It can be terribly confusing how valuations can differ depending on who does it, right? Your real estate agent will give you one valuation figure and then the lender-valued estimate (your banks's valuation) arrives looking much different...
How does this happen? Which price is right? And how does your bank and agent come to different conclusions?
The bank valuation: If your home is or soon to be mortgaged, your lender/bank will need to value it. This is necessary to give the lender/bank confidence your asset/home offers sufficient security against the borrowed amount of money if, for any reason, you cannot pay your mortgage and the lender must sell the property to reclaim the debt. Hence, a bank valuation will usually be quite conservative, sometimes 10%-20% less than the current selling prices of comparable homes in the same area.
The selling agent’s valuation: Real estate agents are commonly asked to assess the market value of your property, and many have some training in how to conduct proper appraisals of property. This agent valuation will often be used to decide who to engage to sell your home. Before completing your valuation, the agent will typically inspect your home and research comparable sales in the local suburb or commune before producing a report and a sale price estimation. This price guide is useful to a vendor when deciding what price to advertise. However, the bank is unlikely to respect this valuation without a follow up appraisal by one of their valuation specialists, or an independent appraisals agent. Of course, the agent wants to help you get a good price - because this means more commission for them, and a happy customer - but these over-confident valuations can be dangerous to a lender.