bank valuations?

[my03]

Hey guys, I understand mortgage valuations would be on the conservative side, but as a rule of thumb, how many % below market value would the banks value your property to establish how much equity are in your assets?

Located in NSW.

Thanks guys

 

[Jamie M]

Hello

I'm not quite sure I understand the question. Are you asking about how often valuations come in low?

If so - purchase vals don't often come in lower than purchase price.

Refinance valuations (equity releases and moving to another lender) often come in lower than the applicants estimate value.

Cheers

Jamie

 

[beachgurl]

I think it depends on comparable data available for each property.

I recently bought a property where the val came in way under purchase price. There was no comparable sales so the valuer picked a number out of the sky.

I've also had recent revals on different properties that have been spot on the money I quoted in my application as there were many recent comparable sales in that suburb.

 

[Redom]

Hey guys, I understand mortgage valuations would be on the conservative side, but as a rule of thumb, how many % below market value would the banks value your property to establish how much equity are in your assets?

Located in NSW.

Thanks guys

Valuers try and estimate the market value of a security property. For sales, this market price largely reflects the contract price, as this generally reflects what the market is willing to pay for a property.

Valuers apply a conservatism principle in their judgements (just like accountants are supposed to).

In periods where prices are moving fast very quickly (like Sydney), valuers may take into account their future market expectations and apply a larger conservatism buffer. E.g. for buyers paying $200k (or 20%) over 'expectations' on Sydney properties, its quite common for valuations to come in a little lower. Some others (Sydney/Melbourne brokers in particular) may have different experiences to me on this though.

Red

 

[Redom]

I think it depends on comparable data available for each property.

I recently bought a property where the val came in way under purchase price. There was no comparable sales so the valuer picked a number out of the sky.

I've also had recent revals on different properties that have been spot on the money I quoted in my application as there were many recent comparable sales in that suburb.

Comparable factors is definitely a factor valuers use to base their judgement. Although there's been a range of anamolies in valuations that it makes it difficult to accurately predict how valuers make their judgements.

beachgurl, you may be able to order a number of vals from different valuers and have more luck.

Cheers,
Redom

 

[Marty McDonald]

In more simple terms I would estimate 7-10% lower than true market value for refinances. For purchases 95% come in at contract price.

 

[Mick C]

It depends on the locaiton, bank and valuer. Generally pruchase comes in fine...refinance is a diff story.

Example only this week ( all refinances)
Property in Chippendale ( 1 bedroom unit)

All diff valuers.
CBA - $673,000
NAB- $600,000 ( Was the clients existing bank)
Macqaurie - $620,000

It's not hard to guess which bank we decide to refinance too


Same client,. different property, done at the same time as Chippendale^.
Property in Rhodes( 3 bedroom unit)

CBA - $860,000
NAB- $930,000 ( Was the clients existing bank)
Macqaurie - $940,000

In this case, clients wishes was to stay with NAB as only $10k less than the highest.

 

[Rolf Latham]

My best variation is 28 % for the same property in one week via 3 diff valuers for the same prop on refi

And it wasnt something out of the ordinary either

ta
rolf

 

[albanga]

Hey Brokers,
A few months ago I got a valuation of my property in preparation for an upcoming development at the rear. It was however not based on me trying to refinance and I believe came in very conservative. They valued it at 610k when market is easily 650k. 2 houses is similar condition on same block sizes have sold for 665k in the past 6 months.

Could someone just explain why they came in so low when it was not to refinance?

 

[Rolf Latham]

Hey Brokers,
A few months ago I got a valuation of my property in preparation for an upcoming development at the rear. It was however not based on me trying to refinance and I believe came in very conservative. They valued it at 610k when market is easily 650k. 2 houses is similar condition on same block sizes have sold for 665k in the past 6 months.

Could someone just explain why they came in so low when it was not to refinance?

did u have separate title to the land at the rear, or will that be issued once build is complete ?

ta

rolf

 

[albanga]

did u have separate title to the land at the rear, or will that be issued once build is complete ?

ta

rolf

Hey Rolf,
That will be issued once the build is complete.

 

[albanga]

Also they did not see the plans or permit, the valuation was purely based on what is there now.
The part I'm having trouble understanding is that from what I am reading is the valuers usually come in market price on sale, conservative on refinance but what about a general valuation?
I am sure people would get these for future planning?

 

[Rolf Latham]

Hey Rolf,
That will be issued once the build is complete.

so whats happening is the valuer is slicing a little off the val for 2 dwellings on one title until completion.

QUite common, and justifiable

With say a 3 unit development a 15 to 20 % discount from end value is normal, and we have seen as high as 30 %

ta
rolf

 

[zimby]

Is your property below average quality or Unique, Ie 4 bedroom Apartment.
Sometimes these properties can look better on paper.
If you're doing a refinance/topup at 80% some banks will use a desktop val, which is just an RPData estimation.
This has worked in our favour in the past as comparable properties may be valued higher.

 

[Corey Batt]

Is your property below average quality or Unique, Ie 4 bedroom Apartment.
Sometimes these properties can look better on paper.
If you're doing a refinance/topup at 80% some banks will use a desktop val, which is just an RPData estimation.
This has worked in our favour in the past as comparable properties may be valued higher.

Very true. Desktop valuations can be very favourable for properties which may be a little 'tired'. Likewise they can be a huge negative if the property has substantial renovations or unique features from the standard of the area. When getting a valuation from a broker/banker, it pays to let them know if this is the case, so they can sway the valuation type where possible to fit the security being valued.

 

[albanga]

so whats happening is the valuer is slicing a little off the val for 2 dwellings on one title until completion.

QUite common, and justifiable

With say a 3 unit development a 15 to 20 % discount from end value is normal, and we have seen as high as 30 %

ta
rolf

Hey Rolf,
I am not sure I fully understand this concept. With me being conservative and going off values of recent sales then I estimate:
The current propery (650m) would have a market value of 650k.
I also had it valued with the planning permits by 3 agents who said 700k.

Going off the planning permit if I was to subdivide the land then again a rough estimate would be front propery value 460k and back land 250k.

If I was to subdivide and build as per plans then based on a standard finished home the total value would be around 1.1m.

The final scenario would be If I was not to subdivide but then built so 2 properties on the same title I imagine it would still be around 1mil.

So given all the scenarios I csn think of I am just not sure which the valuer would have been thinking. The only one that stacks up is the land as is if I wanted to refinance?

 

[albanga]

Hey Zimby,

The house is very similar to the others that sold on my street which fetched 665k and 660k I think. They are all 3 bedroom, 1 bathroom, 1950s brick homes. Mine however is on the other side of the street which is on a slope so I am sure that would effect the value but then I imagine that would be offset with the bungalow I have which has power, an outhouse and running water (it could be tenanted to someone desperate )

 

[Rolf Latham]

Hi Alb

I see ur concern

Try another lender that uses another valuations group

if they also come in low, the chances that they are right increases a lot

ta
rolf

 

[albanga]

Thanks Rolf.
It's not a concern for me at this stage, I am just curious as to how the valuer may have come to his figure. I'm just a sponge for all things propery at the moment and really appreciate your expertise.

 

[tobe]

If the valuation wasnt for the purpose of refinance, what was its purpose? did you engage and pay the valuer directly? If it was done through a lender, and you havent got a contract of sale, then it was actually for the purpose of refinancing.

The two higher sales may not have settled when the valuation was performed, so the valuer cant use them in their comparables. $610 and $665 is well within the 10% variance valuers are allowed in any case.