Today I had one of my investment properties valuated by my lender – (one of the big Banks). I requested an internal inspection, as I want to see the results before and after a planned internal renovation.
I got the valuation results today and am shocked. I was expecting it to be conservative, but this valuation is vastly off the mark (I believe). I told the bank my thoughts, they agreed that they are “conservative” and that if I wasnt happy I could get an independant valuation that may be more realistic.
To give some brief background. It is a 2 bedroom appartment, in a brisbane hub area, extemely close to large shopping centre, train station and cafes. smaller appartments in the block are renting at $250 pw, and other similar appartments sell in the range of $230-240,000. Yet the valuer set a figure of only $190,000 on it. [blink]
Is there an ulterior motive here with the banks, an I missing something…?? If you look at properties everyday (as this valuer would), wouldnt your estimates be pretty damn accurate??
Thoughts……..????[eh]
Realestate agents will suggest a price way over the top to get your listing, you will have a slightly more realistic approach but have some emotion attached, the bank will be ever so conservative. Especially with a unit or appartment as the price can fluctuate quite a lot as in comparison to something with land value.
Oh I forgot the tax man will see it as a mansion worth millions as they want a cut.
I guess you could always try another lender and hope that you get a more realistic valuation.
Wayne Skewes
Mortgage Broker
Email [email protected]
http://www.eaussie.com.au/Mortgages/Aussie_Mortgage_Adviser.asp?ContentID=852280
Refinace, Loan Consolidation, Owner Occupied or Investment Finance. Free Service I come to you!Hi breakeven,
I agree with waynelad about the agents -they will try to ‘buy’ your listing by pumping up the sale price.
But the valuers are different. I know the valuer that works for my bank personally. He values my house every year for the bank so we can assess our equity position.
He only bases his valuations on recent sales that have been completed in the immediate area. He doesn’t look at what the houses are listed for (actually he does) but the decision is based on the actual sale. Because I also do the same thing, I am usually very close to his estimate with my own estimate.
Have a look at what similar properties have sold for in your immediate area in the last 2-3 months to give you a better idea.
If the figures support your assessment, collect some info on those sales to show to your independant valuer if you bring one in. It may help you.Cheers,
Marc.
[email protected]Valuers are independent of banks, so there should be no ulterior motives, but some valuers do tend to be conservative.
If you want to argue the valuer is out or range, you should put together evidence of recent sales of similar properties and present this to the bank or the valuer.Terryw
Discover Home Loans
Parramatta
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Hi Breakeven.
A valuation is actually not a single number but a range based on recent sales of comparable homes and what the valuer believes the market has done since those sales. Actual sales figures are used, not what properties are listed at.
When the market is rising, values tend to come in at the top of the range. When the market is flat, values come in at the bottom of the range. And if the market is falling, values tend to be very conservative.
The closer the comparable sales are to the property being evaluated, then the narrower will be the range the valuer is looking at.
If anything goes wrong, there could be a claim against the valuer for giving an over inflated valuation. Hence the conservative valuations at this time as no valuer wants a claim against his professional indemnity insurance.
If you think who is at risk in the process, then you may be able to more easily understand the value figure.
Mum
interesting stuff, thanks for your comments…
as the market is at the bottom of the cycle, I can understand the valuer coming in at a lower end of the price range (thinking it may still be on the slide).
But I think that this is bad estimate. [thumbsdownanim
Why?1. The property has a rental of $250 pw. If I sold today at $190,000, the buyer would be getting an investment with a yield of nearly 7%. How many properties are for sale with this yield? Rent influences the sale value.
2. Actual sale prices (not listed prices) of like-for-like apartments are in the 230,000-245,000 range. These same units list at $250,000 up…
3. You cannot buy a decent 2 bdr flat in Brisbane for under 200,000. Let alone one in a prestigious suburb, 2 minutes walk cafes, westfield, restaurant and 2 different cinemas.
I dont live in the place, its just an investment – so there is no emotion. Im looking at property every weekend, as Im in the market for another similar unit. You couldn’t by a 1 bedroom bedsit in this location for $190,000.
Very strange. It dosnt really concern me because Im confident of its true value, but its been a surprise that a bank valuation could be $50,000 out (about 25% out of range). [hmm]
Thanks again yall…. [thumbsupanim]
Im arranging for an independant valuation and will be interested to see the difference.
Yeah you’re right…..you couldnt get a unit under 200k. I know cos Ive been looking. Challenge the valuer to find you one.
We are about to conclude a purchase of a DA approved site with a view to build a pair of townhouses in Ashburton VIC.
During the process of financing it, the finance broker was bemoaning his business’ fate because he says that bank valuations are all coming in low at the moment. It seems that with the interest rate rises and more on the way, the banks are using lower valuations to keep their LVR’s more conservative.
The low valuation on the Brisbane flat might be more as a result of the banks going into a self protection mode more than a reflection of market value.
The irony is that the banks response will become a self fulfilling prophecy. When money tightens up, values fall.
More than ever we as real estate investors are going to have to be vigilant about locating properties with the right fundamentals so as to not get killed by bad valuations. It took us ages to locate the Ashburton site as a result but the valuations, both pre and post building came in at the high end of the range.
Valuations are done by independent valuation companies, so I cannot see how banks are being more conservative. It is the valuers. Banks don’t lean on the valuers and say, “look, we want lower valuations”, the valuers are worried about being sued if the banks have to foreclose and the sale price is under what they have estimated.
Some valuation firms may be more conservative than others, and some staff in the same firm may be more conservative than other firms.
Banks use a variety of firms, so changing banks or en asking the bank to use a different firm may solve the problem.
Breakeven, I am not a valuer, but don;t think rents influence valuations – especially on residential property. The only thing they go on is comparable sales.
Any valuers out there?
Terryw
Discover Home Loans
Parramatta
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Another thing to remember is that whilst valuers have a high level of understanding with regards to the market in general (in your case Brisbane) there are also valuers that specialize in certain areas/locations.
EG. I have a friend who recently had to re-mortgage a property. The bank valuer was vastly under priced so they had the property valued through a local valuer which turned out to be more realistic.
Hi Terry
I think some banks still do valuations in house or with a tied valuer. Hence they can influence the definition of market value and hence can request they be conservative.
Not all banks and not all the time. But often enough to be a nuisance to borrowers.
Mum
BreakEven… once you get the independent valuation… would you post it on this thread… now I am sure that we are all interested. I am in a (almost similar position to you). I have unit in Brisbane, 2 bed, within 3 kms of the CBD.
4 yrs ago the banks valuation on it was $300k. We have used that valuation since, as the price would have dropped over the last few yrs, so we avoided having the bank revalue.
However, we know that a unit same as ours recently sold for 360K, and a few real estate people say that it could be put on the market for anything between 315 K and another agent 395K. The bank advises us not to have it revalued at the moment , in case it comes in at less than the original 300K. I cant sort that one out either![eh]Originally posted by mum:Hi Terry
I think some banks still do valuations in house or with a tied valuer. Hence they can influence the definition of market value and hence can request they be conservative.
Not all banks and not all the time. But often enough to be a nuisance to borrowers.
Mum
Hi Mum
Your correct. I know ANZ actually has their branches do valuations in some of the smaller towns. NAB too i believe. So in these cases the banks would obviously influence the valuers, but I would doubt there is a policy of undervaluing.
Terryw
Discover Home Loans
Parramatta
[email protected]
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Just send me a blank email, with “subscribe†in subject line.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
In response to Summer sky I live in Brisbane and within a close radius to the city approx 3-4 kms out and not sure why you would be concerned re having a valuation. As you have mentioned your purchased at 300k and now they are selling around the 360k mark.
Not sure where you are we could be next door to each other [biggrin] I purchased 3 years ago and confident have had some growth not a lot mind you, but certainly has not fallen where I am.
Wayne Skewes
Mortgage Broker
Email [email protected]
http://www.eaussie.com.au/Mortgages/Aussie_Mortgage_Adviser.asp?ContentID=852280
Refinace, Loan Consolidation, Owner Occupied or Investment Finance. Free Service I come to you!Hi Guys, just a quick update for those interested.
I organised an independant evaluation of our property. The valuation has come in at $225,000. This is $35,000 more than the banks valuation a few weeks ago of $190,000. What a difference…
We are now in a much better position to refinance our next property. I STRONGLY reconmend an independant valuation.
Also, I found it helpfull to speak to the valuer and get his ideas on adding value to the place. He discouraged me from a few ideas, such as new flooring in favour of new windows and updating the wet areas. The previous bank valuer seemed unapproachable and did not want to speak to me or answer questions…
Interestingly, the independant valuer spent a good 30 minutes measuring out the place and inspecting finer details. The Bank valuer walked in and out in 2 minutes flat, and didnt even look at the grounds and garage/laundry.[eh]
Overall, Im pretty happy and have learnt a valuable lesson.[specool]
GEEZ!! That is a much better result. Handy to know. Thanks for coming back and updating.[thumbsup2]
kjs
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