How Do Banks Value a Property Before Lending?
How banks and lenders value a property before approving a mortgage: independent valuers, comparable sales, condition checks and why the valuation can differ from the price.
Bellokey Editorial Team
Short answer: Banks usually order a valuation from an approved independent valuer, who estimates the property's market value mainly from comparable recent sales and the property's condition. The lender then bases the loan on the lower of the valuation and the purchase price, so a low valuation can reduce the amount you can borrow.
Key takeaways
- The valuation protects the lender, not you.
- Loan size usually depends on the lower of price and valuation.
- Condition, location and comparable sales drive the number.
- Fees and rules vary by country and lender.
Who does the valuation?
An independent valuer or surveyor approved by the lender. Rules about who may value and who pays differ by country, so ask the lender.
What does the valuer check?
- Recent sales of similar nearby properties.
- Size, layout, age and condition.
- Location, access and local demand.
- Legal status and anything that affects value, such as leases or restrictions.
What if the valuation is lower than the price?
The lender may reduce the loan. You may need a larger down payment, renegotiate the price, challenge the valuation with evidence or walk away if the contract allows. Check conditions in your contract before you commit.
How does the valuation affect your loan?
Lenders set a maximum loan-to-value ratio. A lower valuation lowers the maximum loan. Use the mortgage calculator or the Dubai mortgage calculator to see how a different down payment changes your payments.
Can you prepare for a bank valuation?
- Keep the property clean and accessible.
- Fix obvious maintenance problems.
- Prepare a list of recent comparable sales and improvements.
- Ask your lender what they require and what it costs.
See also the international mortgage guide for non-resident buyers.
Frequently asked questions
How do banks value a property?
They usually order a valuation from an approved independent valuer who uses comparable sales and the property's condition.
What happens if the bank valuation is lower than the price?
The lender may reduce the loan, so you might need more cash, a lower price or to withdraw if your contract allows.
Who pays for the bank valuation?
Often the buyer, but rules vary by country and lender, so ask in advance.
Can I challenge a bank valuation?
Sometimes. You can ask the lender how to appeal and provide evidence such as recent comparable sales.
Is a bank valuation the same as market value?
It is an estimate of value for lending, which can differ from the price you negotiate.
Related: the full guide to property valuation methods explained, cap rates, rental yield and more answers to common questions. This is general information, not financial, legal or valuation advice.
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