Melbourne, bank valuation coming in below auction price?

[jgb75]

Hi All,

I'm planning to bid at an auction this weekend and am in the process of deciding my max bid based on nearby recent comparable sales.

This will be at a high LTV so I'm very nervous about the bank valuation coming in below the auction price.

However, I'm also concerned that I may be overstating this risk and therefore setting a max bid too low and unnecessarily missing out on the property.

It would be really useful for my risk assessment if anyone has any recent anecdotal evidence of bank valuations coming in below the auction price for established housing in my area in the past 6 months.

This is for the Bayside area of Melbourne, Hampton/Sandringham/Black Rock/Beaumaris suburbs.

Appreciate any insights. Cheers....

 

[Aaron_C]

It is very rare for a valuer to NOT value a property bought at a transparent auction at the purchase price. Doesn't matter what the LVR is.

 

[Peter_Tersteeg]

Not quite sure what LTV is, but I suspect you mean LVR (Loan to Value Ratio).

There is some risk that a valuation at auction will come in low, but dispite having written hundreds of loans for people purchasing at auctions, it's only occured once in my experience.

That occassion was almost 12 months ago when a client bought a property on "The Block" reality TV show. The valuer commented that the extra marketing and interest generated by the TV show inflated the value above what the market was saying.

We did manage to go to a different lender and valuer, with evidence supporting that the price paid was reasonable and we did come out the tail end with a good result.

The risk of a valuation at auction (or even via private sale) is probably less than 1% in my experience. On the rare occassions where it does occur, moving the loan application to a different lender usually ends with a positive result.

 

[jgb75]

Thanks for the feedback guys, sorry meant LVR not LTV.

 

[Rolf Latham]

set a limit

do a pre auction val with the lenders valuer in such a way that the val can be used for lending purposes, and ask the valuer to retain the figure as commercial in confidence.

Dont go over your limit and the val amount on the day

Many lenders will do upfront vals

ta

rolf

 

[Marty McDonald]

set a limit

do a pre auction val with the lenders valuer in such a way that the val can be used for lending purposes, and ask the valuer to retain the figure as commercial in confidence.

Dont go over your limit and the val amount on the day

Many lenders will do upfront vals

ta

rolf

How do you do this with lenders who use a random valuer allocation system such as valex & VMS? Just asking..

 

[Mick C]

How do you do this with lenders who use a random valuer allocation system such as valex & VMS? Just asking..

for ANZ they have a list on their tool kit based on the suburb...Homeside shoot BDM the request on the valuer you prefer and they will order it for you( their system is slightly different to the brokers one, they have a function which allows them to choose the valuer)

 

[jonmardell]

Hi All,

I'm planning to bid at an auction this weekend and am in the process of deciding my max bid based on nearby recent comparable sales.

This will be at a high LTV so I'm very nervous about the bank valuation coming in below the auction price.

However, I'm also concerned that I may be overstating this risk and therefore setting a max bid too low and unnecessarily missing out on the property.

It would be really useful for my risk assessment if anyone has any recent anecdotal evidence of bank valuations coming in below the auction price for established housing in my area in the past 6 months.

This is for the Bayside area of Melbourne, Hampton/Sandringham/Black Rock/Beaumaris suburbs.

Appreciate any insights. Cheers....

the only way to be safe is to get the valuation done prior to auction at your maximum bid price and stick to it. There is always an element of risk involved if you do not get the val done prior. A couple of deals over the last few months that stick out to me is a purchase price at auction of 1,050,000 and the valuer came back with a crazy figure of 1,025,000. took about a week to get that one solved and then purchase price of 425k and the val came back at 475K. you just never know what is going to happen so get the val done upfront. ANZ, CBA, Homeside, St George allow upfront valuations if your lender is one of those.

 

[Rolf Latham]

It is very rare for a valuer to NOT value a property bought at a transparent auction at the purchase price. Doesn't matter what the LVR is.

cough


3 % these days on my numbers, and as some valuers become more intellectual I believe this will get worse until some common sense comes in and a valuer can only "make the market" where there are some clear dogies going on and not ......" the agent said there was tremendous interest"

ta
rolf

 

[Rolf Latham]

How do you do this with lenders who use a random valuer allocation system such as valex & VMS? Just asking..

If I hold the val for the property that says 400 k I use that val to submit the deal.

Valex wont allow another val to be done for 90 days

ta
rolf

 

[Shahin_Afarin]

Is there something wrong with the property - i.e. on an extremely busy road, power lines, fire damaged, etc?

Regards

Shahin

 

[jgb75]

Is there something wrong with the property - i.e. on an extremely busy road, power lines, fire damaged, etc?

Regards

Shahin

No, it's on a quiet street next to golf course and very well presented. Lower end of agents estimated range is same as highest price achieved on this estate in the past 12 months. Top end of their estimated range is 9% higher than that.

 

[Aaron_C]

cough


3 % these days on my numbers, and as some valuers become more intellectual I believe this will get worse until some common sense comes in and a valuer can only "make the market" where there are some clear dogies going on and not ......" the agent said there was tremendous interest"

ta
rolf

3% is still rare

 

[Shahin_Afarin]

No, it's on a quiet street next to golf course and very well presented. Lower end of agents estimated range is same as highest price achieved on this estate in the past 12 months. Top end of their estimated range is 9% higher than that.

Ok then I concur with what Aaron in his first post.

Regards

Shahin

 

[jgb75]

Thanks to all for the feedback.

 

[RightValue]

FWIW yesterday I valued a property, with a purchase contract of $300k, at $320k. This was a private sale, it is a first home buyer area not an auction area.

Look up into the sky today folks, I am sure you will see some pigs flying......

 

[Rolf Latham]

FWIW yesterday I valued a property, with a purchase contract of $300k, at $320k. This was a private sale, it is a first home buyer area not an auction area.

Look up into the sky today folks, I am sure you will see some pigs flying......

favourable sale no doubt : )

that aint pigs, its just common sense, and NOT rubber stamping contracts as many valuers do

t
arolf

 

[RightValue]

favourable sale no doubt : )

that aint pigs, its just common sense, and NOT rubber stamping contracts as many valuers do

ta
rolf

was a sale through a real estate agent, a couple of weeks on the market.

For related party transactions I totally ignore the contract price in undertaking my valuation, but upon doing my calcs if the purchase price is close to what I think is fair market value I often adopt it as my valuation figure.

 

[RightValue]

favourable sale no doubt : )

that aint pigs, its just common sense, and NOT rubber stamping contracts as many valuers do

t
arolf

Actually you are pretty close.

Not a favourable purchase in an off market transaction, but not IMHO a sale that me t the definition of market value.

When I probed (I have known the agent for years) it turns out the couple are divorcing and decided to take the first offer.

The agent who handled the sales was an assistant to the agent I met and may well have suggested this to the buyer in an attempt to get a sale, who knows. However in this case you are right it did not meet the "willing but not anxious" part of market value definition.