Private valuation prior to purchase..?

[Futurist]

Hi all,

I have a question about when and whether it is worthwhile to have a private valuation done on a property you wish to buy?

Is this part of the normal pre buying DD?
Or do most investors just rely on recent sales, and current market values for similar properties as their orice guideline?

If this is to be done prior to a purchase, should it be done during the cooling off period after having exchanged contracts and putting in the 0.25 deposit?

Or do it before? And risk losing the price of the valuation if someone else gets in before you do with the vendor.

 

[Rolf Latham]

Hi Future

WHat LOan to value ratio ?

t
arolf

 

[Futurist]

Hi Rolf,

Im looking at 90 % lvr for most of my investment properties.
Why do you ask? Does that sway the decision to do private valuations?

Cheers.

 

[RightValue]

I personally believe that everyone should get an independent valuation prior to any property purchase or offer.

 

[Terryw]

Yes, you should really get a valuation, otherwise you won't know, really, if you are paying too much. You cannot rely of the bank's valuation either as this will be done after you have a contract in place and a known price.

The trouble is timing though. If you do a valuation before exchange then someone else could buy the property and you will have wasted the cost of the valuation. If you do it after exchange and find out you have paid too much then you will lose 0.25%. After exchange means the valuer will also know the price you have agreed on and this will influence them. After exchange you could decide to pull out if the vendor doesn't agree to drop the price. You also only have 5 days cooling off which ain't enough time to do everything.

Therefore, to sum up, you ideally need a valuation before you make an offer.

 

[Aaron_C]

Generally speaking if you purchase a property for $X, that will be the market value upon bank valuation for your home loan. But these days I would definitely allow for a 5-10% drop in that value just in case. I don't think a valuation is needed before purchase unless you are purchasing from a family member and/or it is not an arms-length transaction, especially if you have done all the proper research.

 

[Futurist]

Hi All,

@Terryw thats the same conclusion i came up with.
You can do the valuation prior to exchange of contracts and risk someone else getting in before you do. thus losing what you paid for for that valuation.

Or do it after exchange during the cooling off period, or simply rely somewhat on the bank valuation.

Is it true that sometimes the banks don't disclose what value they came back with? or is this untrue?

 

[Futurist]

@Arron For that reason i'm inclined to goto the REA and make offers 5-10k below the advertised price, and see what the vendors say.

However, the negative i can see from doing this is that if the REA thinks youre are cheapskate they wont do business with you later several discounted offers u make ><
----

Regarding doing your own research.. wont a majority of that research come from checking out current market prices where the properties are similar to the one you are after?

In this scenario, from a Vendors pt of view - wont they advert their property by comparing other properties already in the market - and making theirs on par with their neighbours ? (assuming its similar build, facility, quality etc).

If this is true, then a property selling for 400k will just influence other potential sellers that their own is probably worth 400k also - thus both advertise for 400k.

However, that is not to say the property itself is really worth 400k, nor will the banks valuation agree. They might be both worth 350k only, and yet to the unknowing buyer, they might pay 400k and lose out on 50k equity if they bought it for 350k.

I guess what i'm saying is, even through research, alot of investors use 'current' sale values as an indicator.. whether this be a good thing or bad..

For this reason, i'm curious if it is worth having a private valuation done.
But it seems there is alot of risk involved as per above - doing the valuation and losing out due to other buyers.

I know some say its the cost of making money, but being uptight as i am, i dont like wasting $300 valuation report for nothing if someone else grabs it before i do... just doesnt feel right lol...

 

[Rolf Latham]

Hi All,

@Terryw thats the same conclusion i came up with.
You can do the valuation prior to exchange of contracts and risk someone else getting in before you do. thus losing what you paid for for that valuation.

Or do it after exchange during the cooling off period, or simply rely somewhat on the bank valuation.

Is it true that sometimes the banks don't disclose what value they came back with? or is this untrue?

Hiya Futurist

In an ideal world, you should get a val and a P&B or a strata report on any property you are considering buying before making a formal written offer or entering a contract, at the least before going unconditional.

Depending on the property type, and the state of the market for that particular property,you will be waiting a while and maybe spending a lot of money.

Ok that was the extreme view, the practical view is that at a 90 % LVR a property thats sole security will not be undervalued by a lender AND the loan proceed.

In general,if you ask, a lender will tell you what the val is. If not, find a new lender or broker if this is an important consideration for you.

The argument offered by Terry is that the contract price has a fair determinant factor in what the val will be IF a contract is available. Based on some limited factual evidence I would agree.

I understand that it can be concern that you will pay more than market , however there are risks in doing pre purchase / Auction vals, and these arent small, and can be a major hassle for some people, especially where the property isnt a cookie cutter security.

ta

rolf

 

[Rolf Latham]

I know some say its the cost of making money, but being uptight as i am, i dont like wasting $300 valuation report for nothing if someone else grabs it before i do... just doesnt feel right lol...

the 300 wont be for nothing .

You will have the valuers opinion of what the property is worth.

Following your though process, depending on the state of the market and the particular property spending 300 to save you from overspending 50 k looks like good value.

If your valuer says its worth 350, and some else pays 400.....................

then in theory your 300 has saved you 50 k.

Our experience is that if you want a good "tight" valuation where there is no sales contract in place, you need to engage 3 valuers and take the average.

I dont make the "rules", I just follow em

ta
rolf

 

[BAJ]

Shine the Light and watch them scatter

I personally believe that everyone should get an independent valuation prior to any property purchase or offer.

An independent valuation by an experienced valuer provides a great sense of comfort.

Its perfectly fine to pay over market.

The key is to know that you may be doing so.

Most valuers work within a "market range" and will simply adopt the purchase price if its within a fair tolerance of what their research says is the market value of the property.

Always keep in mind that "Market Value" is the fundamental underlying value of a property based on sales NOT necessarily the agreed price to exchange.ie the contract price

 

[wobbycarly]

*snip*
In this scenario, from a Vendors pt of view - wont they advert their property by comparing other properties already in the market - and making theirs on par with their neighbours ? (assuming its similar build, facility, quality etc).
*snip*

Oh, but ours has a bigger garage, the kitchen is a better layout, our garden is nicer, and we don't have/do have the streetlight out the front.

The neighbour's house is never as nice - or worth as much - as ours!!

 

[RightValue]

An independent valuation by an experienced valuer provides a great sense of comfort.

Its perfectly fine to pay over market.

The key is to know that you may be doing so.

Most valuers work within a "market range" and will simply adopt the purchase price if its within a fair tolerance of what their research says is the market value of the property.

Always keep in mind that "Market Value" is the fundamental underlying value of a property based on sales NOT necessarily the agreed price to exchange.ie the contract price

Please bear in mind that my post was a bit tounge in cheek.

Being a valuer it is in my best interests for there to be more valuations ordered.

However if you are up to date with the market then in reality it is not really necessary. Valuers do not make the market, they merely interept it. Purchasers and vendors make the market. So long as a contract price is supported by market sales evidence - within reason- then if you make an offer on a property that is within the ballpark, the purchase price will invariably be rubber stamped by the valuer.

If it s a rising market and you get a valuation prior to making an offer the valuer could well be behind the market and it could cost you, especially if the valuer only uses settled sales and is lazy in their research.

The converse is that in a falling market you could well pay too much this way.

If you do not know the market getting a valuation prior to making an offer is a good idea, if you know the market then it is not really necesssary.

That said, I have saved some people some serious $$ in the past when they have engaged my to do a pre purchase valuation.

 

[RightValue]

Oh, but ours has a bigger garage, the kitchen is a better layout, our garden is nicer, and we don't have/do have the streetlight out the front.

The neighbour's house is never as nice - or worth as much - as ours!!

I get this all the time.

The house down the road sold for $600k, ours is much better/larger so it is worth $700k.

The fact is that the house down the road is on 900sqm, whereas theirs is on 500sqm and their house is only 30sqm larger than the house down the road.

They fail to see that the property down the road is actually worth more than theirs.