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Jon,
rather than restate the other post, here's a few more items (it sounds like you've been burnt by buying into a 'hot' market and when it cooled expected to cash in).
jontapp wrote:Now if a valuer conducted a property valuation on this case study e.g. 3 bed, 1 bath B & T on 728sqm lot, with no recent improvements. Median price in Jan 2006 was $200K. Purchase price offer $230K in Mar 2006. $30K price increase (15%) over 3 months. (basic location capital growth/no improvements) Annualised this would be a 60% increase or $120K.The median/average price etc bears little resemblance to the market – you must understand statistical analysis to understand how that median price has been established. Basically, if there were 100 sales in an area, the median price is the 50th sale when all prices are arranged in ascending order. So if 70 sales were of older/smaller/lower priced properties etc then the median would be low, if 70 sales were due to a new supply of home units hitting the market, the median might be artificially high. The mere fact that you have bought a property which is 15% above the median bears little relevance to what it is worth.
Valuers do no set the market, they are impartial. How can someone who is not participating in the market (ie active buyer or active seller) influence the market.
The valuer is working for the bank, not for the purchaser – the valuer must satisfy its client of the value of the property, they are not necessarily using a crystal ball to project any pricing in the future only at the date of sale by using historical data. The bank uses its own expertise to determine whether the information provided then fits its risk profile to lend money on the property.
They exclude out of line sales eg divorces.
Market factors drive prices eg: demand, mining boom, housing shortage, rezoning, government policy.
Is a 60% price variance relevant – yes, no and maybe. Is it sustainable? Probably not. Does it occur? Yes. Why? See above.
Ever heard of due diligence? If you don't know what price you should be paying for comparable properties then what would one expect?
Have you ever purchased shares in a company which was undervalued? Did you get carried away when the price rose to meet market expectations (eg float of the Comm Bank, Tabcorp or T1 etc)? Likewise have you bought overpriced shares because you were told they were a 'good buy' according to some mate or a journo or because everyone else was doing it? Did you get ticked off when they then fell 95% eg Centro.
You cannot absolve yourself of all blame, there are plenty of properties on the market, bull runs & booms don't last forever – someone will always get caught. Property is a long-term investment, even longer in regional centres. Prices will rise, often quite quickly on news of a resources boom coupled with investment then they will go backwards or stagnate, quite often for 10 or more years. This doesn't just apply to regional towns but also places like the Gold Coast, Perth etc – history does repeat itself.
Agree with Scott.
Valuers do not set the property prices- they base their valuations on what people are willing to pay for a similar property. So really, it is property buyers that set the values, and the valuers use this sales data to estimate a value.
Luke.
Hi Guys my point is this:
If there is not an acceptable valuation there is no deal and no sale.
Even in a rising market, flat market or falling market an unacceptable valuation = no sale.
Valuers are the deal breakers, as they have the responsibility and accountability to provide a satisfactory valuation.
A sale subject to finance cannot be approved without a valuation. No valuation and no deal.
What ever value they approve, that sets the market price for that property.
Therefore Valuers set property market prices, not buyers and sellers!
Think about it…Oh of course there is further intrigue, in the context that real estate agents act as valuers and vice versa in Australia.
Perhaps I could offer another point of view
Having observed the buying frenzy in Perth in 2006 as a buyers advocate, valuers approving just about anything and lenders accepting crazy short term growth it provided me with an insiders point of view.
Occasionally when observing the market and observing other sales e.g. the property we were considering, that was purchased for over market price (by another buyer), we would see a valuer provide a bank valuation under the offer price and save the buyers bacon (not our client). The deal would fall through and the property would come back on the market. This was the exception and not the norm.
So the valuer was the deal breaker. They could make or break the deal.
Often the valuer would ask the buyers agent for the sales data and naturally the buyers agent would provide sales data that supported the sale. Alternatively the valuers would often call the selling agent for the sales data and naturally the sales agent would provide sales data that supported the sale. Why would a buyers agent or sales agent provide sales data for lower priced sales and risk losing the sale? Self interest and self preservation are human nature.
Often the valuer was very busy and it was much quicker to get sales data from the buyers agent or sales agent. As time is money. The valuers were often on a schedule and have to do so many valuations in one day. Time is money when they have to do volume (valuations). The churn and burn process.
Valuers set property market prices, not buyers and sellers!
They make or break the dealThey are not 'posing' as valuers, the staff have met the requirements for admission to hold a valuation licence. It is a breach of their real estate licence to hold out that they are something that they are not. If you are that concerned, lodge a complaint with the NSW Office of Fair Trading on 13 32 20 and keep me posted with your success.
Valuer's work on the instructions provided by their client – be it the bank (mortgage valuations), insurance company (insurance valuation), Land Titles Office (land tax valuation), developer (emv) etc.
Many valuers deal solely with mortgage valuations, others portfolio valuations. In the two highlighted R&H are a professional office servicing CRE clients generally, VJR will do your family break-up/estates/some insurance works/occasional development site but the number of valuation clients and vals undertaken is relatively small – pretty much a traditional real estate company with a few valuers who sell as well.
jontapp wrote:Occasionally when observing the market and observing other sales e.g. the property we were considering, that was purchased for over market price (by another buyer), we would see a valuer provide a bank valuation under the offer price and save the buyers bacon (not our client). The deal would fall through and the property would come back on the market. This was the exception and not the norm.The valuer is there not to save the purchaser from their own stupidity but to save the bank from bad debts.
jontapp wrote:So the valuer was the deal breaker. They could make or break the deal.No, the bank was the deal breaker – the bank, acting on the advice of its consultant who provided a valuation as to the property's value for mortgage valuation purposes, declined to provide finance for a deal which would expose it to a level of risk it was not prepared to accept. The valuer is not your lap dog, they work in the interest of their client.
jontapp wrote:Often the valuer would ask the buyers agent for the sales data and naturally the buyers agent would provide sales data that supported the sale. Alternatively the valuers would often call the selling agent for the sales data and naturally the sales agent would provide sales data that supported the sale. Why would a buyers agent or sales agent provide sales data for lower priced sales and risk losing the sale? Self interest and self preservation are human nature.A valuer may contact several selling agents in an area for recent sales – this information is 'off the record' as it does not reflect the reported results until the properties have settled. The information can be used for an alert towards a trend (up or down), market sentiment etc but CANNOT be used until they have been reported by the LTO.
jontapp wrote:Often the valuer was very busy and it was much quicker to get sales data from the buyers agent or sales agent. As time is money. The valuers were often on a schedule and have to do so many valuations in one day. Time is money when they have to do volume (valuations). The churn and burn process.Valuers set property market prices, not buyers and sellers!
They make or break the dealYes, valuers are underpaid by the banks but you then have the hide to dispute that they cannot spend sufficient time in completing a 'proper' valuation. Are you prepared to pay the bank more so that they can fairly remunerate the valuer?
Valuers do not rely on real estate agents and definitely not on buyers agents for the provision of data. They might have heard of RPD & APM (it is not a trade secret).
Bulk valuation uses sophisticated statistical modelling, one-off mortgage vals are not bulk vals.
HiHere is some research info
Check out the Valuers Board of QLD website http://www.valuersboard.qld.gov.au/complaints/
One of the decisions below states the valuer " failed to verify factual data that may affect the valuation and was negligent in your performance as a valuer and contravened a prescribed code of professional conduct. "
Decisions of the QLD Valuers Disciplinary Committee
Decision – File No: C119-4/09 – October 2010 (PDF, 56 kB)*
Decision – File No: C132-3/10 – October 2010 (PDF, 48 kB)*
Decision – File No: C116-3/09 – December 2009 (PDF, 76 kB)*
Decision – File No: C110-8/08 – August 2009 (PDF, 84 kB)*
Decision – File No: C111-9/08 – June 2009 (PDF, 80 kB)*
Decision – File No: C87- 8/07 – March 2008 (PDF, 10 kB)*
Decision – File No: C102-3/08 – December 2008 (PDF, 75 kB)*
Just some objective research
Not stating an opinion either waycheers
was any action pursued in a civil court & how much were the damages?
It strikes me that the issue is not so much the valuer, but irrational herd behaviour driving up prices.
crj wrote:It strikes me that the issue is not so much the valuer, but irrational herd behaviour driving up prices.Irrational herd behaviour? It happens from time to time …
http://en.wikipedia.org/wiki/Economic_bubble
Anything from tulips to ostriches to Nickel mining to dotcoms.
Some people get in on the ground floor and make money .. others feel left out and drive the price up into oblivion.
But that also goes with irrational reasoning for price movements on these items. Now .. as long as a renter is paying his way and there are people who actually rent at the listed prices, the property values are moving in line with actual demands. Irrational movements would see places being built where no-one wants to live, and this is EXACTLY what happened in the US.
We still have an undersupply of lower to lower middle class housing in parts of this country. Blame poor government planning, lack of proper housing rules for a significant period of time. But I live in a town (Melbourne) where up until 20 years ago .. most people lived in single story full block houses. And there was very little else. Heck, even with the local shopping strips, they are based on early 20th century double storey buildings. With climbing rents on these places, better means of shop (strip) usage need to be thought of and quickly. There will come a time when a business just wont pay 150k rent for the use of a double storey shop in a good position.
Bad policies and bad govenment planning has brought this on, and only better development schemes will cure it. But until then, there is every reason for prices to keep on moving up. And we need councils with forethought or we are in trouble.There is in fact legal precedent for property valuers (or "surveyors" as they are called in the UK) being held financially liable at common law where they value a property negligently:
–Smith v Eric S. Bush, and Harris v Wyre Forest District Council [1990] 1 AC 831 where a property valuer engaged by a building society valued a property for a mortgage application was found to owe a duty of care to the prospective purchaser of the house despite the fact that it was the building society who arranged for the valuation and not the purchaser.
– The above case was affirmed by the Court of Appeal in Merrett v Babb [2001] EWCA Civ 214, [2001] QB 1174 where both the valuer and his firm were found liable
– The above UK cases were followed by the Victorian Supreme Court of Appeal in Derring Lane Pty Ltd v Fitzgibbon [2007] VSCA 79 where the valuer was again held liable despite the existence of a 'disclaimer' on the valuation.
Of course nothing in law is ever completely straight forward and every case will turn on its merits but generally speaking you can assume that a property valuer owes a duty of care to a prospective property purchaser such that should they act negligently in preparing the valuation and the purchaser subsequently suffers financial loss the purchaser can recover that loss from the valuer and his firm. This duty would normally exists whether the valuer places a disclaimer on the valuation or not.
The real issue is what constitutes negligence in this area.
Bullmarket wrote:Derring Lane Pty Ltd v Fitzgibbon [2007] VSCA 79 where the valuer was again held liable despite the existence of a 'disclaimer' on the valuation.You'd have to read HDY's case summary on that one Bull. HDY Newsletter Get your facts right! The case related to a claim by a purchaser who relied on the vendor's valuer's calculation of GST liability using the margin scheme. The valuer was acutely aware of the purpose of the valuation and who was to be reliant upon it (ie the purchaers) even though they were not named specifically on the valuation. The same would have applied had the calculation been provided by an accountant or other professional.
Bullmarket wrote:Of course nothing in law is ever completely straight forward and every case will turn on its merits but generally speaking you can assume that a property valuer owes a duty of care to a prospective property purchaser such that should they act negligently in preparing the valuation and the purchaser subsequently suffers financial loss the purchaser can recover that loss from the valuer and his firm. This duty would normally exists whether the valuer places a disclaimer on the valuation or not.The real issue is what constitutes negligence in this area.
The only arguments that I can see are who, foreseeably, is going to rely on the valuation and for what purposes. A val is created for a specific user for a named person/s based on the instructions provided by that person. It may be foreseeable that the purchaser may wish to rely on the valuation but the extent of that reliance would not be known to the valuer as the purpose of the val was for mortgage purposes (of the bank). How someone could then wish to rely on that valuation for another purpose goes outside of the scope of the original instruction. In the above case, the purchaser was reliant upon the vendor's valuation as it was liable to pay GST on the property based on the margin scheme calculation provided by the valuer.
The above case is extraordinary and foreseeability is an issue. Generally, would the purchaser (ie the person who sued the valuer) have been in the same predicament had the valuer's report meant that the purchaser would not have secured finance? Hence, was the valuer liable as the comparable evidence used was insufficient to cause the deal to fall over? (In this instance there is no comparable data as it is purely reliant upon the information provided by the vendor to the valuer in the determination of GST payable).
The case does not highlight the liability of Valuers or how they skew or determine prices in the market.
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