expectations.
A bank valuation or sales appraisal? Why bank valuations are superior
- Objectivity: Bank valuations are independent and free from sales targets or emotional influences, providing an unbiased assessment. That means the figure provided reflects the property’s true value, unaffected by market hype or negotiation tactics.
- Risk management: Bank valuations determine lending amounts. This ensures that borrowers do not overextend financially, and lenders avoid financing overvalued properties.
- Consistent methodology: Bank valuations adhere to strict guidelines and data-driven methodologies, including analysis of comparable sales, property conditions, and location-specific factors to ensure consistency and reliability.
Credibility in financial decisions: Bank valuations hold significant weight in financial and legal contexts, such as refinancing or legal disputes. Sales appraisals, on the other hand, are rarely accepted in these contexts due to their subjective nature.
Why the type of valuation matters
While a sales appraisal might provide a snapshot of what your property ‘could’ sell for, it can’t guarantee accuracy. A bank valuation, however, gives you a realistic perspective, making it the better option for critical decisions like securing a mortgage or refinancing.
Current market valuation insights
According to CoreLogic, the Australian property market is expected to remain stable, with refinancing still being the main reason for valuations. Many pandemic-era fixed-term loans have now expired, so borrowers are likely to consider refinancing – especially as interest rate reductions are predicted to create favourable lending conditions in the latter half of 2025.
As long as the Reserve Bank continues to lower interest rates, the housing market should see renewed purchasing demand. Many high-growth areas like Perth, WA are predicted to show particularly strong activity.
How Capital Properties supports your investment journey
As we push further into 2025, securing accurate valuations is essential for successful property investment. At Capital Properties, we recognise the importance of reliable property insights. Whether you’re buying, selling, or refinancing, we’re here to guide you every step of the way. Our team works closely with trusted professionals to ensure you have accurate property valuations to help you make informed decisions.
Contact us today to learn how we can support your property journey!
Or book straight into your FREE Capital Properties Discovery Session and let our expert team guide you through the process.
Note: This information is general advice only. Always conduct your own research and seek independent financial advice before making investment decisions.
