purchaser having trouble with valuation.

[Hodge]

Long story short. Put my IP on the market, purchaser signs contract subject to finance, he's bank values the property $30k less than purchase price. I've granted an extension once which ends tomorrow and pretty sure he will require another extension.

RE agent has been talking to the bank along with his broker showing them comparable sales in the area. I must admit the price is a little high for the area but not far off.

If you are in my shoes would you grant another extension? I don't need to sell but the price is really good. I just don't feel like the bank will change their decision and will waste time.

 

[Jacque]

I'd grant an extension, unless there is another buyer (who perhaps isn't relying on a valuation as much) floating around. In a hot market, it's not unusual for a val to come under, especially if there are insufficient comps in the immediate area. Most purchasers (via their brokers) will contest the val though success will depend on the bank, the ego of the valuer and a range of other factors...... I'm sure the brokers on here can expand more

 

[Peter_Tersteeg]

Negotiating with the lender for a better valuation is fairly futile in my opinion. If their broker doesn't already know this then they're lacking in experience.

The purchaser should look to an alternate lender. Order the valuation up front from that lender, they'll have the result within 2-3 working days. If that works out then grant them an extension for another week to get the rest of it sorted out.

 

[tobe]

A lot of sales tend to fall over after a short val....

Its pretty rare for a valuer to change their mind, its more usual for the broker or buyer to change lenders and therefore get a diferent valuer with a better result.

lets hope your buyer is eligible with another lender and the broker knows to switch them over.

 

[Brady]

Negotiating with the lender for a better valuation is fairly futile in my opinion. If their broker doesn't already know this then they're lacking in experience.

The purchaser should look to an alternate lender. Order the valuation up front from that lender, they'll have the result within 2-3 working days. If that works out then grant them an extension for another week to get the rest of it sorted out.

I disagree with this. I've had success with disputing valuations, needs to be comparable sales and reason as to why the valuation should be higher.

Can also request a secondary independant valuation be conducted in some cases, rather then starting the process from scratch with another lender.

 

[tobe]

I must say the last val I had overturned was with CBA. A docklands apartment. The selling agent wrote a nice long letter with comparable sales and blow me down the valuer upped the val. It was lucky, as the property was on westpacs list and LMI providers wouldnt have been pleased with the property.


Generally though its easier switching lenders. I would usually order another val with a diferent valuer and lender, and use the comparables in that val to contest the first, meanwhile lodging or preparing the new application.

Having a second val also can reassure the client, having the valuer disagree with a purchase price can be a bit of a blow to the clients confidence in the deal. Having a second opinion helps during a pretty nervous time.

 

[Hodge]

Thanks everyone for the reply. I'm pretty sure they're with ING and borrowing 80%. The market isn't crash hot but things are selling.

 

[Corey Batt]

It does happen, which means at times you might need to put an application together with another lender, (perhaps with a lender which accepts contract of sale). I'd give them another extension - if the broker is cluey enough they may just need more time.

 

[Hodge]

That's the scary part, how cluey is there broker? Hopefully he gets the job done.

 

[Peter_Tersteeg]

Brady & Tobe, interesting little factoid regarding CBA and re-valuations. My info could be out of date, but if the loan is under LMI, Genworth will only accept the first figure and not the revised figure regardless of the justification. The CBA is required to conform to this. I've had this confirmed by my BDM about a year ago (although he had to be reminded). I suspect many credit assessors aren't aware of this either.

I've only seen one low purchase valuation in the past 3 years and that one was so far out there was no disputing the result even with another valuer. In my experience the valuers have to go to reasonably extreme extents to justify a result below purchase price; they don't want to risk their PI insurance on someone loosing a deposit because the valuation was low.

 

[Jamie M]

That's the scary part, how cluey is there broker? Hopefully he gets the job done.

Send him to your broker ;-)

Cheers

Jamie

 

[Hodge]

Send him to your broker ;-)

Cheers

Jamie

Haha the funny thing is I actually was thinking of doing this! The purchaser lives around the corner and was going to drop off a couple business cards. Didn't want him to think I'm stalking him so backed out.

 

[Hodge]

This is the other thing I don't understand, my broker gets me finance within a couple days (while holidaying on the other side of the world), it's taking this guy 2 and a half weeks and counting.

Goes to show the importance of a good broker on your side.

 

[Rolf Latham]

I disagree with this. I've had success with disputing valuations, needs to be comparable sales and reason as to why the valuation should be higher.

"success" implies a ratio of better than 1in 2 ?

Id be pleased with 1 in 20

from a brokers side, its less risk to move to a lender that uses diff vals group.

Mostly our vals are done before application, so its not so much of an issue

ta
rolf

 

[Colin Rice]

Mostly our vals are done before application, so its not so much of an issue

That is best practice but not always possible ^^^^^

Statistically less than 3% of val challenges are successful.

You can order a val and wait for the allocation then cancel and reorder if not the desired result, that is a different valuer.

 

[Terry_w]

Perhaps the lender is doing a kerbisde which could be upgraded to a full valuation.

Recently I had one come in at $800k which was low so requested the full val which come in a $900k. Big difference.

 

[Rolf Latham]

^^^^^

Statistically less than 3% of val challenges are successful.

Better ratio than mine - but then on the advice of peops in the know, we have pretty much avoided wasting our and the borrowers time with val challenges, because with many lenders, even if you win the val battle we often still have run ins with credit policy and LMI providers: (

The only time we will give a review a punt is where we have no alternative and NEED to make that val work

ta
rolf

 

[Jamie M]

This is the other thing I don't understand, my broker gets me finance within a couple days (while holidaying on the other side of the world), it's taking this guy 2 and a half weeks and counting.

Goes to show the importance of a good broker on your side.

Haha - on my way back to Canberra today. Going to miss the 30 degree days that I've become used to :-(

Looking forward to getting back into the office on Monday though.

Cheers

Jamie