Have a contract to purcahse a place and bank valuation has come in $20K below purchase price. Is there anything I can do to reduce the difference as I was hoping to keep some funds in reserve and would rather not kick in the $20K. Place still stacks up for immienent redevelopment and I would rather not hear how the valuer might have a better idea of its value etc etc, just practical ways to get around this, if there are nay. Thanks in advance and hope you all have a great weekend.
Bank valuation below purchase price
- Thread starter Kamak
- Start date
My understanding is that some banks' valuers can be asked to do a check-val. Clarify through the bank or broker.
I would be present at the valuation if they re-do it and if you have comparable sales information of like properties, present that to the valuer for his/her enlightenment!
I would be present at the valuation if they re-do it and if you have comparable sales information of like properties, present that to the valuer for his/her enlightenment!
What % of the purchase price is the 20k ?
Hi Kamak
It would be helpful to know your LVR and the lender you have applied to.
I recently had a customer who estimated the value of his property for refinance at $250,000. We were looking for a 90%LVR.
The drive-past valuation came back at $200,000!!! Much wailing and gnashing of teeth. The valuer also estimated rental income at $170 per week even though there was a sitting tenant paying $185 per week.
I contacted my lender BDM and arranged for a full valuation to be done with with customer agreeing to pay for this. This meant the valuer had to actually inspect the property including internally and provide comparable sales and rentals for similar properties in the area.
The valuer rang me after the full inspection and said he was prepared to value the property at $230,000 and to accept $180 per week rental.
This was the minimum valuation we needed to complete the deal so the customer was happy with that.
So, persist with requesting a full valuation and be prepared to provide some factual information regarding recent sales in the area. Valuers are working with settled sales information which can be 90 days old, so if you have details of some more recent sales which can be proved they will confirm the details with the selling agent and may be prepared to incorporate this data in their report.
Also, can you jiggle your LVR about a bit? Some loan products are set at 80%LVR but switching to another product with the same lender may mean you can access higher borrowings provided, of course, that you can service the borrowings.
Of course, confirm that the lender isn't just taking your borrowings down a bit with this application, and building a bit more safety margin for them into the deal.
A bit more discussion with your broker / loans officer will indicate what options are available to you.
Good luck
Kristine
It would be helpful to know your LVR and the lender you have applied to.
I recently had a customer who estimated the value of his property for refinance at $250,000. We were looking for a 90%LVR.
The drive-past valuation came back at $200,000!!! Much wailing and gnashing of teeth. The valuer also estimated rental income at $170 per week even though there was a sitting tenant paying $185 per week.
I contacted my lender BDM and arranged for a full valuation to be done with with customer agreeing to pay for this. This meant the valuer had to actually inspect the property including internally and provide comparable sales and rentals for similar properties in the area.
The valuer rang me after the full inspection and said he was prepared to value the property at $230,000 and to accept $180 per week rental.
This was the minimum valuation we needed to complete the deal so the customer was happy with that.
So, persist with requesting a full valuation and be prepared to provide some factual information regarding recent sales in the area. Valuers are working with settled sales information which can be 90 days old, so if you have details of some more recent sales which can be proved they will confirm the details with the selling agent and may be prepared to incorporate this data in their report.
Also, can you jiggle your LVR about a bit? Some loan products are set at 80%LVR but switching to another product with the same lender may mean you can access higher borrowings provided, of course, that you can service the borrowings.
Of course, confirm that the lender isn't just taking your borrowings down a bit with this application, and building a bit more safety margin for them into the deal.
A bit more discussion with your broker / loans officer will indicate what options are available to you.
Good luck
Kristine
We had this situation. The bank said the valuation was $200,000 when all our research said $235,000.
When I asked the manager to tell the valuer we thought it was a bit low, his response was interesting. The valuer has to preserve his integrity and reputation with the bank and won't change an estimate on request. I said we've driven around the place and armed with APM data for individual properties, we had a different price.
"Oh, you've seen individual properties yourself?", asked the manager
"Yes, we've got a list and we drove by them and they all look like our property from the outside"
"If you send the the addresses that should be considered, maybe something can be done".
I think what happened is that the manager was able to provide the valuer "additional information" that needed to be considered. We send the addresses by email, and the new valuation came in at $235,000.
Good luck
Jireh
When I asked the manager to tell the valuer we thought it was a bit low, his response was interesting. The valuer has to preserve his integrity and reputation with the bank and won't change an estimate on request. I said we've driven around the place and armed with APM data for individual properties, we had a different price.
"Oh, you've seen individual properties yourself?", asked the manager
"Yes, we've got a list and we drove by them and they all look like our property from the outside"
"If you send the the addresses that should be considered, maybe something can be done".
I think what happened is that the manager was able to provide the valuer "additional information" that needed to be considered. We send the addresses by email, and the new valuation came in at $235,000.
Good luck
Jireh
Hiya
Often a low val is in the buyers favour, half the time the "low" val is the right val and the purchase price is over the top.
This can more often than not be used to negotiate the vendor down to the real price.
In the other half of instances the valuer has made an error of judgement and can in 60 % of cases be swayed to revisit the val IF you can present evidence that suports your case as has already been talked about above
ta
rolf
Often a low val is in the buyers favour, half the time the "low" val is the right val and the purchase price is over the top.
This can more often than not be used to negotiate the vendor down to the real price.
In the other half of instances the valuer has made an error of judgement and can in 60 % of cases be swayed to revisit the val IF you can present evidence that suports your case as has already been talked about above
ta
rolf
Here we have rpdata running 6-8 weeks behind so the valuer often does not have up to date information. If its low we can often fill in the blanks of more recent sales. If we (as agents) feel this could be a problem we go to the property to meet the valuer armed with the data to prove our point.
Land Value
I had an issue last week where my current PPR which is at building stage required to have the land valued for security on my first IP. I estimated it to be 180K.
The banks first valuation came back at 160K. I couldnt believe it.
I complained that who ever did the valuation didnt know a thing about the area and the local manager agreed if I got a local agent to value the land from 170K to 180K then that would do for approval.
I did this and the agent came back with signed eval of 185K.
My loan is has know been approved.
I had an issue last week where my current PPR which is at building stage required to have the land valued for security on my first IP. I estimated it to be 180K.
The banks first valuation came back at 160K. I couldnt believe it.
I complained that who ever did the valuation didnt know a thing about the area and the local manager agreed if I got a local agent to value the land from 170K to 180K then that would do for approval.
I did this and the agent came back with signed eval of 185K.
My loan is has know been approved.
Breakdown of valuation
Slightly off topic....are standard valuations supposed to show the breakdown of land and building components? I recently used a different valuer and was not given this information on the report. The single valuation figure and format of the report seems to be the normal way of doing things for this company.
Slightly off topic....are standard valuations supposed to show the breakdown of land and building components? I recently used a different valuer and was not given this information on the report. The single valuation figure and format of the report seems to be the normal way of doing things for this company.
Hi Ebbie
The standard does normally separate land and improvements for housing stock, however, valuers need no stick ot the standard
ta
rolf
The standard does normally separate land and improvements for housing stock, however, valuers need no stick ot the standard
ta
rolf
Just a reminder that valuations for lenders are for mortgage purposes only i.e. If the lender needs to do a firesale of the property, what would the lender expect to receive in such a sale. So more often than not they are not close to what the owner has estimated.
Also I have noticed in the last 6 months or so vals are not stacking up as the valuer is not willing to stick their neck to what the market is going to do over the next 6 - 12 months, and I can see it getting worse.
Also I have noticed in the last 6 months or so vals are not stacking up as the valuer is not willing to stick their neck to what the market is going to do over the next 6 - 12 months, and I can see it getting worse.
this is a common problem - the valuers are great historians but are often conservative and not willing to value at current market levels. it can be very frustrating and all you can do is find the 'additional information' and try talk them up. I have seen fair value deals fall over because a valuer won't come to the party.
as pfsfinance points out - these are fire sale valuations. if you got a sales valuation it would probably be quite different
as pfsfinance points out - these are fire sale valuations. if you got a sales valuation it would probably be quite different
Hi ALL
Id have to disagree quite strongly on the issue of fire sales price used as a valuation base.
A normal mortgage valuation is based on a price that can be achieved in a reasonable time frame (6 to 8 weeks) in the current market at the time the valuation is provided.
The most commonly accepted approach is a comparison of similar sales in the last 90 to 180 days.
While I too have had my issues with valuers, better then 95 % of vals in my experience are spot on, even if they have come in low.
ta
rolf
Id have to disagree quite strongly on the issue of fire sales price used as a valuation base.
A normal mortgage valuation is based on a price that can be achieved in a reasonable time frame (6 to 8 weeks) in the current market at the time the valuation is provided.
The most commonly accepted approach is a comparison of similar sales in the last 90 to 180 days.
While I too have had my issues with valuers, better then 95 % of vals in my experience are spot on, even if they have come in low.
ta
rolf
Rolf Latham said:
Rolf is right.
When I was working as a valuer (until July last year) doing over 6 vals a day for over 3 years, I was never once instructed to value for fire sale. This included vals for almost all the big banks and loads of second tier lenders (Aussie/Wizard/Homeloans, Macquarie etc) and the lenders of last resort. Bluestone, Pepper, Liberty. All instructions were for current market value.
All lenders,especially the brokers/managers, were interested in getting the highest possible value to make the deals work if at all possible.
With some lenders no sales evidence could be more than 3 months old (from date of sale not settlement) nor more than 10% from market value.
I realise others are experts based on second hand info, so I may be wrong, just letting you know my experience.....
cheers,
RightValue
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yes the definition of 'current market value' is the sticking point here. i can cite numerous example of valuers being WAY off the mark, both above and below market value. sorry if I upset anyone here, but a valuers 'valuation' is really worth little more than a comfort blanket. examples of developers selling units in a complex to support a valuers valuation is common place - I have seen it happen and they swallowed it hook line and sinker (mnuch to my disgust!). and yet on other properties it is glaringly obvious they have it wrong (like below replacement cost) but they can't admit they have made a mistake, so you have to do a Japanese style 'preserve the honour' discussion and they negotiate a bit until it gets into the ball park. They are also valuing based on actual sales - which is difficult in low turnover suburbs or a rapidly changing market place. I can't blame the guys - who can possibly get all these unique products valued correctly in such a short amount of time? and to say the definition is 'fair exchange of blah blah on so many days' is still a load of rubbish as you are talking about a theoretical event - it may be better value than every property ever sold based on square metres, fitout etc but if the walls are bright purple it may never actually sell. the fact remains it is still very frustrating and everyone knows a mortgagers valuation comes in below a sales valuation - instructed it to be so or not. this is why they restrict the application of a valuation to a particular end user.
Hiya Ausprop
New stock especially is hard to value.
I have also lost a deal or "TWO" due to low vals, I too have had my run ins with valuers, however, again in my experience its rare (say 2 in 100) that the valuer makes a boo boo and doesnt fix it.
Sales valuations, especially on established stock tend to vary by up to 20 %. Why, I dont think Ill comment there since there are some valid and sometimes some not so valid reasons
ta
rolf
New stock especially is hard to value.
I have also lost a deal or "TWO" due to low vals, I too have had my run ins with valuers, however, again in my experience its rare (say 2 in 100) that the valuer makes a boo boo and doesnt fix it.
Sales valuations, especially on established stock tend to vary by up to 20 %. Why, I dont think Ill comment there since there are some valid and sometimes some not so valid reasons
ta
rolf
I'm not sure about other states but around here its not uncommon for valuers to call us to ask what recent sales have sold for etc. Some that know us well will even ask our opinion of market value of certain properties.
When I was younger I used to have the attitude, 'That's your job, you work it out!!' but realised that was a bit arrogant and that they were doing their due diligence. Its the best way for them to get the most recent sales figures. Thinking about it, its really a compliment that they ask and trust our judgement.
In Peter Spann's latest book he devotes a chapter to valuers. For those forumites that haven't read it, a 'strategy' that he uses is, find out the valuers 'your' bank uses and get a valuation done by one of them. I think he mainly did it when he was having properties re-valued so that he could borrow against them and by employing the valuer himself would ask for the valuation to be as high as possible. Then he went to the bank to ask for more money with a valuation from 'their' valuer. (Basic summary)
Maybe someone could employ this method when buying a property. That is, of course, as long as you've done your due diligence and are sure of the value of the property yourself. Any thoughts??
When I was younger I used to have the attitude, 'That's your job, you work it out!!' but realised that was a bit arrogant and that they were doing their due diligence. Its the best way for them to get the most recent sales figures. Thinking about it, its really a compliment that they ask and trust our judgement.
In Peter Spann's latest book he devotes a chapter to valuers. For those forumites that haven't read it, a 'strategy' that he uses is, find out the valuers 'your' bank uses and get a valuation done by one of them. I think he mainly did it when he was having properties re-valued so that he could borrow against them and by employing the valuer himself would ask for the valuation to be as high as possible. Then he went to the bank to ask for more money with a valuation from 'their' valuer. (Basic summary)
Maybe someone could employ this method when buying a property. That is, of course, as long as you've done your due diligence and are sure of the value of the property yourself. Any thoughts??
Sultan,
I recall that this has been discussed in a previous thread.
My recollection is that a complication is that for legal reasons, the bank must commission the valuer themselves - allows them redress in the event of dispute. If an individual engages the valuer and presents the valuation/s to the bank, the bank can't sue the valuer if there is a problem "down the track".
regards,
I recall that this has been discussed in a previous thread.
My recollection is that a complication is that for legal reasons, the bank must commission the valuer themselves - allows them redress in the event of dispute. If an individual engages the valuer and presents the valuation/s to the bank, the bank can't sue the valuer if there is a problem "down the track".
regards,
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