Property Valuation Made Simple: How To Value Property
How to value property accurately starts with a single question: Is your home worth what the real estate agent says it is, or what the bank says it is? The difference could be tens of thousands of dollars—and it can make or break your home loan application.
While an agent wants to get you the highest price, a bank wants to know the safe price. Whether you are refinancing, buying your first home, or leveraging equity for an investment, knowing the difference between a market appraisal and a sworn valuation is critical.
In this guide, written by an expert mortgage broker, we break down exactly how to value a property in Australia, the methods experts use, and how to avoid the ‘valuation trap’ that catches out many buyers.
What Are The Key Methods For Property Valuation?
When learning how to value property, there are three main methods to know: the comparative market analysis (CMA), the income approach, and the cost approach. Each of these methods helps in its own way to find out what a property is worth, and knowing the differences is important for accurate property valuation.
Comparative Market Analysis (CMA): This method figures out the value of a property by comparing it to similar properties that have recently sold nearby. CMA is often used for regular homes. By looking at the sale prices of similar houses, you can get a good idea of what the market will pay for a property like yours.
Income Approach: This method is mostly used to value properties that are investments. It figures out value based on how much money the property can make, which makes it ideal for rental properties. This is useful for investors who want to see if a property will be a good investment.
Cost Approach: The cost approach values a property by calculating how much it would cost to rebuild it, including the land and construction costs. This method is especially helpful for newer or unique properties. For example, if the property has a unique design or if there aren’t many similar homes, the cost approach can give a more accurate value.
Each of these methods gives a different view of how to value property, and using more than one method can help you make a better decision. By using these different ways, you can get a clearer picture of what a property is worth, which is important for both buyers and sellers.
Why Accurate Property Valuation Matters
Knowing how to value property correctly is important for several reasons:
Buyers: To make sure you’re not paying too much for a property. A well-informed buyer can make a fair offer that matches the real value.
Sellers: To set a realistic price that will attract buyers. A property that is valued correctly is more likely to get interest and sell faster.
Investors: To see if a property is a good investment and reduce risks. Accurate valuation helps investors decide if the property is worth it and set realistic goals for future returns.
Lenders: To decide how much money they are willing to loan based on the property’s value. Accurate valuations help lenders make sure they aren’t lending too much, which protects their money.
Accurate property valuation is important for planning your finances, avoiding mistakes, and having successful real estate transactions.
A proper valuation helps prevent expensive errors, like paying too much or undervaluing a property, which can lead to financial problems or missed opportunities.
Market Appraisal vs. Bank Valuation: What’s the Difference?
Many Australians get caught in the trap of confusing a real estate agent appraisal with a sworn bank valuation.
The two numbers can be tens of thousands of dollars apart. Understanding the difference is critical if you want to avoid a “valuation shortfall” on your home loan.
Here is the breakdown of how to value a property correctly for your specific needs.
Real Estate Agent Appraisal (The 'Sales' Price)
A market appraisal is an informal estimate of price. It is usually provided by a real estate agent who wants to sell your home.
- Definition: An opinion of price based on local market trends and comparable sales.
- Purpose: To set a listing price that attracts buyers and markets the property.
- Cost: Generally free.
- The Risk: Agents often inflate this figure to win your business. This is known in the industry as “buying the listing.”
An agent relies on emotion and future potential. They look at “what a buyer might pay” on a good day. This is great for selling but dangerous for borrowing.
Sworn Valuation (The 'Bank' Price)
A sworn valuation (or bank valuation) is a formal report. It is the only figure lenders care about when you apply for a mortgage.
- Definition: A legally binding report created by a qualified valuer from the Australian Property Institute.
- Purpose: Used for mortgage approval, family law settlements, and calculating capital gains tax.
- Cost: A professional independent house valuation typically costs between $300 and $600. However, lenders often cover this cost for loan applications.
- The Risk: It is conservative. Valuers must protect the bank’s money. They focus on “resale risk” and strip away emotional value.
Expert Tip: A bank valuation is typically valid for only 90 days. If your settlement is delayed, you may need a new report.
At a Glance: Appraisal vs. Valuation
Why the Gap Exists
You might see a difference of 10% or more between these two figures.
An agent adds value for potential renovations or a “hot market.” A bank valuer ignores that “potential.” They look at the property as it stands today.
If you buy a property for $800,000 but the bank values it at $750,000, you have a shortfall. You must cover that $50,000 gap with your own cash.
Knowing how to find property value accurately protects you from this financial shock.
Important: How long does a valuation last? A common mistake is getting a valuation too early. A bank valuation is typically valid for only 90 days (3 months). If your settlement is delayed beyond this window (common with off-the-plan builds or long settlements), the bank will require a new valuation. If the market has dipped in that time, your borrowing power could decrease unexpectedly.
How Valuations Impact Your Home Loan (LVR & LMI)
Getting a property valuation is not just a formality. It is the most critical step in getting your home loan approved. Why? Because banks lend against the mortgage valuation, not the purchase price.
If the numbers don’t stack up, your finance approval could be in trouble. Here is how a low valuation can impact your wallet.
1. The "Shortfall" Risk
A valuation shortfall happens when the bank’s valuer thinks the home is worth less than you agreed to pay. Banks always calculate your loan based on the lower of the two figures: the purchase price or the valuation.
Here is a real-world example:
- Purchase Price: You sign a contract to buy a house for $800,000.
- Bank Valuation: The valuer decides the market value of property is only $750,000.
- The Gap: There is now a $50,000 shortfall.
The Consequence: The bank will not lend you money for that $50,000 gap. You cannot add it to the loan.You must pay that extra $50,000 upfront in cash, on top of your deposit. If you don’t have the savings, the deal could crash.
2. Triggering Lenders Mortgage Insurance (LMI)
Even if you can cover the gap, a low valuation changes your Loan to Value Ratio (LVR). Most banks require you to pay Lenders Mortgage Insurance (LMI) if your deposit is less than 20% of the property value.
How a low valuation hurts:
Let’s say you planned to borrow 80% of the property value to avoid LMI.
If the valuation of property comes in lower than expected, your LVR might jump to 85% or 90%.
- The Result: You are now considered a “higher risk” borrower.
- The Cost: You may be forced to pay thousands in Lenders Mortgage Insurance to proceed.
Hunter Galloway Tip: Worried about a shortfall? We can often order an upfront valuation for you before you make an offer. This gives you peace of mind and protects your deposit.
Automated Valuations vs. Manual Valuations
When learning how to value property, it’s also important to know about automated valuations and manual valuations. These are two different approaches to property valuation, each with its own strengths and limitations.
Automated Valuations
Automated valuations, like those provided by Corelogic RP Data reports, use computer algorithms and large datasets to quickly estimate property values. They are efficient and easy to use, but they’re not always super accurate. It takes a bit of time for their algorithms to catch up to the market and provide an estimate of a property’s value. So if you’re in an area with rapid growth, they can easily underestimate the value of a property, sometimes by 10% or more. On the other hand, the valuation report does provide a lot of useful information, so they can be helpful if you want to get a rough idea of the value of your property.
You can also use onthehouse or Property value to get free automated valuations, but they is pretty limited and can be wildly inaccurate. The value of the property could be much higher or lower than they report. They’re good as a starting point but you would need to back it up with your own research.
The "10-20% Rule" for Online Estimates
Automated tools generally have a margin of error of 10–20%.
- On a $1,000,000 home, that is a potential variance of $200,000.
- Expert Insight: Never rely on these automated figures for legal, divorce, or lending decisions. Always seek a sworn valuation for financial certainty.
Manual Valuations
Manual valuations are done by professional valuers who physically inspect the property and consider many different factors to find its value. They are much more detailed, and take into account the local market conditions and recent sales, so they are typically much more accurate.
In practice, many people use a mix of both methods. You might start with an automated valuation to get a basic idea and then do a manual valuation to get a more accurate number that includes all the specific details.
Is it better to use an appraiser or rely on online tools for property valuation?
For property valuation, it’s generally better to use an appraiser for accurate and detailed assessments, especially for unique or high-value properties. Online tools can provide estimates but lack the human insight and context that a professional appraiser can offer to ensure precise property valuation.
How To Value Property: Four Steps To Determine Market Value
1. Find Local Sales
The first step in how to value property is to find local sales of similar properties. This is called a comparative market analysis and is the most common method for valuing a property. Look for properties that have sold in the last six months that are like yours in size, condition, and features. This will give you an idea of what buyers are willing to pay.
You can use online tools, talk to local real estate agents, or check public records to find this information. Try to find properties that are as similar as possible to yours so you get the best comparison.
2. Compare Properties
Next, compare the properties you’ve found. Think about things like location, size of the property, age, and features that might change the value. Make adjustments to make your property similar to the others, which will give you a clearer idea of its value. For example, if your property has a new kitchen but the others don’t, you should increase your value estimate.
Also, think about things like the neighborhood and how close it is to schools, transportation, and other amenities that may affect the value. A good comparison will help you figure out the true worth of your property.
3. Adjust for Differences
After comparing, adjust for any differences between your property and the others. If your property has something extra, like another bedroom or an upgraded kitchen, add value. If it’s missing something, subtract value.
You need to understand the local market and what features add or reduce value. For example, having a big backyard, a pool, or recent upgrades can change the value compared to other properties.
4. Account for Market Changes
Lastly, think about changes in the market when learning how to value property. Adjust for changes in the market since the comparable properties were sold. Look at things like interest rates and local demand since they can affect property value.
If interest rates have gone down, more people might want to buy, which could push prices up. If the economy is struggling, property values might go down. Keeping up with market trends will help you get an accurate value.
Hidden Factors That Devalue A Property
Most guides tell you how to boost your property valuation with a fresh coat of paint.
However, fewer people talk about the silent “value killers.”
These hidden issues can drag down your market value significantly. Even worse, they can scare off lenders completely.
When figuring out how to value a property, you must watch out for these five red flags.
1. Zoning and Easements
You might see a big backyard perfect for a pool. A valuer might see a “no-build zone.”
Easements are sections of land that others have a right to use. Often, this means sewer or stormwater pipes running right under your lawn.
- The Impact: You cannot build over these pipes. That dream pool or granny flat is impossible.
- The Result: This restricts the land’s potential, lowering the valuation of property compared to a clear block.
2. Unapproved Renovations (The "DIY" Trap)
Did the previous owner add a deck or a downstairs bathroom themselves?
If they did not get council approval, you have a problem.
Banks and valuers are strict on this. If a structure is not on the council plans, they effectively pretend it doesn’t exist.
- The Reality: That expensive new deck might be valued at $0.
- The Risk: You might pay a premium for a “renovated” home, but the bank valuation comes in short.
Expert Tip: Not All Renovations Are Equal
Many homeowners overcapitalise by spending more on renovations than the bank will recognise. Based on current Australian market trends (2025), here is the typical Return on Investment (ROI) for common upgrades:
- Kitchens (The Winner): Typically offer the highest return, often recouping 75–80% of the cost. Example: A $20,000 cosmetic kitchen refresh can add ~$16,000 to your valuation.
- Bathrooms: Generally recoup 60–70% of what you spend.
- Swimming Pools (The Trap): often have a negative ROI. A $50,000 pool might only add $20,000 to a bank valuation because valuers factor in ongoing maintenance costs and limited buyer appeal.
3. Poor Street Appeal and Neighbors
You can fix your house, but you can’t fix your neighbors.
Valuers assess “marketability.” They look at how easy it is to resell the home.
If the house next door is overgrown or has wrecked cars on the lawn, it increases the risk. Lack of off-street parking in busy suburbs is another major negative factor.
- Valuer Insight: High-risk neighborhoods often lead to conservative property value estimates.
4. Environmental Risks (Floods and Fires)
Climate risks are now a major part of house valuation. Properties in flood zones or high Bushfire Attack Level (BAL) areas are expensive to insure.
- Insurance Costs: High premiums reduce the amount buyers can afford to borrow.
- Lender Security: Some banks may even refuse to lend on properties in high-risk postcodes.
Check First: Always check the local council flood maps before you sign a contract.
5. Market Saturation (Unit Density)
This is common in the Brisbane and Melbourne CBDs. If you own an apartment in a high-rise where 50 other identical units are for sale, your value drops.
- Supply vs Demand: When supply is high, prices must fall to attract buyers.
- Bank Restrictions: Lenders often have “postcode caps.” They limit how much they will lend in high-density areas to reduce their exposure.
Mortgage Broker Tip: Before you buy, always order a strata report or do a title search. Finding these issues before you make an offer can save you thousands.
Common Mistakes In Property Valuation
Comparing Properties Still on the Market
One mistake when figuring out how to value property is comparing it to properties still for sale. Unsold listings might have high prices that don’t reflect the real value. It’s better to use data from properties that have already been sold because they show what buyers are actually willing to pay.
Over-reliance on Selling Agents
Selling agents may give high valuations to get you to list with them. It’s important to get different opinions and do your own research to understand how to value property correctly. Depending only on an agent’s opinion could lead to mistakes and missed opportunities.
Not Comparing the Right Properties
Make sure you’re comparing properties that are similar in location, size, and condition. Comparing your single-family home to a duplex or a property in a different area won’t give you a reliable value.
Emotional Attachment
If you’re selling your home, you might have an unrealistic expectation of the value of your home compared to what it’s actually worth. For property owners, it’s important to take the emotion out of your evaluation.
Key Property Valuation Terms to Know
Median House Price: The middle price of all homes sold in an area, which helps show pricing trends. Knowing median house prices helps you see if values are going up or down.
Auction Clearance Rate: The percentage of properties sold at auction, which shows buyer demand. A high rate means a strong market, while a low rate means less interest.
Vendor Discounting: The difference between the original asking price and the final sale price, which shows market trends. A high discount means sellers are negotiating more, which can mean a buyer’s market.
Days on Market (DOM): The number of days a property is listed before it sells. A low DOM means properties are selling quickly, while a high DOM might mean the property is overpriced or there’s less demand.
Tools You Can Use To Calculate The Value Of A Home
Here are some tools that you can use that will help you to calculate the value of your property.
Domain Property Value: Provides access to the same tools banks use, offering price information for over 13 million properties in Australia.
OnTheHouse Offers free calculated estimates for over 12 million homes, along with suburb trend analyses to help you understand local market dynamics.
Property Value: Strives to provide up-to-date home valuation information, covering 98% of Australian properties and offering insights into rental and sale trends.
Real Estate View: Features an interactive home value calculator that allows customization based on property details and potential renovations.
MicroBurbs: Provides detailed neighborhood insights along with property values, helping users understand local demographics and trends.
How To Value Property FAQs
How much does a property valuation cost in Australia?
A professional sworn valuation typically costs between $300 and $600 for a standard residential property. However, if you are applying for a home loan, the lender often covers this cost for you.
How long does a property valuation take?
Once the valuer inspects the property, the report is usually returned to the bank or client within 2 to 3 business days.
Does a messy house affect a valuation?
Technically, no. Valuers look at the structure, land size, and fixtures, not your furniture or clutter. However, a clean, well-presented home can make it easier for the valuer to see the property’s condition and may subconsciously assist with a favorable assessment.
Why is my bank valuation lower than the market price?
Banks value risk, not potential. In a “hot” market, buyers pay emotional premiums (FOMO). Bank valuers strip away this emotion and value the property based on what it would sell for within 90 days in a “fair” market, often leading to a conservative figure.
Can I challenge a low bank valuation?
Yes, but it is difficult. You cannot simply argue that the price is “too low.” To succeed, you must provide factual evidence, such as 2–3 recent sales of comparable properties that the valuer may have missed. This process is called a “valuation dispute,” and your mortgage broker can help you submit the evidence to the lender.
What is a 'desktop' or 'kerbside' valuation?
Sometimes, a lender won’t even send a person to your house. A desktop valuation uses data and satellite imagery to estimate the property value remotely. A kerbside valuation means the valuer drives past to check the outside but doesn’t enter. These are common for low-risk loans (where you have a large deposit) because they are faster and cheaper.
What specific features do valuers look for inside?
Beyond just counting bedrooms, valuers look for “permanent” features. This includes the condition of the kitchen and bathrooms, the size of the living areas, and storage. They also check for structural issues like cracks or dampness. Unlike a buyer, they typically ignore removable items like fancy curtains or expensive furniture.
Conclusion: How to Value Property Effectively
Learning how to value property correctly is important for anyone in real estate. By understanding and using different methods—comparative market analysis, income approach, and cost approach—you can gather the required information to make better decisions that help your financial future. Remember to avoid common mistakes, keep up with the market, and make adjustments to find the true value.
If you’re not sure how to value property, reach out to us here at Hunter Galloway. We can give you some assistance with getting an RPData valuation if you are a customer of ours, and we can give you some tips if you’re struggling to find some good comparable properties. Contact us for a free assessment or give us a call on 1300 088 065
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