Buyers paying more then the Bank Valuation, Moonee Ponds, Essendon...

[windsor]

Why are alot of buyers paying alot more then what the bank value the house for.

Take a look at Moonee Ponds, which I've had a few Bank Valuations done on and the Bank undervalued nearly ALL the houses that were sold and are listed.

Some banks under valued a few houses by $300,000 that’s alot of equity you can’t use, and these houses are listed for $990,000 and 1.2mill.

$1.2mill listed. Bank Valuation $900,000 Moonee Ponds
$900,000 to 990,000 approx listed. Bank Valuation $780,000 Essendon

 

[long88]

Maybe it is a bubble, and the last person to hold that property will be responsible for it ?

Just my wild guess.

 

[asdf]

Cos they don't want to live in accurately bank valued places out in Melton or Frankston. How can a valuer put a valuation on something which they have no control over - people's buying emotions and impulses. Supply and demand, its a bitc* isn't it? Unfortunately the massive price gains we've seen in inner city Melb would've benefitted a lot of home owners. Hopefully the increase would've trickled through to the investor belts too.

 

[ILoveProperty]

I've always thought bank valuations are notoriously low for Melbourne's inner suburbs? It's in the banks interests to value properties low. Gives them a bigger buffer if things go bad?

 

[sash]

This going to open a can of worms but........

The banks always play to win....they know that in a fire sale it is the higher priced property that takes the biggest hit. Thus why they value conservatively.

Buying in expensive suburbs is risky in bad times....whilst we have prolonged economic growth there is continual growth. Should recession eventuate it gets ugly. Whilst lover priced suburbs do also drop their drop is usually not as dramatic. This might also explain why Jan Somers advises a 3 or 4 out of ten property as this stuff is still bread and butter.

Further properties in Melton and Frankston have larger samples and are more common....thus easier to value as stuff is always coming onto the market and is affordable.

 

[oasis1frog]

Does that mean if buying IPs subject to bank finance then you are unlikely to overpay ?

 

[redsquash]

Cos they don't want to live in accurately bank valued places out in Melton or Frankston. How can a valuer put a valuation on something which they have no control over - people's buying emotions and impulses. Supply and demand, its a bitc* isn't it? Unfortunately the massive price gains we've seen in inner city Melb would've benefitted a lot of home owners. Hopefully the increase would've trickled through to the investor belts too.

A bank valuation may not necessarily mean a valuer actually determined the value. It may just have been someone from the bank who may or may not have visited the location.

 

[marg4000]

Bank valuations are for their benefit only. They are simply interested in how much they can get if it all goes belly up and they have to sell. Banks then base the loan on what percentage of their valuation they are prepared to lend on a particular property.

So yes, particularly in times of quickly rising prices like a lot of places have experienced recently, the bank value will be below what you are paying.

Do your own homework to work out what you are prepared to pay.
Marg

 

[sash]

Oasis1Frog

One of the strategies I use to protect myself from paying too much is to only put down a 5-10% deposit. Usually this will involve some level of mortgage insurance. In order to get mortgage insurance the insurer (PMI or Genworth) will protecting their interests by reviewing the valuation and doing their own due diligence prior to approving this insurance.

In Sydney a lot of properties in the Southwest and West are not valuing up. This is adding to the defaults as homeowners have no equity buffer to cope. I suspect with recent interest rate rises this will also become common place where properties have risen substantially - Perth comes to mind.

 

[Ausprop]

approach all bank vals with caution, one I received recently was 20% more than I knew I could sell it for. the next was 10% under I know what I can get for it

 

[DavidMc]

I think it could be one of three things:

1 - Banks being conservative or just out of touch with the market
2 - People are paying too much
3 - Finance fraud

 

[sash]

I think it could be one of three things:

1 - Banks being conservative or just out of touch with the market
2 - People are paying too much
3 - Finance fraud

Ausprop, DavidMc

The banks being conservative is a good thing from a fiscally responsible perspective. By being conservative they are not exposed to calling in their loans when the asset does not value up. On the otherside it hinders our progress as property investors as we can't pull out as much equity out to invest further. I am not a fan of the banks...but it is much better they are conservative otherwise we could have a housing meltdown like what is happening in the USA and in Hong Kong, UK & Singapore a few year ago. That would not be good for any of us.

DavidMc, I think your point that people have payed too maybe a reality shortly in inner Melb, Perth, and Brisbane as market forces readjust the equation. Only time will tell!

Interesting times indeed.