How did this happen..??

[Chromium]

Folks,
I am sure many of us here have read / seen a story about struggle street in Kellyville ridge where a house was bought for above $900K at the peak and repossesed / sold just recently for $550K..ouch..!!!

When it was bought did'nt the bank do a valuation on the property ? If they did then was it @ 900K ? If not then how come they lent that amount to borrower ? If the prop was bought without borrowings then did'nt the buyer study the market ? What was behind this irrational exhuberance ?

I am trying to understand the flow of events in this case / buyer psychology / bank valuations (if any)...market sentiments and so on....

How did it get here ??

 

[MarkB]

It's a mortgagee sale, so the bank only cares about covering it's hide (and sometimes not even that*) and getting the property off their books.

Not sure how it works in Australia, but I am told that in NZ when valuers have to estimate the market value of a property and they look at comperable sales they have to exclude any mortgagee sales as they are not considered a fair representation of market value.

M

*Remember, that if the previous owner had LMI, then the bank is covered for any losses they may have incurred as a result of the $550k sale. Of course, the LM insurer will then initiate action against the property's former owner to recover that loss.

 

[twobobsworth]

Long discussion here http://www.somersoft.com/forums/showthread.php?t=39440&highlight=kellyville

Live around the corner and am very surprised these places sold at this price. They back on to one of the busiest roads in the area and from the outside don't look anything special. Was an article in the local paper where a local REA said whats been reported isn't the full story and the buyers aren't in the country anymore. But didn't provide any further details.

 

[lizzie]

mark is right - if comparable properties in the area recently sold for around $900,000 then the valuer would be right to value this property at that price.

a property is worth only what someone is prepared to pay for it - which makes a valuer's job difficult as all they've got to go on is what someone was prepared to pay for a similar property.

valuers really have no other method available to them - do they?

can't go on construction costs as the same house in st kilda would cost the same to build as the identical house in bedigo, so it comes down to what someone is prepared to pay for the location.

 

[twobobsworth]

I don't believe there are comparable sales at this price at this time. Not from the sales reports I have of this street & surronds.

 

[alexlee]

They probably took the most extreme example there. There might have been fraud, or spruiking involved.
Alex

 

[willair]

Folks,
I am sure many of us here have read / seen a story about struggle street in Kellyville ridge where a house was bought for above $900K at the peak and repossesed / sold just recently for $550K..ouch..!!!

IF that's all someone was prepared to pay then that's the value no matter what anyone thinks,but from 900k face value back to 550k plus all the add on costs very sad day for those people..willair