Ridiculous bank valuations

[Erin Woods]

My partner owns our PPOR outright.

In Lower North Shore of Sydney. Purchased for 2.5m in Jun 2008. RP data value of $3-$3.5m which is about right given sales over the past couple of years (although turnover is really low in this neck of the woods).

Just looked to one of the majors to take out an equity loan of 1.9 m (bit over 50 % LVR) to purchase an investment property. They sent in a valuer.

Absolutely astounded- he came back at 2.55m! I told my partner I will buy it off him for that price.

Has anyone heard of valuations coming in so much under RP data/market worth? The valuer also demonstrated some really bizarre behaviour (i,e. Booked an appointment on the 24th then turned up unannounced on the 31st and did not even state who he was. Asked my partner what the house was worth.)

i think I will get into the valuation game. 15 mins work. Take RP data and subtract 20%.......

Any ideas from the forum? What would you do?

 

[pinkboy]

Get a second opinion?

pinkboy

 

[Perp]

If you only want to borrow $1.9M, you're under 80% of $2.55M anyway, so why do you care?

 

[Rolf Latham]

If its a lender instructed val, and not an upfront broker type val, then its highly likely the valuer is doing simple risk mitigation stuff.

they know your partner is borrowing X, the val needs to be y. Deal done.

In an ideal world, that not the way its meant to be ................

if your partners need and serviceability is for more than 1.9............. then youd want to go valuer shopping, although that might not be so easy woth many valuers charging a premium for vals > 1.5 to 2 mill

ta
rolf

 

[Redom]

Has anyone heard of valuations coming in so much under RP data/market worth? The valuer also demonstrated some really bizarre behaviour (i,e. Booked an appointment on the 24th then turned up unannounced on the 31st and did not even state who he was. Asked my partner what the house was worth.)

That's pretty strange, most valuations I've done have been relatively smooth sailing. Some valuers are a lot more detail orientated and spend a healthy amount of time and record lots of detail. Others do a quick walk through and go to the next property.

Quite often we see significant variations in valuations depending on the valuation firm, and the particular valuer's opinion.

If you need more finance/want to borrow more of your equity - than best to order a couple valuations and go from there.

By the sounds of it, the valuation doesn't actually impact your financing needs. In terms of using it as a basis to guide you how much equity you actually have, you should take this particular valuation provided with a grain of salt - recent comparables are your best estimate of what the market value of the house is.

Cheers,
Redom

 

[Ausprop]

we all think our house is worth x, however I have come to accept that bank vals are usually about right for a reasonably expedited sale

 

[Redom]

we all think our house is worth x, however I have come to accept that bank vals are usually about right for a reasonably expedited sale

My partners an academic and did a study on what we think our house is worth vs what our house is actually worth. Its basically NSW/ACT wide survey data before sale v after sale. According to her study, homeowners over-estimated the value of their home by 12%.

 

[Rolf Latham]

According to her study, homeowners over-estimated the value of their home by 12%.

very similar to the notion that 83% of drivers feel they are better than average

ta

rolf

 

[sanj]

Did you get any appraisals or a private value done? Rp data estimate is irrelevant imo and your range is very wide which indicates ypu might not be too sure what the valuation actually is

 

[Erin Woods]

Real value

Agree that majority of ppl over-estimate what their property is worth.

I have been in the game for 15 yrs though and really know the values - it's at least $3m so expected from a bank valuer $2.8m plus. Made no difference to us though because we didn't need the full equity.

I now realise I think values base it ALOT on what you are asking for. Because we only wanted about 55% of the real value they came back at 2.55m.

I really think if we had asked for 80% of 3.25m the valuation would have come in at at least $3m.

Rolf- as always- you are spot on- I think their is a risk mitigation strategy between lenders and valuers. Good tip for future valuations- always ask upfront for 80% of Max RP data value. Can always reduce it later on. Banks are never going to offer you more than what you ask for.

At least not since GFC.

 

[Corey Batt]

And at this end of the market you can see some extreme variations between valuations, with values moving 250k in any direction depending on how good the latte was that morning.

If you're truly concerned about the valuation send through a valuer from another lender/an independent valuer(not a real estate agent) to see a comparison.

 

[Erin Woods]

Private val

Did you get any appraisals or a private value done? Rp data estimate is irrelevant imo and your range is very wide which indicates ypu might not be too sure what the valuation actually is

I agree Sanj- range is wide. But true test is only putting it up for sale and its only worth what you can get a buyer to pay. That can vary by quarter of a million at least.

RE appraisals were in mid $3m's but I am more a fan of comparable sales. Knock downs in this suburb (wollstonecraft) go for $2.5m. Real issue is lack of comparables. Turnover in this area is 1-2 houses per year.

I have found RP data not too far out unless significant reno's have been performed.

 

[Ausprop]

I have found rpdata vals to be wildly inaccurate, one I ran was in my favour to the tune of $1m (on a $1m property). I can't see how banks can finance using them but apparently it does happen

 

[Jamie M]

Get a second opinion?

pinkboy

Yep - different valuer usually ends up as a different result.

However - it looks like the equity release is still achievable based on the value provided so a second opinion might not be necessary.

Cheers

Jamie

 

[RetireRich101]

just a question/concern here.

most banks use ValEx system regardless valuer vendor they use.
once it's in the ValEx system, can all valuer see valuation history ?


Just concerned that a valuer might use previous ValEx valuation and apply their percentage to the old valuation.

 

[Erin Woods]

Yep - different valuer usually ends up as a different result.

However - it looks like the equity release is still achievable based on the value provided so a second opinion might not be necessary.

Cheers

Jamie

The LVR is still less than 75% so don't need another valuation, but I have ordered a free one with another lender anyway to see how large the variance is. Will post the result.

 

[Erin Woods]

just a question/concern here.

most banks use ValEx system regardless valuer vendor they use.
once it's in the ValEx system, can all valuer see valuation history ?


Just concerned that a valuer might use previous ValEx valuation and apply their percentage to the old valuation.

Would like to know the answer to this too. This was my primary concern. That one bad valuation will influence future valuers.

Which lenders do desktop valuations when doing an equity loan or refinance up to 80%? Does is depend on the lender or is it a case by case basis?

 

[sanj]

The LVR is still less than 75% so don't need another valuation, but I have ordered a free one with another lender anyway to see how large the variance is. Will post the result.

Won't that be another hit on the credit file?

 

[Corey Batt]

Won't that be another hit on the credit file?

Upfront valuations don't hit your credit file, they are done before any application is submitted.

 

[INVSTOR]

I've had a hard time with realistic valuations so feel your pain. One of the recent val's came up as $10,000 more than than the land tax val. It has a reno'd home on it that you could retain and build two houses behind. Another banks val came up at around $300,000 more so ended up leaving it with them rather than changing.
After much bitching to the valuer/company about a crap valuation they gave a year prior they revalued another property at $620,000, sold it soon after for $645,000, which I'd consider much more realistic. It MAY help to ***** in advance.