Do I really need a valuation as a condition of my loan?
The purpose of a valuation is ultimately for the lender to have professional advice as to the market value and other factors relevant to the property. Put simply, is the proposed purchase price (or estimated value if already owned) what it would realistically achieve if it were sold?
As valuers we are sometimes accused of providing forced sale or ‘worst case’ scenario valuations. This is not so. The basis of market value is the sale price that would be achieved between a willing vendor and purchaser, in the open market, given a realistic period of marketing (typically 6 months unless stated otherwise) and assuming no special purchaser status.
The purchase price is often considered to be in line with the market value. However, sometimes the property is considered to be over-priced. Reasons are many, but in the case of commercial property can be: poor condition, over-rented floor space (investment properties only), or most commonly, the purchase price is not supported by analysis of comparable property sales in the locality. In such cases the purchaser will often negotiate a reduced price.