BANK VALUATION V/S MARKET VALUATION OF REAL ESTATE PROPERTY

Bank valuation and market valuation are two methods used to determine the value of real estate property. Bank valuation is used by banks and other financial institutions to assess the value of a property for lending purposes, while market valuation is used to determine the value of a property for sale or purchase on the open market.

Bank Valuation: Bank valuation of a property is typically conducted by a professional appraiser who evaluates the property and provides an estimate of its value. The appraisal takes into account the condition of the property, its location, and other factors that can affect its value. The appraisal report provides the bank with a fair market value of the property which they use to determine the maximum amount they are willing to lend to the borrower.

Market Valuation: Market valuation is the process of determining the value of a property based on its current market conditions. This involves looking at recent sales of similar properties in the area and taking into account factors such as location, condition, and any unique features of the property. The market valuation helps property owners determine a fair price for their property when selling, or helps potential buyers determine how much they are willing to pay.

Difference: The key difference between bank valuation and market valuation is the purpose for which they are conducted. Bank valuation is used by financial institutions to determine how much they can lend against a property, while market valuation is used to determine the price at which a property can be sold in the open market. Bank valuations tend to be more conservative, as the bank is concerned with minimizing the risk of the loan, while market valuations tend to be more optimistic, as the seller wants to maximize the sale price.

In summary, while bank valuation is used to determine the value of a property for lending purposes, market valuation is used to determine the value of a property for sale or purchase on the open market. The purpose of the valuation impacts the approach used and the resulting valuation, with bank valuations tending to be more conservative and market valuations tending to be more optimistic.

The key differences between bank valuation and market valuation of real estate property can be summarized as follows:

1. Purpose: Bank valuation is conducted to determine the value of a property for lending purposes, while market valuation is conducted to determine the value of a property for sale or purchase on the open market.
2. Approach: Bank valuation is typically more conservative and objective, as the appraiser is concerned with minimizing the risk of the loan. Market valuation, on the other hand, may be more optimistic and subjective, as the seller wants to maximize the sale price.
3. Factors considered: Bank valuation takes into account the condition of the property, its location, and other factors that can affect its value. Market valuation considers recent sales of similar properties in the area, as well as any unique features of the property that may affect its value.
4. Timing: Bank valuation is typically conducted at the time of the loan application, while market valuation may be conducted at any time, depending on when the property is being bought or sold.
5. Valuation report: Bank valuation typically results in a formal appraisal report that provides the bank with a fair market value of the property. Market valuation may be less formal, with the seller or buyer using their own estimates of the property’s value.

Overall, the key difference between bank valuation and market valuation is the purpose for which they are conducted and the approach used to determine the value of the property. While bank valuation is more conservative and objective, market valuation may be more subjective and optimistic.