I was recently looking at a property in Sydney's inner south and got three bank valuations done (by their appointed valuer), one came back at $480k, one at $520k and another at $540k, all three were below the price the vendor was seeking. It seems that valuers can often have varied opinions on fair value price. Does anyone have particular strategies or approaches to get the best valuations?
Experiences with volatile valuations
- Thread starter mgs4
- Start date
At this point valuers are being consistently conservative. The vendor may be asking too much (don't all vendors want too much), but the valuers almost certainly gave you an estimate lower than what it will actually sell for. If you purchased the property, chances are the valuers would have agreed with their purchase price.
Do your research based on other recent sales in the area, don't bother with valuations up front because it will only cost you money and won't get an outcome.
Do your research based on other recent sales in the area, don't bother with valuations up front because it will only cost you money and won't get an outcome.
The problem with the Sydney market (watch out as Brisbane is heading there soon) is that the "settled" valuations cannot keep up with the market. The market is going too fast and the valuers are using settled comparisons (rather than comparables which have just been purchased at say an auction but are yet to settle).
To give you an idea - a client just settled on a 2 bed TH in Castle Hill (Kerrs Rd) for $622,000. I thought gee thats huge and he overpaid. 2 weeks later they sold a 3 bedder for $720,000!
So let's assume there are 3 identical units in a block. One is sold 2 months ago for say $500,000 and then another is sold last week at auction for $700,000 and today you purchase the third one for $700,000 as well. Since the property last week has not settled - the valuer will take into consideration the comparable that has settled which in this case is $500,000.
I used to fight with valuers once a week more than 12 months ago and now its approx once a day.
To give you an idea - a client just settled on a 2 bed TH in Castle Hill (Kerrs Rd) for $622,000. I thought gee thats huge and he overpaid. 2 weeks later they sold a 3 bedder for $720,000!
So let's assume there are 3 identical units in a block. One is sold 2 months ago for say $500,000 and then another is sold last week at auction for $700,000 and today you purchase the third one for $700,000 as well. Since the property last week has not settled - the valuer will take into consideration the comparable that has settled which in this case is $500,000.
I used to fight with valuers once a week more than 12 months ago and now its approx once a day.
Funny thing is that real estate agents are also affected by valuations coming under so much so that we can regular calls from the agent saying that "We have black listed this valuer - please use another one"!
This is there is a lot of advantage using lenders that offer upfront valuations vs those that do it post submission (particularly when we are talking high LVR loans).
This is there is a lot of advantage using lenders that offer upfront valuations vs those that do it post submission (particularly when we are talking high LVR loans).
The theoretical problem with valuations I find is they're not current, by the virtue of the approach of using historical settled sales it is an attempted valuation for a point in history, eg 3 or 6 months ago. For example if your using data of comparable property sales settled in August they may have exchanged contracts at the agreed price in June and may have been on the market for that price in April. The actual price that property could sell for now could be significantly different to the marketed price in April.
But in all fairness to the valuer (and don't worry i have my fair number of battles with them) just because an Agent tells you the property is unconditional or sold at Auction doesn't mean that every deal will settle.
In a fast moving market i can't see any other way a valuer can fulfill his obligations to a lender.
In a fast moving market i can't see any other way a valuer can fulfill his obligations to a lender.
Why are you doing bank valuations prior to buying? Don't forget that 99% of the time what you pay for something is what it's worth. If you use a bank valuation before signing a contract you will have to be stuck with the lower val.
Bank valuation is necessary to get bank finance. I would say in the Sydney market things selling over bank valuations are a little more common than previously.
No but you're missing my point. Obviously a bank valuation is required for finance. However, if a property's asking price is say $600k and you get several bank valuations that come in at around $550k, then even if you pay $600k the bank will just lend against $550k.
If you bought the place, then got a valuation, most likely it would come in at $600k as the contract of sale is already there for the valuer to refer to. Most valuers will rubber stamp a valuation for a contract of sale as long as it is reasonable - and a 10% variance is reasonable enough.
Yes this is where we've already agreed on price and then during the cooling off period, so the valuations have come back considerably lower than the agreed price in the contract.
I think others would have had a similar experience on some of these inner Sydney city terraces that go for 15% above the reserve, when you later get a bank val done they will come in a chunk lower than the auction price.
Okay well that clarifies it then. In that case you may be better off going for a no valuation policy lender (if possible), stump up the difference in cash, increase your LVR or just withdraw!
Still rare for an auction result not to be rubber stamped by a valuer. I've seen one recently where that's happened for a client of mine which is annoying but oh well.
Adelaide market is also heating up.
Had a valuer try telling me that the comparable property that I advised him of was overpriced... It sold at auction which had multiple bidders and >15 registered bidders. He tried telling me they paid too much, I went on to show him of two properties that are under contract settling this month for the same price but obviously he excluded them as they were under contract. Just like when I asked him to find me a property similar for price he valued the property and told him I would buy 10
Ended up getting secondary valuation $5k shorter then mine and clients expectation so can work with that.
But 3 valuation, that hurts. If we constantly only went off previous sales for valuations and everyone borrow from the bank then wouldnt that mean prices couldnt increase until someone took the hit on the lower valuation or paid cash.
Had a valuer try telling me that the comparable property that I advised him of was overpriced... It sold at auction which had multiple bidders and >15 registered bidders. He tried telling me they paid too much, I went on to show him of two properties that are under contract settling this month for the same price but obviously he excluded them as they were under contract. Just like when I asked him to find me a property similar for price he valued the property and told him I would buy 10
Ended up getting secondary valuation $5k shorter then mine and clients expectation so can work with that.
But 3 valuation, that hurts. If we constantly only went off previous sales for valuations and everyone borrow from the bank then wouldnt that mean prices couldnt increase until someone took the hit on the lower valuation or paid cash.
Adelaide market is also heating up.
Had a valuer try telling me that the comparable property that I advised him of was overpriced... It sold at auction which had multiple bidders and >15 registered bidders. He tried telling me they paid too much, I went on to show him of two properties that are under contract settling this month for the same price but obviously he excluded them as they were under contract. Just like when I asked him to find me a property similar for price he valued the property and told him I would buy 10
Ended up getting secondary valuation $5k shorter then mine and clients expectation so can work with that.
But 3 valuation, that hurts. If we constantly only went off previous sales for valuations and everyone borrow from the bank then wouldnt that mean prices couldnt increase until someone took the hit on the lower valuation or paid cash.
Yes not only that but the 3 valuations were all significantly below the contract price, not even close. The problem I have with valuations is they with have historically settled properties which may have been advertised on the market 6 months ago, so it's not a valuation based on current comparable sales, it's 6 months old, and in a lot of areas now properties are going up over a 6 month period.
Have you got a copy of the valuations? Do the comparable sales stack up? It's usually very hard to argue with valuers even if they are being conservative.
Valuations consistently being under purchase price is quite rare, especially at an auction. I've only experienced this once and talking to other brokers my experience is consistent with theirs. In every case the simple solution is to go to a different lender and get a different valuer and a different result. The only time this has ever failed me was when I personally thought the client was paying too much in the first place.
You seem to be getting the same result from different valuers, this kind of suggests that you've paid too much for the property.
The other explanation could be that you've used the same bank, they're giving the same instructions to various valuers which could yield conservative valuations. Perhaps you're dealing with the wrong lender.
Valuations consistently being under purchase price is quite rare, especially at an auction. I've only experienced this once and talking to other brokers my experience is consistent with theirs. In every case the simple solution is to go to a different lender and get a different valuer and a different result. The only time this has ever failed me was when I personally thought the client was paying too much in the first place.
You seem to be getting the same result from different valuers, this kind of suggests that you've paid too much for the property.
The other explanation could be that you've used the same bank, they're giving the same instructions to various valuers which could yield conservative valuations. Perhaps you're dealing with the wrong lender.
How did you come up with the price to pay?
How did you deem it to be fair market value?
Did you do research on comparable sales?
Can you not dispute the valuation and provide the comparable sales?
If there aren't any comparable sales for the same price you could possibly be over paying?
If the property has something unique about it like a view or something don't expect the valuer to add value to the valuation (which is silly).
How did you deem it to be fair market value?
Did you do research on comparable sales?
Can you not dispute the valuation and provide the comparable sales?
If there aren't any comparable sales for the same price you could possibly be over paying?
If the property has something unique about it like a view or something don't expect the valuer to add value to the valuation (which is silly).
I want to throw my case in here.
Got valuations done a year ago for a property in Rangeville, QLD @ $235,000. I thought this was $30,000 too low.
Get valuations in today for the same property @ $220,000. You can not buy a three bedroom house in Rangeville for under $285,000. Additionally, the suburb has seen large gains of double digit growth in the last 12 months.
Confused.
Am I missing something?
Regards,
R
Got valuations done a year ago for a property in Rangeville, QLD @ $235,000. I thought this was $30,000 too low.
Get valuations in today for the same property @ $220,000. You can not buy a three bedroom house in Rangeville for under $285,000. Additionally, the suburb has seen large gains of double digit growth in the last 12 months.
Confused.
Am I missing something?
Regards,
R
What sort of valuaion was this? Desktop/drive by?
Because if it was a full valuaion theb there must of been a least one property close to that range unless your property has something adverse. The valuer needs to show the valuation through comparable sales. Why not find some and dispute the valuation?
I will start of by saying that I am not defending incompetent valuers, of which there are many.
However, valuers can now use unsettled sales in their sales evidence, so long as they have three settled sales in the report.
A little while ago I was chatting with the manager of my office. He was doing a valuation in Melbourne's East in a hot market. He mentioned that the settled sales all said $900k, the unsettled recent sales said $1.1m. It was a refinance valuation and he ran with $1.1m on the valuation.
What people often fail to realise is that a valuer can only base their valuation on sales evidence. They must be able to prove in court that they had a basis for arriving at their valuation figure based on analysis of sales evidence. If the evidence is not there then the valuer will often not go there.
In times of fast moving markets the supporting sales evidence ifs often not there. One or two sales does not make a market. Three of four sales that support a sale price, should however be sufficient.
However the valuation standards changed in November 2012 which said that settled sales are to be used. Many valuation firms objected to this due to situations such as we are experiencing in current rapidly rising markets, hence the change that unsettledsales are acceptable but I will warrant many valuers do not realise this or their management, fearful of litigation prefer to rely on settled sales.
Also there are many lazy valuers out there who do not update their databases and are using dated sales evidence. I see this in my own firm/office. I myself try to add at least one to two new sales per valuation to keep the database up to date with the current market.
However, valuers can now use unsettled sales in their sales evidence, so long as they have three settled sales in the report.
A little while ago I was chatting with the manager of my office. He was doing a valuation in Melbourne's East in a hot market. He mentioned that the settled sales all said $900k, the unsettled recent sales said $1.1m. It was a refinance valuation and he ran with $1.1m on the valuation.
What people often fail to realise is that a valuer can only base their valuation on sales evidence. They must be able to prove in court that they had a basis for arriving at their valuation figure based on analysis of sales evidence. If the evidence is not there then the valuer will often not go there.
In times of fast moving markets the supporting sales evidence ifs often not there. One or two sales does not make a market. Three of four sales that support a sale price, should however be sufficient.
However the valuation standards changed in November 2012 which said that settled sales are to be used. Many valuation firms objected to this due to situations such as we are experiencing in current rapidly rising markets, hence the change that unsettledsales are acceptable but I will warrant many valuers do not realise this or their management, fearful of litigation prefer to rely on settled sales.
Also there are many lazy valuers out there who do not update their databases and are using dated sales evidence. I see this in my own firm/office. I myself try to add at least one to two new sales per valuation to keep the database up to date with the current market.
Keep holding yourself to that higher standard and you can be evidently proud of the product.
ta
rolf
