Bank verses Estate Agent valuation?

moonpenny

Bit of a strange one - Why do Banks value a property less than an Estate Agent would and which one would be the correct valuation?

I know a house is only worth what someone is willing to pay but, why do they do this?

kingstreet

In reality a bank does not value a property.

On application, a mortgage lender may have a chartered surveyor inspect a property to ensure the estimated value or purchase price is reasonable and that the property is suitable security for a mortgage.

They will also sometimes use a desktop "indexed" system to estimate how a property value has changed since it was purchased last.

An Estate Agent carries out a marketing appraisal, which is designed to produce a figure which prompts the vendor to put the property on the market with that particular agent. How that figure relates to the true value is debatable...

brit1234

Some estate agents including major brands are also renowned for over valuing properties to get business.

One company is told to over value by 30%.

dunstonh

Why do Banks value a property less than an Estate Agent would and which one would be the correct valuation?

Estate agents over value knowing that they are likely to be knocked down. 15% is not an uncommon figure.

harpoboy

moonpenny wrote: »

Bit of a strange one - Why do Banks value a property less than an Estate Agent would and which one would be the correct valuation?

I know a house is only worth what someone is willing to pay but, why do they do this?

The banks were badly stung in the financial crisis, so many valuers actually underestimate the true worth of a property to avoid the risk of them being sued by the banks.

As you correctly point out, the value of the house is only worth what someone is willing to sell it for and someone else is willing (and able) to pay for it.

As for EA's overvaluing, I saw something recently stating that typical accepted price is usually around 90-95% of asking.

shortchanged_2

harpoboy wrote: »

As you correctly point out, the value of the house is only worth what someone is willing to sell it for and someone else is willing (and able) to pay for it.

That's not strictly true. It's the buyer that sets house prices because the seller might only be willing to sell it for an unrealistic price that no one will pay. That doesn't mean that is then what it is worth.

harpoboy

Equally, one could argue that no bargain is to be had if the buyer proposes an unrealistic price.

The true value is the agreed value between both parties.

shortchanged_2

No buyer, no sale, no value.

harpoboy

Equally no vendor, no purchase

... but the property still has value.

shortchanged_2

harpoboy wrote: »

Equally no vendor, no purchase

... but the property still has value.

True, but you only get a true value with a sale.

harpoboy

Or a purchase.

I think we are both making the same point