Bank Valuations?

[grossreal]

hi
some where there is a tread on valuation or value if you have time to look
but a valuation if just an opinion of a person that works for a valuer company
no rocket science
and most I have found get it wrong so many times its just not funny
here is a prime example
valuer valued a comm at 12 mil
in 6months they revalued it at 7mil
then the bank took it to market and the highest they got to was 4.5 mil
the bank now want it revalued
what the ---- whats the value or the price
is it 4.5 mil not to the valuers or the bank its somewhere from 4.5 to 7
now you think that the above is simple
well its been 2 weeks now and still no val number.
so you think you can't work out how they get the values
simple
purchase price or valuation which ever is the lessor
now if you have a purchase price
the valuer drive past and says is he/she paying to much.
and how do they know they go and chat to the real estates in the area.
and ask are you paying to much if they say no
then the value is the same as you are buying it for.
I have so many arguments with valuers when you buy it under market val
they say well when you buy it thats its value
even if its doing 16% net net returns and and the average is 9%
they just don't care
they just need to show a lender that they are not high
and they don't care how low they are
sohoiw do they get there values
head one siode and tails the other in alot of cases and has very little to do with value.
value comes in when you refinance as they now have to value whats in the area
you will find that the val at purchase and the val at refi is very different
if you have bought well under market its a niche and if work correctly can be very benefitial
and don't think I don't like valuers I do they have a job to do you just have to understand where they stand and how they have to tick or sign the boxes for the bank
also different banks have different ways to value so you have to know the bank also before getting the val
or you can get out a coin
and do as above
rightvalue
you can get a copy you have to ask the valuer to value the same and you pay for it and the valuation are a mirror
yes you pay twice but it depends if you have an issue with the val.
my prefered is to find the valuer that the bank is to use and order at the same time and its alot cheaper

 

[RightValue]

Hiya

Agree with all.

.

In 10 years or so of over 2000 purchases, I have had 2 come in over value.

That means either

You are a rare beast to place a value above the contract price on an arms length sale.

or

All my client purchase are just on the money

Gotta say that val over contract is rare in my limited experience

ta
rolf

Hi Rolf,

I like to say that I value without fear or favour.

I would do over 2,000 vals a year.

Not many arms length purchases are at a discount but it does happen. Unfortunately we have a bit of a company policy not to go above contract price, but in some cases I cannot ignore it .. it would be negligent not to.

I would come in over contract price more than twice a year regardless of the policy. I also regularly come in over Owners Estimate of Value on refinance valuations (this is the majority of a valuers work) where justified. In factI have been above contract price twice in the past month alone (exceptionaly rare for it to happen twice in 30 days) - but the comparable sales evidence speaks for itself.

That said I do crash my share of sale contracts when I feel the purchaser has over done it.

I have had some pissed off people, who later thanked me when they have found a far better deal .. and there are a few developers and seminar sales people and agents who hate my guts as well...

cheers

RightValue

PS.. a hint to real estate sales people... if you ever try the sales pitch on me at an inspecttion - or ask .. "well do you think it stacks up" I know then that you have oversold the property and that you know it too ..

 

[RightValue]

Hi


I find it strange that the figures are an exact match. Was expecting it to be off by a few hundred/thousand either way.

Thanks in advance.

A valuation is an opinion of market value, based on research.

Valuation is part art and part science.

I personally value to the nearest $5k when I am doing refinance valuations, I don't believe any valuer can accuratley value to the $1k.

However when I am valuing a contract I will usually adopt the contract price.

Many Jenman agents tink it is cute to get the purchaser to offer say $360,200 to show the vendor they have squeezed every last dollar out of the purchaser.

I used to value these contract at $360,000 .. but the bank clerk gives me grief and asks for the valuation to be raised to purhcase price as if not it will ruin their deal etc etc.. so I will value the bloody thing at $360,200 .. once I valued something like that at $360,205 and got just as much grief.

I don't get paid anymore to answer queries so if I feel a purchase is worth the purchase price, no matter how wierd the number I put that figure in my valuation .. and yes I have valued properties at $xxx,888 in the past.

cheers

RightValue

 

[Ski-bum]

RightValue thanks for your posts - gives an excellent insight into how valuations are calculated.

 

[grossreal]

hi right valuer
I think you have put the difference between val at purchase and the reval val
I do my own vals and they are no where near 5k
my problem is that one valuer is very different to another
if you got 5 vals on a property all 5 would be out by well over 5k
I have seen out by 50k not 5
and in one case out by 2.5 mil
and these two valuers valued at the same time.
I have simple question who are you valuing for the bank or the buyer/refinance / land owner
and I will give the answer the bank/lender.
you(well not you but valuers)have a vested interest in giving the banks lenders what they want because they pay the ferryman
and don't say
I like to say that I value without fear or favour.
because thats not true fear have no idea but favour is to your biggest client
why do I say this because I would
we all favour our client well I do
so your client is not the land or property owner its the ferryman
and in some case i pay for the val so maybe I am the ferryman
what does interest me and my red wine
is
part science.
what science is involved.
we are talking of a pile of bricks on a piece of earth with a nature water source and man made heat form.
I am interested what science is used to evaluate a value
voodoo
charms
tea leaves
water readings
maybe a chinese earth reading
what do you use to get a value
am I reading some thing wrong here I can't use voodoo or any of the others

 

[LisaP]

A valuation is an opinion of market value, based on research.

Valuation is part art and part science.

I personally value to the nearest $5k when I am doing refinance valuations, I don't believe any valuer can accuratley value to the $1k.

However when I am valuing a contract I will usually adopt the contract price.

Many Jenman agents tink it is cute to get the purchaser to offer say $360,200 to show the vendor they have squeezed every last dollar out of the purchaser.

I used to value these contract at $360,000 .. but the bank clerk gives me grief and asks for the valuation to be raised to purhcase price as if not it will ruin their deal etc etc.. so I will value the bloody thing at $360,200 .. once I valued something like that at $360,205 and got just as much grief.

I don't get paid anymore to answer queries so if I feel a purchase is worth the purchase price, no matter how wierd the number I put that figure in my valuation .. and yes I have valued properties at $xxx,888 in the past.

cheers

RightValue

Hi RightValue,

Great to have a valuer on the forum! I have been thinking lately, "It would be great to actually find out what a valuer knows."

So, since you are here, I would like to ask you a few questions with regards to a refinance valuation:

-if I purchase an undervalued 3 bedroom, 1 bathroom property for $252K, renovate it and can prove through comparable sales (using RP Data) that in the past 3 months a number of 3 bedroom, 1 bathroom houses (same land size, in worse condition) in the same area sold for $390K, would you revalue the property for $390K?

- What other factors due you look for when you are revaluing a property, eg. do you put more value on certain streets in the suburb, or do you match the cheapest comparable house in same suburb (even if this had been bought under market value too), or do you revalue at the requested valuation price if is is fair?

- If the house has been renovated, do the 'extras' make any difference? I.e would french doors leading out to a deck versus no french doors leading out to a deck, have any influence on the final value? Do before and after pictures help the cause?

- Is there anything else that I should be aware of that you guys look for when doing refinance valuations?

- If I wanted to learn more, are there any resouces for the layman (ie. me) to access, such as a website, valuers handbook, etc that I got access to learn more about the valuation process.

Cheers,
Lisa

 

[RightValue]

Hi RightValue,

Great to have a valuer on the forum! I have been thinking lately, "It would be great to actually find out what a valuer knows."

So, since you are here, I would like to ask you a few questions with regards to a refinance valuation:

-if I purchase an undervalued 3 bedroom, 1 bathroom property for $252K, renovate it and can prove through comparable sales (using RP Data) that in the past 3 months a number of 3 bedroom, 1 bathroom houses (same land size, in worse condition) in the same area sold for $390K, would you revalue the property for $390K?

Unlikely that it will really be worth $390k as few owners are really objective .. but if the evidence was there I would go there.

If the median value for the suburb was $330k and for the most part the value range was $280k to $360k .. well I would be less inclined to go right to $390k

- What other factors due you look for when you are revaluing a property, eg. do you put more value on certain streets in the suburb, or do you match the cheapest comparable house in same suburb (even if this had been bought under market value too), or do you revalue at the requested valuation price if is is fair?

Depends on the area, in some areas, certain streets or little area have a chacet or prestige value, so I would make allowances .. remember buying the best house in the best street in the suburb is not a smart move especially if you are relying on refinancing.


If you bought a house for $252k I would initially look at sales in that price range until I realised that it was undervalued .. but not many people can buy that well at that price range and add that much value.

In reality, for myself I value a tight area and usually know what something is worth because I do a fair amount of work in the area. As a genberal rule I totally ignore the Owners Estimate of Value

- If the house has been renovated, do the 'extras' make any difference? I.e would french doors leading out to a deck versus no french doors leading out to a deck, have any influence on the final value? Do before and after pictures help the cause?

As yourself this objectvely..

You are looking to buy an IP across the the road. One has french doors leading to the deck and one doesn't... how much more are you going to offer for the IP witht he french doors?

Purchasers are not Quantity Surveyors, they do not walk around a house counting items, adding the value and then making an offer.

Neither do I value in this way

- Is there anything else that I should be aware of that you guys look for when doing refinance valuations?

Value = Land + Improvements .. most of the value is in the land, Land appreciated buildings depreciate.

- If I wanted to learn more, are there any resouces for the layman (ie. me) to access, such as a website, valuers handbook, etc that I got access to learn more about the valuation process.

Funny you should mention this...

I am planning on running some property valuation and Investment courses next year. basically you will know how to value a property by the end of the course .. I have had this in mind for a few years now, and am finally about to do it.. watch API magazine for advertisments. Cost will be aout $1,500 and it will be an intensive course .. it will not be a get rich quick schemce or a boot camp and you will not be sold anything.

cheers

RightValue

 

[RightValue]

hi right valuer
they pay the ferryman
and don't say
I like to say that I value without fear or favour.
because thats not true fear have no idea but favour is to your biggest client
why do I say this because I would

I guess you know me better than I do.

I have told lenders to F .. off in the past (using those words without the ...) and have told my employers the same on more than one occasion.

Many times I have been pressured to change figures, especially by managers -who are being pressured by lenders- who fear loss of business .. I never have .. I still have a job and we still have the clients.

You are using examples of commercial valuations in a discussion on residential valuations .. not really the same thing.

I have said many times here that valuers are like any profession, you get the good, the bad and the ugly.

Please do not tell me I am lying about my personal approach to conducting valuations made under my own CPV status just because you have had varying experience with other valuers in the past.

There are a massive amount of misconceptions about valuers and the valuation process amongst the general public and as is evidenced here by many property investors. All I try to do is help explain things, I do not justify the actions of others, but sometimes try to point out what may be happening. I do not need to be told not to say something I have said when it is the truth, just because of your limited personal experience.



RightValue

 

[Rolf Latham]

That said I do crash my share of sale contracts when I feel the purchaser has over done it.

U mean u value the place at what its worth. and the pruchase then makes a decision what to do with that.

Depending a few things, a lower than contrat val can sometimes be used to obtain a lower price from a seller.

A low val does not always make it a no deal.

ta
rolf

 

[65fbk]

When I was setting up a LOC against my PPOR, the valuer came along with his measuring wheel etc.. He didn't say a lot, other than to ask what I thought the property was worth. I was a bit surprised, and it caught me off guard. I knew that most owners he asked would probably have an inflated opinion of what their house was worth and I gave him my realistic, or even a slightly low number.
I immediately regretted it.

His valuation came back at that exact figure. Surely he didn't take any notice of what I thought?? I was definitely a bit low, but typical of 'bank valuations' i guess..

Rightvalue, how should I answer this question if asked again when I look to increase the LOC limit later this year? The reality is that my opinion should not matter one bit.. But why did he ask? He was not a chatty bloke at all, so he wasn't asking just to make conversation.

 

[pdawg]

Thanks for all the information above. Makes alot of sense. Glad it turned out to be an insightful thread.

 

[Token Funder]

I guess you know me better than I do.

I have told lenders to F .. off in the past (using those words without the ...) and have told my employers the same on more than one occasion.

Many times I have been pressured to change figures, especially by managers -who are being pressured by lenders- who fear loss of business .. I never have .. I still have a job and we still have the clients.

You are using examples of commercial valuations in a discussion on residential valuations .. not really the same thing.

I have said many times here that valuers are like any profession, you get the good, the bad and the ugly.

Please do not tell me I am lying about my personal approach to conducting valuations made under my own CPV status just because you have had varying experience with other valuers in the past.

There are a massive amount of misconceptions about valuers and the valuation process amongst the general public and as is evidenced here by many property investors. All I try to do is help explain things, I do not justify the actions of others, but sometimes try to point out what may be happening. I do not need to be told not to say something I have said when it is the truth, just because of your limited personal experience.



RightValue

RightValue has been both transparent and accurate on how things work in the valuation space. What many years running a lending business has shown me is that borrowers invariably over estimate the value of their property.

 

[Rolf Latham]

RightValue has been both transparent and accurate on how things work in the valuation space. What many years running a lending business has shown me is that borrowers invariably over estimate the value of their property.

What ? .........................we arent all above average drivers ?

ta
rolf

 

[RightValue]

. He didn't say a lot, other than to ask what I thought the property was worth. I was a bit surprised, and it caught me off guard. I knew that most owners he asked would probably have an inflated opinion of what their house was worth and I gave him my realistic, or even a slightly low number.
I immediately regretted it.

His valuation came back at that exact figure. Surely he didn't take any notice of what I thought?? I was definitely a bit low, but typical of 'bank valuations' i guess..

Rightvalue, how should I answer this question if asked again when I look to increase the LOC limit later this year? The reality is that my opinion should not matter one bit.. But why did he ask? He was not a chatty bloke at all, so he wasn't asking just to make conversation.

A few possibilities

Firstly and most likely the valuer is not very experienced in the area. They asked you so that they could have a starting point for culling out the irrelevant sales evidence. No point in looking at $700k sales if it is a $600k property.

Your Estimate of value shoild have been on the instruction sheet.

Sometimes I ask to confirm what is on the sheet - if after talking (I chat quite a bit when I am in a property and answer what questions and give what advice I can) - I realise the owner is level headed.. sometimes the estimate of value is out by a couple of hundred or several $10's of thousands .. It usually turns out they told the broker a realistic figure and the broker upped it by 20% or whatever.

If you have a realistic estimate of value, and it is supported often the valuer will agree and put that down as the figure.

Sometimes I find out that the owner needs the value to be at say $390k.. the estimate on the sheet is say $430k.. well in that case if I think it is worth say $380, I will usually put it up to $390 to make the deal work .. however if the property is at the upper end of the value range for the suburb, then I am less likely to do that, nicely in the middle, with enough sales evidence, I can sometimes be a nice guy. I am less likely to push a figure if the person follows me around, questions how experienced I am, is late for the appointment or acts like a dick. Having the house plans available is a sure fire way to make me happy.

Otherwise I will ask the person what they think the property is worth maybe once in every 400 valuations. It will usually be followed up wit this question..

So how did you arrive at that figure?... the answer is usually.. based on what has sold in the area .. I then ask for examples.. this is where people fall down\, especially if they are unrealistic .. or they quote far better properties that have sold ages ago.

I may have mentioned it before but a while ago I was in a property with an Estimate of $1.2m the owner asked my the usual questions.. how well do you know the area, how long have you been doing this ... then stated that he knew what his property was worth anyhow. He quoted a sale in the same street and a figure well below his estimate of value - but said his was far superior.. He was out in the sale price by nearly $100k (most just know asking price, selling price is what I look at); it was a larger house with tennis court on a site that was 50% larger. .. his house valued up at around $750k.

An owner being out by too much on an estimate of value does peeve me quite a bit as I usually have the wrong sales evidence (I take evidence +/- 20% with me if I neeed it) . it takes another day before the report goes out, and I have to spend a longer time on the valuation for the same pay

I agree what the owner thinks their property is worth is irrelevant, it is what I think itis worth that counts, generally I totally ignore the owners opinion, however that said if the estimate of value is realistic I will often value there or close about if the sales evidence supports it.

I trust this has helped.

cheers

RightValue

 

[65fbk]

Thanks for the informative supply.

I will have plans ready for the next guy

 

[wylie]

RightValue has been both transparent and accurate on how things work in the valuation space. What many years running a lending business has shown me is that borrowers invariably over estimate the value of their property.

I always undervalue our properties. I would rather a nice surprise than find we cannot do the deal we want because we don't value up.

 

[LisaP]

Hi RV,

Thanks for your posts so far.

If you bought a house for $252k I would initially look at sales in that price range until I realised that it was undervalued .. but not many people can buy that well at that price range and add that much value.

I believe I got a really good price for it. A 3 bedroom duplex on the same street sold in June for $322K. A 3 bedroom house in the same suburb sold for $460K on the 22nd July.

As yourself this objectvely..

You are looking to buy an IP across the the road. One has french doors leading to the deck and one doesn't... how much more are you going to offer for the IP witht he french doors?

Oops, sorry I was meant to say french doors and a deck versus no french doors and no deck. I realise french doors wouldn't make a difference, but if the house had french doors, leading out to a deck would that make any difference? I'm trying to guage how far to go with me renovations - make it look as classy as possible, or just concentrate on paint, new floorings, kitchen, and a tidy up.

Value = Land + Improvements .. most of the value is in the land, Land appreciated buildings depreciate.

Is there a general rule of thumb with regards to land size? And I realise that this probably depends on the suburb and the scarcity of land factor. However, say you had two exact houses, and one was sitting on 450sqm of land, while the other was sitting on 500sqm - would you value the properties the same? My question, I guess is, is there an increment type system that is used to equate value with land size? So for example, it might be that for every extra 50sqm, a house is valued at $50K more?

Funny you should mention this...

I am planning on running some property valuation and Investment courses next year. basically you will know how to value a property by the end of the course .. I have had this in mind for a few years now, and am finally about to do it.. watch API magazine for advertisments. Cost will be aout $1,500 and it will be an intensive course .. it will not be a get rich quick schemce or a boot camp and you will not be sold anything.

Ah, that is interesting as I've never seen this type of service marketed before. This information would be handy to have. Can I ask you though, how would one go about getting their valuer qualifications, how long does this take, and how much does it cost?

Thanks again for imparting your knowledge! I'm finding it very insightful.

Cheers
Lisa

 

[boods99]

RightValue,
Thanks for the insight in regards to how valuers operate. I think your advice has been valuable (pun intended!)
One quick question for you, how would obtaining a DA effect the value of a property for a refi...scenario; you buy a property that is on a block that is able to be subdivided. The house is in good condition and is able to be rented out no problems. To value add, you go and get a DA approved, enabling you to knock down existing house and build 3 units. Usually a DA approval is valid for two years. You refinance to top up LOC etc. Would the approval have any bearing on the overall value of the property? Even though you won't necessarily go ahead with the development. Just wondering if this could be done instead of renovating to value add, therefore enabling you to get into another IP sooner.

Cheers

Boods

 

[LisaP]

I always undervalue our properties. I would rather a nice surprise than find we cannot do the deal we want because we don't value up.

It is my understanding that it's better to overvalue your place, than to undervalue it, a little bit like selling a property. So, if want the place valued at $360K, it's better to suggest to the valuer that the place is worth $390K (by showing comparative sales via RPData) and you are more likely to get the 360K you wanted in the first place.

Maybe Right Value has an opinion on this?

Cheers
Lisa

 

[LisaP]

RightValue,
Thanks for the insight in regards to how valuers operate. I think your advice has been valuable (pun intended!)
One quick question for you, how would obtaining a DA effect the value of a property for a refi...scenario; you buy a property that is on a block that is able to be subdivided. The house is in good condition and is able to be rented out no problems. To value add, you go and get a DA approved, enabling you to knock down existing house and build 3 units. Usually a DA approval is valid for two years. You refinance to top up LOC etc. Would the approval have any bearing on the overall value of the property? Even though you won't necessarily go ahead with the development. Just wondering if this could be done instead of renovating to value add, therefore enabling you to get into another IP sooner.

Cheers

Boods

Hi Boods,

Good question!!

Cheers
Lisa