Essential Guide to the Valuation of Property for Mortgage Approval
Understanding the Valuation of Property for Mortgage Approval
Whether you are buying property for business purposes or refinancing an existing investment, understanding the valuation of property for mortgage approval is essential. For commercial property investors, the estimated property value plays an important part in securing finance, whether it is for a new property investment loan or reviewing the terms of an existing home loan used for commercial purposes.
A property valuation is an independent assessment of a property’s market value, carried out by a certified independent valuer. This provides both the buyer and the lender with clarity regarding the true worth of the property in the current market. It is different from a negotiated purchase price or the opinion of a real estate agent. Instead, it offers an objective view based on market data, comparable sales, and the property's features, condition, and location.
In commercial transactions, an accurate valuation helps you understand your asset’s value, assess your financial position, and make informed investment decisions.
The Importance of a Bank Valuation in the Loan Process
A bank valuation is a core requirement of the home loan assessment process, including loans used for commercial property investment. The bank orders a valuation to determine the market valuation of the property, ensuring it reflects true market conditions rather than the agreed purchase price.
This assists the lender in assessing risk. The value determined in the valuation report influences the loan to value ratio, which impacts how much you may borrow and the terms of your mortgage repayments. A higher loan to value ratio may result in stricter lending conditions or additional requirements from the lender.
Whether you apply through a mortgage broker or directly with a lender, the bank valuation often determines whether you receive unconditional loan approval.
Factors That Affect the Value of a Property
Valuers assess a wide range of factors when determining the estimated property value. For commercial properties, these include features that influence both short term performance and long term investment potential.
- Location and proximity to business hubs or infrastructure
- Land size, layout, and usable space
- The condition and age of the building
- The strength of rental history or lease agreements
- Recent sales data and comparable sales in the area
- Local market conditions and economic trends
- Zoning and development potential
Each of these elements contributes to how the valuer determines the final market value.
How the Property Valuation Process Works
A commercial property valuation usually begins with a physical inspection of the building, land, and surrounding environment. The valuer examines key elements such as layout, size, condition, fit-out quality, and recent improvements.
They then analyse recent sales, market conditions, and location specific considerations. The findings are compiled into a valuation report, which outlines the estimated value of the property and is provided to the lender as part of the loan process.
Depending on the lender, the valuation may take several forms:
- Full valuation, including an internal and external inspection
- Kerbside valuation, involving an external drive-by assessment
- Desktop valuation, based on market data and recent sales without a site visit
Most valuations are completed within a few days, depending on the complexity of the asset.
How to Prepare for a Commercial Property Valuation
Proper preparation helps ensure that the independent valuer receives an accurate impression of your property and all relevant information.
- Ensure the property is clean, safe, and easy to access
- Complete minor repairs or maintenance where possible
- Prepare a list of improvements, upgrades, or refurbishments
- Provide documentation such as rental history, floor plans, zoning certificates, and comparable sales
- Be available to answer questions or clarify details
A well presented property supported by complete information is more likely to achieve an accurate valuation.
Choosing the Right Valuer
For commercial property, it is vital to choose a qualified valuer with relevant experience. Look for a professional certified by the Australian Property Institute who has a strong understanding of the commercial real estate sector.
- Ask for referrals from your real estate agent or mortgage broker
- Confirm they operate under an active Australian credit licence
- Ensure they are completely independent and not aligned with a developer or seller
- Check their track record with similar commercial assets
The right valuer ensures you receive an accurate and well supported estimated property value.
Understanding the Cost of a Commercial Property Valuation
The cost of a commercial property valuation varies depending on the size, complexity, and location of the asset. While residential valuations are generally lower, commercial valuations involve detailed analysis and therefore attract a higher fee.
Some lenders may include the valuation fee within the loan application costs. Always request a written quote in advance.
Mistakes to Avoid During the Valuation Process
To avoid unintentionally reducing the value of your property, make sure you:
- Do not neglect presentation, maintenance, or repairs
- Do not forget to document upgrades or improvements
- Do not assume the purchase price is equal to the market value
- Do not proceed without appropriate professional advice
Preparing thoroughly for the valuation ensures a smoother process and a more accurate outcome.
Final Thoughts: Valuation as a Strategic Investment Tool
A professional valuation is not simply a bank requirement. It is a strategic tool that provides clarity about your asset’s financial position, strengthens negotiations, and helps you align your investment strategy with current market conditions.
By understanding how valuers assess property value, preparing correctly, and working with qualified professionals, you place yourself in a strong position to secure favourable loan terms and make informed investment decisions.
Need a Mortgage Security Valuation in Brisbane
For expert advice and reliable commercial property valuations, contact our valuation specialists at McGees Property. Whether you are purchasing, refinancing, or reviewing your investment portfolio, our team can assist with all Mortgage Security Valuation requirements across Brisbane.
Michael Walsh – Head of Valuation and Professional Services (Associate Director)
0402 810 425
Mel Evans – Valuations Consultant
0419 722 134