Why is a valuation needed when buying a house?

Anyone buying a house with a mortgage will almost always encounter a valuation. Yet many buyers don't know exactly why it's needed and what a valuer does. In this article we explain it.

What is a valuation?

A valuation is an official assessment of a home's market value. A certified valuer visits the home, assesses its condition, location and layout, and compares the home with recent sales in the neighbourhood. The result is a valuation report with the market value and any points of attention.

Why does the bank ask for it?

The lender wants to know whether the home is worth enough as collateral for the mortgage. If you can no longer pay the loan, the bank must be able to sell the home. The valuation report provides certainty about that. Usually the report must be validated by an independent institute. This checks whether the report was drawn up according to the rules.

Valuation or valuation estimate?

A valuation estimate by an agent is an indication of what your home could fetch. That's useful when thinking about selling. For example, request a free valuation. A formal valuation is official, carried out by a certified valuer, and needed for the financing.

When do you get a valuation?

When buying, the valuation is usually carried out after the purchase agreement is signed. The report must be ready within the term of the financing contingency. So plan the valuation on time. A valuation may also be needed when switching mortgages, renovating, or during a divorce.

What if the valuation comes out lower?

If the appraised value comes out lower than the purchase price, you can often borrow less than expected. You'll then have to pay the difference yourself, or talk to the seller again. That's why a realistic offer is important. Also read our tips on bidding smartly.

What does the valuer look at?

The valuer looks at, among other things, the living area, the year of construction, the state of maintenance, the energy label, the location and the amenities in the neighbourhood. Matters such as leasehold or a VvE are also included. For apartments he looks at the VvE documents. Read more about the VvE in buying an apartment.

Valuation and renovation

Planning to renovate or make the home more sustainable after purchase? Then the valuer can also determine a value after renovation. That's sometimes needed if you want to co-finance the renovation. Our colleagues at renovation can help with a cost estimate.

Arranging your valuation

Evim Makelaars arranges valuations by certified valuers. On our valuation page you can read how it works. Have questions about your financing? Our advisers at mortgage advice are happy to help. Get in touch to plan an appointment.

Who chooses the valuer?

As a buyer you usually commission the valuation yourself. The valuer must be independent and may have no interest in the sale. Many lenders set requirements for the valuer, such as registration in a recognised register. So check in advance whether the chosen valuer is accepted by your bank.

What's in the report?

The valuation report contains the market value, a description of the home and its surroundings, photos and a rationale with comparable sales. It also lists points of attention, such as deferred maintenance, foundation risks or special legal matters. This information is also valuable for you, because it gives an independent view of the home you're buying.

Valuation when selling

A valuation can also be useful for sellers, for example if you're unsure about the asking price, in a divorce, or dividing an inheritance. An independent valuation then provides an objective value all parties can trust. For an ordinary sale, a valuation estimate by your selling agent is usually enough to determine a realistic asking price.

How long does it take?

A valuer usually visits the home within a few days of being commissioned. The report often follows within a week, after which validation takes place. Plan well ahead of the end of your financing contingency.