A valuation is an assessment of a property's market value at a given point in time. Valuations are carried out for various purposes, including mortgage lending, selling, insurance, probate, and tax calculations. The method used depends on the purpose.
For mortgage purposes, the lender arranges a valuation to confirm the property is adequate security for the loan. This can be a physical inspection by a surveyor or an automated valuation model (AVM) that uses data such as recent comparable sales, property characteristics and market trends.
A valuation is distinct from the asking price or the price you agree to pay. It is an independent professional opinion of what the property is worth. If the valuation comes in below the agreed purchase price, it can affect how much the lender is willing to lend, potentially requiring you to find additional funds or renegotiate the price.
You agree to buy a flat for £200,000. The lender's valuation confirms it is worth £200,000, so the mortgage proceeds as planned. Had the valuation come in at £190,000, you would have needed an extra £10,000 deposit or to renegotiate the price.
Key Points
- An independent assessment of a property's market value
- Used for mortgage lending, selling, insurance and tax purposes
- Can be a physical inspection or an automated desktop model
- The valuation may differ from the asking price or agreed purchase price
- A down-valuation can affect the amount a lender will offer