25 July 2022

Why Banks and Agents Value Your Home Differently: Valuation vs. Appraisals

For both home buyers and sellers, an accurate assessment of a property’s value is a crucial first step in making a secure financial investment. For example, when preparing to sell a home, you may have the property appraised by a real estate agent and be pleased with their estimated selling price— until you receive the bank’s assessment report, which is much lower. Even in the case of a first-time home purchase, it is as necessary for you to know the property’s fair market value as it is for your bank to know this value in order to ensure that the property’s value exceeds the loan amount you are requesting. However, prospective buyers may be taken aback if the bank’s valuation turns out to be much different from what they had anticipated. 

Maybe you also have been puzzled why a home’s value might vary so widely between a bank’s estimation and that of a real estate agent. And how do you know what the right price is? This is a common problem that real estate agents face on a regular basis, as many clients fail to recognize the distinction between a bank’s assessment and an agent’s price appraisal, despite its critical importance. Both are forms of valuation, yet they serve distinct objectives. The bank is concerned with how much they can lend you in proportion to the cost of the property, while the agent is concerned with getting the property sold at a higher price, thus their valuations will be different. In order to help you buy or sell your property with confidence, this article will explain the differences between an agent’s valuation and a bank’s valuation.

What is Property Valuation?

A valuation is an estimate of a property’s worth in preparation for a financial transaction such as a purchase, a loan, or a refinance. These kinds of assessments are necessary for property deals because every property is different, particularly in terms of its current condition, which is a crucial determinant of value. Real estate values are affected not only by their location but also by the quality of nearby amenities and infrastructure.

It is possible for a property to have several “prices,” one of which is the owner’s own estimation of the asset’s fair value. Bank value, real estate agent price appraisal, homeowners’ price, sale price, etc. are just a few examples of the various valuations one may find in the market. However, there are two basic approaches to determining a rough estimate of the value of your property: formal valuations or agent appraisals.

An appraisal is a price opinion provided by a real estate agent based on market data and comparable sales in the region. Typically, this service is provided without charge. On the other hand, a formal valuation provides a more precise assessment of the property’s value and can only be performed by a certified valuer, who will make sure they take into account all of the aspects and problems connected to a specific property. The process of valuing a property is complicated and is influenced by a number of variables, including the property’s location, age, structural integrity, individual features, and other aspects. Since formal appraisals are typically performed by banks as part of the financing process, they are commonly referred to as bank valuations. When a property’s precise worth must be determined, bank valuations are necessary.

Understanding the Agent’s Appraisals

Agents in the real estate industry are often asked to provide an opinion on the property’s fair market value. That’s useful information for anyone trying to decide on a real estate agent to sell their home. Likewise, a seller’s agent will typically check the property extensively before agreeing to represent the seller. They will look up recent house sales in the region and use that data to create a complete CMA (comparative market analysis) that will include their own appraisals as well as a low and high estimate for the property’s selling price. If a buyer or seller does not have a strong grasp of the market, this data will be key to helping them come to a decision on an appropriate price for the property. Therefore, the appraised value is the price at which the agent believes the property could be sold if it were placed on the open market. Sellers can get many agent values before selecting on one to sell their home.

In most cases, a seller will obtain this type of appraisal from their real estate agent in order to acquire a “feel” for the local market price before deciding whether or not to sell. The asking price of the house is based in part on this valuation. When valuing a property, the agent’s goal is not the same as the bank’s; rather, it is to get the greatest feasible sales price for the client. They must, however, be practical and work within the constraints of current sales and real estate activity in the area. A real estate agent will base the valuation of a property on a number of factors, such as recent comparable sales data, the current sales climate (which is informed by the number of buyer inquiries they are receiving), the number of seller inquiries, and how “steamy” or “calm” the market currently is based on experience and intuition, while the bank will take a far more methodical and conservative approach.

Despite the fact that an appraisal is not a guarantee that a house will sell for the price stated, a qualified agent will have deep knowledge of the local market and will work with the seller’s preferred sales timeline and price targets to establish reasonable expectations. It’s important to engage with local real estate agents because those from outside of your neighborhood might not have as thorough an understanding of your area’s unique market conditions, leading them to provide you with an estimate that is either too high or too cheap.

Understanding the Bank’s Valuation

An official bank valuation is conducted by the bank itself for purposes like loan applications, property settlement, and determining a property’s worth after a death. Before lending money, financial institutions must verify the legitimacy of an estimated property value. An appraisal of the property is the only way to be sure of this. A valuer is a third party hired by the bank or lender to conduct an unbiased market analysis and produce a report on the property’s worth. Your bank or lending institution will order a valuation of your home if you intend to secure a mortgage on it. As the property is the asset providing security for the loan, the bank valuation is typically lower than the anticipation to protect the lender financially in instance you cannot pay off your mortgage or there are issues with the loan and the property must be sold to satisfy the debt. With time constraints, the property will have to be sold for less. This assures the lender that your asset can cover the loan. Despite your assurances that the mortgage will really be paid, you can never predict the financial curveballs that life may send to you. It should come as no surprise, then, that a bank valuation is often conservative, often coming in at 10-20% below the prices at which similarly situated homes are selling.

In order to determine how much of a loan you would be able to afford to repay, banks conduct credit checks and use valuations to determine your repayment capacity. In spite of the fact that the bank valuation is based on careful examination of similar properties, it will be decreased when the buyer is taking on a larger loan. When you apply for a mortgage, the bank must make sure that the amount you borrow is not more than the worth of the home you intend to buy. Since the property is used as collateral for the repayment, this is the case. If the bank faces a loss, the valuer may be held accountable, so they will opt for a more conservative estimate. If the valuer thinks the buyer paid too much, they can recommend that the bank deny the financing application. It’s not always clear to homeowners what the final valuation figure is, as the bank may choose not to share this information.

How Does an Appraisal Differ from a Valuation?

Agent’s Appraisal

Bank’s Valuation

An agent appraisal will usually be higher than a bank valuation. A bank valuation will always be lower than an agent’s appraisal for the same property.
The potential selling price of a house is determined in part by the agent’s valuation of the property. Only the seller and their agent will benefit from this. Banks can use valuations as a self-regulatory and precautionary measure. Therefore, it serves the bank’s purposes more than the homeowner’s.
When appraising a property, an agent typically thinks the seller is looking for the highest feasible price and isn’t in as much of a hurry to sell as a bank would be. Generally, sellers are motivated to achieve the greatest price for their home, even if it means waiting longer. The most common reason for a bank to sell a piece of real estate is a loan default (through non-payment by the client). The bank’s primary motivation in this sale is to quickly recover the outstanding loan, as opposed to the individual seller’s goal of maximizing profit.
The agent’s valuation may be influenced by the seller’s sentimental attachment to the home, in addition to maximizing profit.  In order to ensure that they will get their money back from the sale of the property, banks will typically tend to underestimate its value.
A real estate agent’s valuation takes the current market into account. The housing market’s ups and downs have more of an impact on it. When the real estate market is thriving, an agent’s valuation will be significantly greater than a bank’s. In addition to the current status of the market, the bank must also take into account economic forecasts and the selling costs associated with the property. These selling charges include things like advertising, legal fees, and real estate commissions, amongst other costs.

What to Do to Improve the Bank’s Valuation?

When the time comes to sell, every homeowner has an ideal asking price in mind, and the vast majority also have a bottom line below which they will not budge. In both cases, the asking price and the selling price are determined by the home’s location, orientation, and amenities, although sellers’ estimates of the selling price are sometimes based more on feelings than on reality. However, there are several options available to you if you are unhappy with the bank’s valuation of your property.

1. Challenge the given valuation

First things first, if you’ve received a valuation that’s lower than you were hoping for: talk to your lender about what went wrong. Make sure there are no mistakes in the valuation report by reading it carefully. Discuss with your lender why you disagree with the bank’s value. Provide evidence to back up your position, such as details of recent comparable sales in the neighborhood, if you want to challenge the valuer’s first estimates. However, beware that many valuers won’t budge from their initial assessment.

2. Find another bank

Since there will always be variations in determining prices between different lenders, this strategy tends to do better than the first. Instead of trying to get a new valuation from your current bank, you could keep looking around for a new bank. A different financial institution could return a different figure.

3. Borrow more money from your current lender

You should be able to move forward with the deal by borrowing a larger amount if the estimated value of the property is lower than the purchase price, provided that the loan amount does not exceed 95% of the assessed value as determined by the bank.

4. Utilise equity from different property

If a second valuation again turns up a low estimate, you might be able to use the equity in another piece of property as collateral. If you are a first-time homebuyer, you may be able to secure a loan with fewer requirements by asking a family member to act as a guarantor on your behalf and contribute to the loan’s equity. Saving thousands of bucks in this way is worth making sure your relationship with the guarantor is good enough to handle the stress of possibly losing their property.

5. Renovate before valuation

Don’t make the mistake of neglecting critical repairs before conducting appraisals and selling your house, since first impressions count. Refresh the look of your home with a few inexpensive changes. A fresh coat of paint, some landscaping, and a few quick fixes could all fall under this category. When it comes to increasing your home’s value, you might be surprised by the impact that high-quality interiors can have. All renovations should be accomplished before the surveyor is scheduled to arrive.


It is inevitable that real estate prices will change over time as a result of market conditions and other variables. Keep in mind that banks are usually very careful when valuing a property to make sure they will be able to recover enough amounts from the sale if required, whereas agents’ goals are to get you a great deal for your home that you will be delighted with. So don’t fret about viewing different values for your beloved property. In order to successfully negotiate the price for your property, it is essential that you understand how and why various institutions assign varying valuations to the same piece of real estate.


Is it common for a bank’s valuation of a home to differ from that of a real estate agent?

Ans. Indeed, this is quite common. When compared to an agent’s valuation, a bank is often on the lower end of the pricing spectrum.

Can I do my own property valuation?

Ans. Sure. However, if you are not a part of the real estate industry and do not have a deep understanding of the real estate market, you are likely to make an inaccurate estimation.

Is it expensive to get an agent’s appraisal?

Ans. In most circumstances, the agent you’ve hired will provide you with a complimentary appraisal.

Can valuations fluctuate over the years?

Ans. The market condition has a major impact on property values, which can cause them to fluctuate greatly over time.

If I am not pleased with the initial valuation, can I get a second opinion? 

Ans. If you have proof to support your claim, you can ask your lender to reassess the initial valuation.


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