Bank valuation explained: Why it is more important than the purchase price
If you want to buy a property, the first thing you look at is the purchase price. This is logical - after all, this is what the buyer and seller are negotiating. For the bank, however, this amount is only part of the story. It does not blindly rely on what the two parties agree, but makes its own assessment. own valuation. And this can be higher or lower than the purchase price. This is what ultimately decides how much mortgage you actually get.
The purchase price is strongly influenced by the market, demand and sometimes also by emotions. The bank, on the other hand, thinks more long-term. It wants to know: How stable is this value over many years? It therefore takes a closer look - at the location, condition, potential uses and comparative values from the past. A lower bank valuation does not automatically mean that the purchase price is „too high“. It simply answers a different question: How safe is this property as a long-term investment?
This difference can have major consequences for buyers. Banks will finance a maximum of 80 percent of the Bank values - not necessarily the purchase price. If the bank's valuation is lower, the gap must be closed with more equity. People who are buying for the first time are often surprised because they calculate with the simple formula „20 percent equity“. However, this only applies if the purchase price and bank valuation are the same.
And this is where it gets emotional. Anyone looking to buy an apartment or house for the first time is often under pressure anyway and doesn't have an infinite amount of money on the side. If the bank then comes along with a lower valuation, it can throw a spanner in the works. If you understand how banks value properties and why they do so, you will be much more relaxed and realistic when talking to sellers and financial institutions.
