Independent Valuation Issues

Long time reader, first time poster.

Hoping for some advice/experiences in dealing with a bank valuation that has come back below the contracted price. Short story is I bought a place in Melbourne at public auction a few weeks ago. There were two bidders - a buyers advocate and me. We pushed the price up rapidly and it supposedly sold for ~25% above the reserve, 4 mins after the auction started. I understand there were 6 other parties the agent was expecting to bid - it was a unique property.

An independent valuer has completed a valuation for the bank that suggests the 'market value' is 12% below what I have paid. It references the fact the auction only had 2 bidders who were aggressive, I was previously the underbidder on a similarly priced property in another suburb a week prior, the reserve and fact I was bidding against a buyer's advocate. The valuer had been unable to find any comparable properties in the same suburb, so has used 5 properties in surrounding suburbs.

My banker (at CBA) is going to dispute the valuation/order another firm complete one, but I'm doing some work to assist her in building a case. I've:
- Found comparable properties in the same suburb sold over the last 12 months the valuer has seemingly overlooked
- Sent my calculations on how I determined value - primarily based on (1) comps (2) per sqm for the suburb (3) median price growth since the property was sold 5 years ago and (4) comps in surrounding suburbs I believe are more appropriate than those in the report.

I'm interested in anything else I can do - I'm guessing others have dealt with this problem before. Going back to first principles, I'm still struggling to work out how a public auction with willing buyers and willing sellers is not illustrative of market value.

Any thoughts/advice appreciated! Cheers.
 
Auction vals should generally come back the as the sale price.

By recommendation is to order 2 more upfront valuations (make sure you use different valuers) and have a plan b/c. You can argue the val until you are blue in the face but its unlikely (statistically) for the valuer to increase his/her valuation.

Also depending on the LVR you may be able to finance the property with a lender that has a no val policy at 80% or even 90% LVR but leave this as option d.
 
Auction vals should generally come back the as the sale price.

By recommendation is to order 2 more upfront valuations (make sure you use different valuers) and have a plan b/c. You can argue the val until you are blue in the face but its unlikely (statistically) for the valuer to increase his/her valuation.

Also depending on the LVR you may be able to finance the property with a lender that has a no val policy at 80% or even 90% LVR but leave this as option d.

Thanks Shahnin, that's very useful advice. I'm trying to get CBA to seek additional valuations now.
 
If possible - you could look at getting it done via ANZ, STG, etc under their no val policy. If the loan/property fits within certain parameters then the bank may go off the contract of sale.

Also pass on all that info to your banker to contest the valuation - it's rare that the valuer will adjust their price but it does happen. Last week we managed to get a CBA valuation increased by $30k. Admittedly it was a refi valuation (not a purchase).

Whatever you do - don't commit to another bank until you're reasonably certain that the valuation won't pose an issue (so if they have a no val policy - then seek clarification that your application will fit within that policy).

You don't want to go submitting multiple applications right now.

Cheers

Jamie
 
When getting independent valuations I always commission a valuer, of which ever bank Im financing with, to conduct a fair open market valuation.

Then I present those valuations to bank as back up for my case if a banks valuations comes back low.

Makes it harder for them to dispute a bank panel listed valuer.

Yes, an independent valuation will cost you but from my 15 years IP experience its money well spent.

To find out who's on their panel list - simple phone them and I have found the banks to be very forthwith on the information.

I hope this helps.
 
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I've only seen one property come back lower than an auction purchase price, it's a very rare thing to happen. I think I've seen it about 3 times when the purchase is made via negotiation.

If the LVR is above 80%, even if your valuation appeal is successful, the CBA may not be able to use it. They used to have a quirky policy around this (not sure if it's still in place, this problem rarely occurs).

If the appeal doesn't work, the easy solution is to use a different lender, using a different valuer. This is probably more an inconvenience than a problem that can't be overcome.
 
I feel for you however I'm not sure a second valuation will be accepted by CBA's credit department if they know about the first one. It does kind of defeat the purpose of getting a valuation if they ignore the result and shop it around so to speak.

I'd be trying plan b & c upfront vals and or contract of sale policies asap. Hope you are also not tied up with X- colled securities with CBA? If so you need to act fast.
 
Thanks all - some very good tips here.

LVR is below 80% (bank requires 75% as value >$3m), no cross-security etc. - just don't want to tie up an additional ~10% of my capital for no reason.

The bank is ordering another valuation. I have 3 months to settle, so will let the process run its course - banker is confident it will get through as its rare for value to come back below sale price after an auction.
 
Property worth $3M+, there's the problem...

At this price point there's fewer comparable sales and property prices can be very much based more on the individuals perception of value, less on the market as a whole.

I'm not saying the property isn't worth it, but this is at a more extreme end of the market and that alone makes it more difficult to finance. It's for this reason that the CBA will only lend 75% rather than a higher LVR.
 
Based on this I don't think you will have troubles.

My banker (at CBA) is going to dispute the valuation/order another firm complete one, but I'm doing some work to assist her in building a case. I've:
- Found comparable properties in the same suburb sold over the last 12 months the valuer has seemingly overlooked
- Sent my calculations on how I determined value - primarily based on (1) comps (2) per sqm for the suburb (3) median price growth since the property was sold 5 years ago and (4) comps in surrounding suburbs I believe are more appropriate than those in the report.

I secondarly independant valuation wouldn't be ordered unless they argreed that first valuation might not be right. Best of luck keep us updated on the outcome
 
Thought I would share a small success story.

Bank ordered valuation which came back lower than price paid at auction.

Told them I wasn't happy and they said they would order an internal valuation - sent them a list of comparable properties in the area to build my case.

Their valuation came in at the puchase price - all sorted :D
 
Thanks all - some very good tips here.

LVR is below 80% (bank requires 75% as value >$3m), no cross-security etc. - just don't want to tie up an additional ~10% of my capital for no reason.

The bank is ordering another valuation. I have 3 months to settle, so will let the process run its course - banker is confident it will get through as its rare for value to come back below sale price after an auction.

Is the purchase price $3mil or more? If its $3mil then CBA's max LVR is 80% but if its more than $3mil then max LVR is 75% unless you apply for an exception to policy (doable but you not a given).

Also have plan B ready in case plan A fails.
 
Update - so CBA risk refused to get a second valuation.

Have gone to plan B via a broker. Quick question for the brokers on the forum - the bank (big 4) who we are now progressing forward with wants me to pay for the valuation as 'long form' is required. Will cost a couple of grand. Is it unreasonable if I ask the broker to rebate cost of the valuation against their commission should the loan be successfully funded? I figure a $2k rebate against a fee of over $10k is fair, but keen to sense check my logic.

Cheers
 
Some lenders charge if the purchase price is over $2.5mil as the valuer charges them a higher price but several lenders do not pass this cost onto the customer.

Which lender is this?
 
Quick side question related to the OP's situation: how does the valuer know the specific details of the auction (i.e.: how many bidders, bid history)?
 
Some lenders charge if the purchase price is over $2.5mil as the valuer charges them a higher price but several lenders do not pass this cost onto the customer.

Which lender is this?

Yes - that's why.

The lender is NAB.

The valuer knew the finer details as he spoke to a number of agents in the area.
 
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