Bank Appraisals are Unconcerned with the Intangible  

bank appraisals bbqs

Banks don’t care about the family bbq.

By now, I’m sure you’ve read and heard plenty of people talking about the market value of a property, which is basically the amount of money the market — in this case, the buyers interested in the property — are willing to pay for it.

A bank appraisal or bank valuation, on the other hand, is significantly different. Unlike the market value of a property, which is determined by a buyer who is concerned with intangible things, such as their lifestyle, a bank valuation is chiefly concerned with ensuring that they’re lending money responsibly, and that the value of the home loan doesn’t exceed the value of the property.

This is where many first home buyers are often disappointed, because although they too have a vested interest in making certain they’re not paying more than a property is worth, they fail to take into account those intangible things we, as human beings, tend to place so much value and emphasis on when we go out to buy things.

What Drives up the Market Value Up?

I recently had two similar houses listed for sale in Sydney’s Lower North Shore suburb of Cremorne. The homes shared almost the same land size, same number of bedrooms, bathrooms and the streets were within walking distance from each other. However, I noticed people leaning toward the second property because of the way the house itself was appointed. One of the Cremorne properties was located on a corner block with considerable time and energy spent landscaping the gardens in such a way as to give the outdoor area a great deal of character; you could just imagine yourself enjoying barbecues with your family there — and I imagine so could everyone else inspecting the property. I estimate this single factor alone was enough to push the value of the property higher than its counterpart.

Banks Don’t Care about Barbeques

Banks, however, don’t care how much you’ll enjoy entertaining your family in the leafy outdoors. What they do care about are the following, tangible aspects of the property:

  • General location and zoning
  • Overall size and number of rooms
  • Vehicle access to the property
  • Building structure and condition

These attributes are combined, and, together with the recent comparable sales in the area, used to produce a valuation report, which the bank considers when viewing your finance application.

Bank Appraisals are Always Lower than Market Value

A bank appraisal is used to determine how much the bank would get if it were to sell a property. If the market value of a property happens to be two times what the bank’s appraisal of it is, then you may be required to have a higher deposit in order to secure the loan, which can obviously affect the ability of many buyers to purchase a property. Of course, if the bank’s appraisal of a property varies significantly, it might indicate that you’re paying too much.

So while the market value of a property is more important to you as a buyer and homeowner; it still wise to consider the bank’s appraisal, especially if you’re buying in a seller’s market and there’s a chance that you could be paying more for the property than you really should.

I specialise in helping people buy and sell real estate in the Lower North Shore of Sydney, including Naremburn, North Sydney and Cammeray, and from Neutral Bay through to Mosman. For more tips and advice on buying and selling property, you can continue reading my blog or subscribe to access my series of educational videos on the property market. Alternatively, if you’re thinking of selling, feel free to request a proposal from me to receive an obligation-free market value appraisal of your home.

— This blog first appeared at


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