As part of refinance process, my broker obtain a valuation report from Heron Todd White.
The report shows photoes being taken both outside and inside the property only a few days ago and a valuation figure that suggested within the past 8 months or so, the property is now valued at 50K above how much I paid for it.
I was like “wow”, that’s surprising because only a few months ago, someone presented me a CoreLogic figure that shows the property is valued at -60K ~ +10K compare to the price I paid for it.
I do notice HTW is said to be “one of the biggest valuation companies” in Australia, and in many property investment seminars I attend the name HTW do pop up quite often, so that appears to be a sign that HTW should be a fairly respected valuation entity.
Just wondering for all the investment gurus in this forum, what’s your view on HTW and do you think their valuation figures are accurate?
Cheers
StevenHi Steven,
In my experience, most valuers tend to be conservative (as their neck is on the line if they over–value). HTW is certainly one of the more well-known.Also in my experience, a valuer will RARELY value a property at higher than the contract price – so if a deal “stacks up” when purchasing, it may well be that the property is worth MORE than they first quoted, and likely won’t be worth less.
This follow-up valuation you mentioned might be “a little out of the ordinary” – e.g. was it a valuation commissioned by a Bank, or was it at your behest? If the latter, then a lift in value is not too unusual as there is no Bank depending on their val so they can be freer with it. If it is to allow further loans against the property, then a Bank is depending on them for a “fair val” – thus the lift in value is a good sign.
Maybe check out what the median values have been doing – if they are showing a lift too, then this can indicate a generic shift in values.
Benny
Hi Benny
No, I did not request for the valuation.
I simply spoke to my broker about refinancing my investment loan from my current bank to a lender which he has contact to for a lower interest rate. (my current bank offers 5.1% IO while the lender — which is not a bank — introduced by broker is offering 4.4%)
The property was purchased for 550K, with a 440K loan.
However, back then I didn’t understand the advantages of using IO, so I picked P&I, so in actual fact, now the loan is just slightly over 430K as I have been paying almost 9 months of P&I.
The valuation happened in background without my knowledge. Just that once the report was ready, my broker sent it to me as an FYI.
I did a quick search on realestate.com.au, and found the properties of similar size have quoting from between 500-550K to 570-600k, with a few exceptional cases where similar properties got sold close to 650K.
It makes me think the valuation is probably reasonable… though to be honest, I expected capital growth to be lower than 50K in 8 months…
I also didn’t think a valuation with HTW would happen as part of refinance… I have always been under the impression that lenders have their own appointed valuation entity and the valuation figure is usually pretty close to the property’s selling value, if not the same…
Also, how long is the validity period of the valuation?
Hi Steven,
HTW gets a lot of work from a lot of lenders, so they could well be doing the vals for both your old bank and the lender the broker is suggesting. OK, let’s take a look at the facts (as I now understand them to be):-1. Your place was purchased for $550k, and there was a lift of $50k this time, so now $600k. Nice !!
2. You said “I also didn’t think a valuation with HTW would happen as part of refinance…” and you are right, Steven, in some situations.
If refinancing with the same bank, they might order a “drive-by valuation” where an internal Bank staffer will take a look at the house, check out comps, and give it a tick for the increase. But for a new lender, using a valuer like HTW is the smart (and usual) way to go.
3. You said “…the valuation figure is usually pretty close to the property’s selling value, if not the same…” – and yes, that is common. However, this means the value is pretty much guaranteed to be at least whatever that purchase price is – but, you might have bought it at a great discount (for whatever reason) and it is only at re-finance time that you get to learn of its true value. Like now perhaps? Did you buy it at what you believed was a discounted price?
4. Or, as mentioned earlier, maybe that area is in an upswing. Now $50k lift on a $550k property is a 9% lift if over a year, but in just 8 months, that is more like 13% – which is huge. Could it be so?
Well, yes it could. Each suburb of each city/town has its own “market” and they are influenced by other things – like wage growth (whether localised or national), tax changes, health of economy, etc. There are so many variables.
But 13% in a year – yep, it sure can happen. Have a read of this post from a year or two back where a member could not believe just how the values were scooting skyward. So much so that the median values were LAGGING behind hugely. Just look how much they went up in value over 12 months.
https://www.propertyinvesting.com/topic/5029447-australia-undervalued-suburbs-opportunity/
By the way, do read all through that topic – there is some VERY interesting information about the way median prices are calculated that you should be aware of. In that case, the median values quoted were close to useless as the suburb was surging in value and the median is calculated as a lagging indicator. As it turned out, way too far behind to be useful. That is when comparables make more sense than medians.
Benny
Just wondering for all the investment gurus in this forum, what’s your view on HTW and do you think their valuation figures are accurate?
Hiya
As a very general rule – valuations for refinancing tend to be on the conservative side. It’s not uncommon for a valuers estimate to be less than the client believes their home to be worth.
On the flipside – it’s not uncommon for purchase valuations to come back at the purchase price. It’s quite rare for them to come in less.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Hi Benny
Thank you very much for the good explanation.
To answer some of the question you asked. No, truth be told, I was pretty sure I bought above market value.
I myself was actually not so interested in buying that property (it is the 2 bedroom unit I spoke about in another thread), and back then in October-November last year, my family was actually looking to buy for a place to live in, primarily because we liked that area and we wanted our son to go to school in that zone.
However, my wife quite liked it and she rationalized that even if we buy it for investment, we can move in for a year or two just to get our son into the school and move out again if we wanted to. Back then we also didn’t have deposit to win any auctions for large properties, so we ended up landing on that one.
Back then was also a time when I was not so familiar with property investing, so rather than buying under market value properties, we bought it at an auction (I find auctions tends to conclude with price above market value most o the time).
So no, I definitely do not believe it was bought at below market value, which is why it came as a shock to me when I saw the HTW report… I thought I read the figure wrong… to the point where I thought HTW made a mistake or something.
But, I guess now that I have calmed down a bit. It makes me quite happy to a degree.
I would be even happier if the rental income can be higher. Currently, the weekly rental income is only a bit more than 350, less than 400, which means despite what appears to be a good capital growth, but ROI is veeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeeery low.
So it seems you have had an Equity jump. Does the median value for the Units agree with HTW’s current valuation? And, if using re.com to get the median, they also provide a median rental %age. Here’s an example:-
https://www.realestate.com.au/property-apartment-vic-burwood-125813538
After clicking on that, wait about 15 seconds as it takes that amount of time before the “median data” makes it onto the page. The median data appears just before the “Recent Sales” info. You will see that the units in Burwood have a median value of $600k. You will also see that the median rental yield is a paltry 3.6% which translates to a rental of $415 a week.
Now, to the right of each of the median value and the rental %age is a > symbol – click on both of those to learn a heap more.
Of course, you will want to do similar for YOUR area – I just happened to choose a suburb in Melbourne that has a unit price approx what yours is. Have a good read,
Benny
Saw that.
The area is Vermont.
RE.com says median price is 555K, but if I drill down into “sales history”, I can see similar sized units gets sold ranging from 500-700K. The 2 most recent sales all hit up to 700K, while the rest just really varies.
HTW are one of the major players in property valuations – you’ll find that valuers valuation results are usually conservative more than anything so take this as a positive sign.
The Corelogic information on the other hand would have been a computer result which are nowhere near as accurate and generally lenders will only use these for valuation purposes at lower LVR’s (generally 80% LVR maximum).
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
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