What is the Difference between Property Appraisal and Property Valuation?

Rayson L.
Feb 28, 2022
7 min read

Updated: Jul 21

Difference between property valuation and market appraisal

Are there any differences between Property Valuation and Market Appraisal? How do they differ? What are the things you need to know?

Difference between Market Appraisal and Property Valuation

The difference between a Market Appraisal vs Property Valuation is an important concept that all property buyers and home buyers must understand. While they may sound the same and probably look similar, there is a fundamental difference.

What is a Property Appraisal?

A Property Appraisal gives you an indication of price, from a Real Estate agent's perspective. It is how much the property can sell for in the Melbourne property market in the prevailing market conditions.

What is a Property Valuation?

A Property Valuation is a formal, legally recognised assessment of a property's market value, prepared by a licenced, qualified independent valuer. This valuation is used by a bank or lender to process your mortgage or wealth. The property valuation is also used by the legal profession to determine the value of the property for compensation and settlements such as divorce, separation, etc.

Difference between Property Appraisal and Property Valuation

The table below summarises the difference between a Property Appraisal and a Property Valuation:

	Property Valuation	Property Appraisal
Purpose	Satisfy banks, courts, tax authorities, insurance	Give an estimated selling price for buyers/sellers
Who Provides It	Certified practising valuer (CPV) bound by Australian Property Institute (API) rules	Sales agent or buyers advocate
Legal Standing	Admissible in court; relied on by lenders and solicitors	Not legally binding
Cost	$500–$800 for standard Melbourne residential property	Often low-cost or free
Typical Uses	Mortgage lending, refinancing, deceased estate, family-law settlement, capital-gains tax, SMSF audits, insurance replacement	For Sellers to set an asking price or vendor strategy. For Buyers to define buying, negotiation or bidding strategy.

How do Real Estate Agents do a Property Appraisal?

To determine a property value, the licenced buyer agents or real estate agents perform property appraisal by firstly inspecting the property and utilising their knowledge and understanding of the property, location, demand, supply, etc, in the specific property market. Because this is based on one agent's understanding of so many parameters, it is normal to see this value differ from agent to agent. If the appraisal is independent with no hidden agenda, the number should be relatively similar, and reflective of the property in the prevailing market condition.

How do Property Valuers Value a Property?

Property valuation is a lot more formal and is a legal procedure to determine the value of a property. It is carried out by a licenced valuer who is an independent professional and works on behalf of banks and other lenders. Property valuation takes a closer look at the property and its quality and features to arrive at a more accurate value.

However, because most tend to work on behalf of the lenders, their property valuation tends to be more conservative to protect the interest of the lenders. It usually is lower than the price you could get in the prevailing market.

Property valuations are not free and can cost you around $500-$800 whereas market appraisals can be obtained for free from any licensed Real Estate agent.

Are There Free Market Appraisals?

There are a few places where you can get "free" market appraisals, but they each come with their own catch. There's no free lunches, unfortunately.

Real Estate Agents. Your real estate sales agent friends would be able to give you an idea of what the price it could sell for, if they are local to the property and are familiar with the property and location. But do understand of the values are often tainted by the sales agent's agenda.
Online Appraisal. Some real estate related websites provide a free appraisal for the property. However, this is your worst option and least accurate appraisal. We had seen these number vary by between $300,000 - $500,000 for the same property. Use this only if you are desperate for a free appraisal, then add/subtract up to 30% to the results.
Perform Your Own Price Assessment. With enough experience and knowledge of the property and local market condition, buyers can do their own appraisal. However, experience tells, us buyers always have a certain degree of biasness.

Part 1: Free Market Appraisals from Real Estate Sales Agents

How are Sales Agents Using Appraisals to their Advantage

Property buyers are usually not aware of how the valuations/appraisals are done. Sales agents often prey on this to present numbers which benefit their sales agenda. The number can be higher or lower than what it is, depending on whether they are trying to get your listing or trying to sell the property.

Our buyers advocates often see differences of between $200,000 to $300,000. In one case, the difference is as high as half a million dollars. It is often impossible for inexperienced buyers to decide which appraisal or valuation is more accurate.

What are There Differences in Property Appraisal Values?

As explained above, if the differences in appraised values are small, it probably suggests the appraisals are accurate. However, when the differences are huge, it can be confusing and misleading. When there is huge difference, it is important to find out why, and which value is more realistic. There might be something unique in the house. A gold bar hidden somewhere? Or the property might have a hidden termite infestation or structural issue. These are probable reasons why there is this big difference in property appraisal value.

Why are Sales Agents Appraisal Controversial? What is the Hidden Agenda?

While most sales real estate agents attempt to make an honest attempt to put a value to a house, many are driven by the need to get a listing. The number of listings is one of the sales agents' Key Performance Indicators (KPIs) in the market. Their performance in the agency is determined by the number new properties they can list for sale.

So, in order for real estate sales agents to increase the number of listing they have, they need to convince property owners to let them list and sell their properties. And what else could be a better incentive than to convince sellers their properties are worth a premium ($100k?) above everyone else, and to promise property owners that only they can sell their property for top dollars.

Thus market appraisal (include price guides and statement of informations) from sales agents can seldom be trusted. Understanding the real value involves guesswork and adjustments based upon the experience (and agenda) of the sales agent.

Part 2: Free online Property Appraisals

Where Can we Get Free Property Valuations/Appraisals?

So, if buyers cannot fully trust the appraisals from the agents, and they are unable to do the appraisal independently, can they trust the free property valuation websites?

Yes, there are some websites who claimed to be powered by AI to provide free property appraisals. However, as explained above, time and experience, plus a visit to the property to understand the condition, etc, is needed to individually assess and appraise a property. The AI would probably be better at learning. However, has the AI physically visited the property to understand the property condition? No.

Thus, websites which provide free property valuations are nothing more than a algorithm in a computer program calculating the average of properties sold in the area. Numbers which our buyers advocates have seen, can often differ by a few hundred thousand dollars.

How Accurate are Free Online Property Estimates?

Free online estimates might give you a rough idea of the value of a property, but our experience tells us the values can differ by hundreds of thousands for the same property. So, professional real estate Buyer's Advocates like us have never trusted those numbers. We always take those numbers with a pinch of salt. Those free valuations are more often than not, generated by simply computing an average of all properties in the suburb, and do not consider if the property has any unique selling points or of there are any problems with the property

Part 3: Buyers can do you Own Assessment

Can Buyers Do Their Own Property Appraisal?

Buyers definitely can do their own appraisal. You will need a good understanding of the market conditions, and skill set and discipline to keep the appraisal neutral. The more experienced and neutral you are, the more accurate your appraisal will be.

In addition to knowing the market conditions in the area, you will also need to:

know the profile of buyers in the area
understand what buyers in the area are looking for
know the potential of the property

It is critical to ensure you are neutral. Make sure your assessment is impartial and you have not added a few thousand dollars to your estimate, because you liked the property (personal biases).

The most critical thing you need to know is, your personal appraisal is only good for your own consumption. If you're not a licenced real estate agent, your appraisal is worthless.

Where can You Get an Independent Property Appraisal?

If you're are receiving conflicting property appraisals values or valuations, worry not. There are other ways of knowing the market value of the house. Property Appraisals and Valuations can also be done by:

Property valuations provided by an independent valuer
Estimates provided by experienced buyers advocates or buyers agents

Why Agents Charge for Accurate Appraisals?

As you would appreciate above, time and experience is essential to individually assess and appraise a property. It can take the real estate agent doing a detailed property appraisal at least an hour or two (or faster of the agent already know the area well) before they have enough information to determine a fairly accurate appraisal. Thus, fairly accurate reports are usually not free. Most property consultants and advisors charge a small fee of about $200 for an accurate property appraisal.

At Concierge Buyers Advocates, we are confident of the accuracy of our Property Appraisal Report. The report is completed by our Melbourne based buyers advocates, and we guarantee the accuracy with our Money Back Guarantee.

Are There Any Low-Cost High Accuracy Property Appraisal?

Yes there are low cost but highly accurate property appraisals. Our low cost property appraisal service gives you that peace of mind.

For a low fee of $138, we guarantee the accuracy of our reports. It is the first in the industry. No one else is confident enough to guarantee them like we do.

Accuracy Guaranteed Property Appraisal

This independent give you a good estimate of the fair value of the property, given you the confidence of knowing what the property is worth and buy without overpaying. If the sold price of the property is more than 10% different from our appraisal, we will refund the cost of the report. Yes, and if our appraisal is inaccurate, you get the report along with the property's sales history, proprietary and confidential information on the property and suburb for free. The insider information on the suburb is yours to keep and will help with your other purchase.

Many buyers have benefited from our low fee, accuracy-guaranteed independent appraisal reports. Buyers like yourself can now have the confidence of know what to pay, without breaking the bank.

Buy your Confidential High Accuracy Appraisal Now

If you’re buying your property or selling your property, consider speaking to one of our senior buyers advocates. Our agency principal, Rayson, has over 20 years of property buying, selling, and investment experience and would be happy to give you a hand.