Your all getting a little tied up in knots.
if one bank decided to instruct their valuers to be conservative, it would have no effect of improving the look of their balance sheet currently because the reduced value is noted on their balance sheet. However, in time if the market discovers the 'new' value, and the bank book the new value to their balance sheet, their balance sheet improves markedly.
Now, banks dont instruct their valuers, however many valuers are just naturally conservative, if they all took a conservative approach, it does certainly have a self fulfilling prophesy effect, with prices spiralling downwards, just as they spiraled upwards when prices were going up.
As to the comment about 'real' value, or underlying value, there is no such think. A bank valuation is how much the valuer reckons the bank could offload the property for in 30 days with a sign saying 'mortgagee in possession'. A real estate appraisal is how much it takes to get the vendor to put the property on the market with that particular estate agent. A sale price is how much said estate agent was able to condition down the expectations of the vendor. Many argue the only real way of assertaining value is based on yield alone. Residential property investors that negatively gear seem to want to have a bet each way.
if one bank decided to instruct their valuers to be conservative, it would have no effect of improving the look of their balance sheet currently because the reduced value is noted on their balance sheet. However, in time if the market discovers the 'new' value, and the bank book the new value to their balance sheet, their balance sheet improves markedly.
Now, banks dont instruct their valuers, however many valuers are just naturally conservative, if they all took a conservative approach, it does certainly have a self fulfilling prophesy effect, with prices spiralling downwards, just as they spiraled upwards when prices were going up.
As to the comment about 'real' value, or underlying value, there is no such think. A bank valuation is how much the valuer reckons the bank could offload the property for in 30 days with a sign saying 'mortgagee in possession'. A real estate appraisal is how much it takes to get the vendor to put the property on the market with that particular estate agent. A sale price is how much said estate agent was able to condition down the expectations of the vendor. Many argue the only real way of assertaining value is based on yield alone. Residential property investors that negatively gear seem to want to have a bet each way.