Valuation comes too low

Yan, your borrowings will be capped to what the valuers have provided to your financier ie 80% (without LMI) will be less than $400k. There are 2 courses of action – 1 retract your offer, wait and see if they are prepared to drop their price to what the banks will approve (nerve racking if you are keen on the property). 2 seek a second valuation from another valuer on the bank's panel (or through another bank).

Yan, a real estate agent's role is to sell the property for the maximum price acheivable for the vendor, they work for the seller and look after the seller's interests. They are not your buddy, friend etc, they are there to seal the deal. They may try to convince you that the property is worth $500k but you will need to get the agent to provide the information on which he has based his opinion (a valuer is specifically trained to analyse sales data and the current market in order to make a legal valuation – REA cannot).

If the agent can prove to you that the value is $500k by providing more recent comparable information than is available to the valuer, then there may be some argument for the valuer to revise his assessment. EG there might be some sales which have been completed but the valuer is not aware of.

Work on the agent.

Hi, Yan

Perhaps what is lacking is proper research on your target suburb? We bought our PPOR in Nov 07 and am looking for our first IP now. However, there are loads of FHB going around bidding for whatever they can get their hands on, so we have to thread carefully. Did your initial research into the area indicate that the price for the property that you wanted was worth $500K that you offered?

Alternatively, one safe guard is to put in a clause that the purchase is subject to a successful valuation at cost or higher; as suggested by Steve during his recent webinar.

Regards
Daniel Lee

Would valuer be influenced by REA? NO
They work for the bank and liable for the mistake if the valution is too high

Get and independant valuer if you are so keen…

I always get independant valuation if in doubt… don't believe REA (bunch of suckers)…..
in this economic climate, I will just walk away… losing 0.25% deposit is better than 40k down

Did you get independant valuer???

cheers

Yan, I have NEVER heard of a valuer changing his valuation days after writing the figure. Once written, cast in stone for at least three months!!!

That said, you could have 10 valuations done by 10 different valuers all on same day and expect to get 10 different figures. 

For example, I know of somebody (not me!) who had valuation done here in NZ recently which came in at $220K.  She thought that was extremely low and properties used as comparable were all inferior (her property was three bed, valuer used sales from two bed properties and mortgagee sales).  So, she had another valuation done that came in at $280K.  Now, she's totally confused and doesn't believe either of them.  Low one is too low, and high one is rather generously high, but at least used more comparable properties in assessment.

If you don't have experience negotiating (which it sounds like you don't), I would recommend you buddy up with an experienced property investor at your local property investing club (check yellow pages).  Find someone there who you trust and who is happy to go and negotiate for you.  I would even say, decide the price you are happy paying, tell investory buddy if he can get the property for lower than that you will split the difference with him.  Sound fair?  Win-Win for both of you.

Also remember, when buying IP not to get emotionally attached.  There will be many more good deals coming up.

Happy negotiating,

Vicky

I have had an instance where the original val was very optimistic. We asked for a review, it was completely thorough including an independent review by a second valuer and the director of resi valuations for the company. I had extensive discussions regarding the rationale in order to satisfy myself of the sufficiency of the revision (decrease by 30-40%) however it was a valid revision (there was no market interest at the original price).

The valuer was very thorough in his review to his credit, he undertook consultation with the town planner at council, several newer sales in the housing estate, took account of the value of land resumed for road widening (still to be done). The valuer was concerned that he was still too high (I knew what the buyer was prepared to pay, obviously alot less than the original val, but I needed to justify the sale price).

Yanhong, in this instance, I would walk away. 0.25% is a small price to pay for the lesson learnt (however I would still approach the agent to see if they will forgo the penalty – no harm in trying).

As you did not complete the purchase or cannot prove that you are currently a property investor, it may be difficult to prove that you are an active investor (unless you actually go ahead and complete a purchase).

Playa suggests teaming up with a more experienced investor – good advice (or use & learn from a buyers agent).

SNM

Hi guys,

New to property investment as well.

I like the NZ way as mentioned by Vicky, but in Australia, most property go for auction, and with no cool off period.  Is that mean we have to do the valuation ourselves before going for auction?

How do we prevent from losing the deposit?

Thanks.