Ugh!! 10k difference in valuations!!

[S83]

UNBELIEVEABLE!!

After getting approval from ANZ to switch from St. George and making a complaint to the Ombudsman re: St. George, St. George have finally decided that they will bend over backwards to keep our loan.

However, we needed to go through the full application process again.

We had our place valued at $350k by ANZ 2 weeks ago. This is enough for 95% LVR at St. George.

St. George has today valued the property at $340k!

The Ombudsman Complaint Manager at St. George says she will have it reviewed, but what chance have we got?!

Has anyone had any success here?

Is this a case of St. George offering us the world to keep the Ombudsman happy, but sending in a valuer with the instruction to be overly conservative? Or am I just being paranoid?

Grrrr!

 

[Rolf Latham]

Hi

On a property worth 350 a reasonable valuatrion range is 5 % . so 10 k is ok.

Do u have some comparable sales to chase the lender with that are different or better than the ones they have used.

ta
rolf

 

[RightValue]

but sending in a valuer with the instruction to be overly conservative? Or am I just being paranoid?

Grrrr!

I am a valuer, and have valued for heaps of different lenders including most of the major banks.

In about 20,000 valuations, never once have I received an instruction to to be conservative. .. but this could just be an abberation of course.

Three things to consider.

1. The first valuer was innexperienced and just rubber stamped the Estimate of value, our juniors has a much higher incidence of doing this than our experienced valuers.

2. The first valuer may have actually been a bit high (yes it does happen).

3. The market is going down and there is some fresh evidence that justified a lower figure on the second and more recent valuation.

Or the $340k valuer could just be a bit low.

Frankly I think that is pretty good getting two valuations - which are opinions- that close.

BTW do you always expect two people opinions to be exactly the same, or is it only when it affects your borrowing capacity? Get a couple of REA's around to appraise your property and then listen to the ranges. I had two for an IP I sold this year and the top of the range differed from $525k to $600k!

good luck with it.

cheers

RightValue

 

[wylie]

I am a valuer, and have valued for heaps of different lenders including most of the major banks.

In about 20,000 valuations, never once have I received an instruction to to be conservative. .. but this could just be an abberation of course.

This is something that always interests me. As a typist/secretary for one of the big 4, I did some time in the housing loans area, and typed up many valuations. We are talking 1976 onwards, so a long time ago.

Whilst the valuers never said anything about being asked to value low, it was always sort of "understood" that valuations for the bank were conservative, for reasons we all understand. The bank is not really interested in what the house is worth, but needs to cover their ar$e in the event that the house must ever be sold should things turn bad.

We just had our house valued and our broker (ex bank Johnny also) told us the value, but prefaced it with "this is a bank valuation for their own purposes, and you know that it will be low"..... and told me the value.

Unless we were selling, we would never be able to test the value, but it certainly seems low, compared to what is being sold now, and has sold in the recent past, even allowing for a flat market. I would say it is $35K less than the figure I would have thought, and our broker thought my figure was too low.

The last time we had this house valued, we really needed enough of a rise in value to get over the line with another purchase, and I did my own homework and gave the valuer my comparables (in a very polite way).

I'm just wondering if, as you say, you are not asked to value low, but wonder if it is just something that is understood and expected in the banking system in general. It certainly was always my understanding after having worked in that system (but never as a valuer).

It is also my understanding that if I pay a valuer, I can "ask" for a valuation to be conservative, or not, depending on my purposes, ie. if I am transferring to a trust, I may wish for a "low" valuation for reasons of transfer duty. Of course, I do understand that any valuation must be backed up by comparables, but it is very hard to find comparables in an older suburb where land size, condition of renovations etc can make a bit of difference.

I'm not trying to be smart or anything, but I always find putting a value on these older houses is so hard. Right now, we have a house for sale on a big block. It is priced less than a similar house on a block a quarter of the size, but with extra bedrooms/bathroom. A house in our street is priced high due to the fact that someone will remove it and build to get full city views, so it seems to be valued due to its potential by the agents, but a valuer (I imaging) cannot value due to what it "could" be, but only what it "is". So, when this house sells, it would skew things due to its value on the RPData not showing that a high price was paid for future potential.

RightValue, I do wonder if the chap who valued our place last week knew the actual value the bank needed to get the guarantee over the line? Or does the bank just say "value this house" and give him no information at all. In this case, I understand that the bank are not valuing my son's unit at all, and as long as our house values up (which it does) enough to allow us to guarantee one fifth of his loan, that is all they are interested in.

 

[RightValue]

RightValue, I do wonder if the chap who valued our place last week knew the actual value the bank needed to get the guarantee over the line? Or does the bank just say "value this house" and give him no information at all. .

All I get is an address, a contact name and an owners estimate of value.

Basically, it is a case of..

Here is the address, put a figure on it.

I know not how much the person is borrowing nor the purpose of the loan nor do I care.

I usually ignore the estimate of value as I know my patch and what the properties are worth. Interestingly a lot of the time, when I am talking to the owner and they ask me what I think it is worth, I ask them if they have had an agent around to give an appraisal or what they think it is worth.

More often than not the owners estimate of value (OEV) figure on my sheet is considerably higher than the figure they tell me! Usually a broker of bank loan officer ups the figure.. hence I Ignore it.

Last week, in discussion an owner said he thought his place was worth, "hopefully $535k". I showed him the OEV on the sheet at $700k. He couldn't believe it.

He told me of the sale of his brother in law's house across the road last month.. at $485k and thought his was worth more (identical land). He was right that his was worth more, I was thinking I would value his place at $530k based on that sale.

I get home and check the other sale out.. it sold for $455k!.. His place valued at $505k.

Today my last property, talking again, the owner said $290k, the OEV showed $350k .. his broker had upped the figure. In this case his broker is closer to the money than he is, it will probably value at $350k, when I finish the report at about 6.30am tomorrow.

The one i am working on now from friday. Owners Estimate $1.1m. This is significantly abolve the cost of land plus building the place brand new. The highest sale I have is $600k, it will value probably around $675k.

On a desktop valuation yesterday, the estimate said $450k, talkling to the owner on the phone, he says the agents say it is worth $700k... go figure on that one.. (yes I desktop it at $700k).

Here is another one. Proeperty is on the market in August, Owners estimate on the sheet is $900k, agent lets me through.. worth "mid to high $800's". I value it at $780k. It sells two months later.. for $780k (occasionally I get it right).

No, there is no tacit understanding to value low or conservatively between banks and valuers of which I am aware.

Banks and loan officers and brokers make money by doing deals. I have only ever been asked by bank workers/lender to put higher figures (happens heaps) not to put lower figures. Being too conservative kills deals and the valuation firm will find they get less and less work from the lender.

Sometimes I have to get onto the risk people at a bank to get them to get the loan officer off my back when I come in under an unrealistic estimate.

And sometimes I will push a valuation figure higher than I am comfortable with to get people to shut up .. I just hope they have lots of equity as the report gets highly risk rated so I know the LVR will be lower.. often this pushing a value a little bit can be very counter productive.

I trust this helps.

RightValue

 

[csc2]

I am a valuer, and have valued for heaps of different lenders including most of the major banks.

In about 20,000 valuations, never once have I received an instruction to to be conservative. ..

i could nominate a person in westpac who gives clear direction to a valuer to be very conservative....

it happens in qld at least.....the sunshine state, the not so smart state, the dud cab drivers state etc etc..

for sure i doubt it will be in writing but it definitely happens

 

[wylie]

Thanks for that post RightValue. I appreciate hearing things from your perspective.

I know that for me personally, I always value what we have very conservatively when I am listing assets. I much prefer a nice surprise than hearing "sorry, it doesn't value up".

One thing that has helped shape my opinion was a CBA value on an IP of $150K which we sold less than two months later for $208K. I don't know why that value came in so low, but it was clearly wrong.

I imagine though that you have a hard time dealing with owners who think their place is worth way more than it really is. A house near us was thought to be worth "mid $900s" by the owners. I guessed possibly mid $800 or even low $800s. It has not sold, is very stale and compared to us (same block size - but we have four bed/2.5 bath/pool/2 car - they have three bed/1 bath/2 car) our value came in at $815K. I just don't see how they compare.

If they have done their figures on selling for mid $900 they are in for a nasty shock. If they (like I do) had done their figures on $750K then anything over that is a nice bonus.

 

[RumpledElf]

We're still fighting our valuation - our combined value before and after the revaluations (it was a security switch, replacing a very cheap house with one over twice the value + land) was identical. REA valuation put the house at $175k (this REA is new and has been selling houses within a few weeks of listing as she seems to be the only REA who actually has RPdata access to recent sales, and her price estimates are spot on), most sales in the area hover from $160-240k, but we got a bank valuation of $115k, which gets you either vacant land or a 2br fibro in poor repair. Houses in our area tend to range from $130k right up to $700k, but most older houses cluster in that $160-240k range. It has been about 6 years since you could pick up a nice house for $115k here.

By the time we get this sorted out we'll probably have saved up the $8k the bank took off us for the low val and won't have needed this dispute process at all. I don't put much faith in their 'resolve in 45 days' when that timeframe spans Christmas.

 

[S83]

Well my bank has requested a review.

What are our chances of 10k getting whacked on? Lol.

 

[RightValue]

Wylie and Rumpled Elf.

I will be the first to admit that there are quite a few crap valuers out there. The way the profession is going this will only increase as the experienced ones leave and due to a shortage of valuers, some pretty crap but qualified people are kept in jobs they are not good at as there is no one better to take their place.

IMHO undervaluing is as big a sin as overvaluing.

If I had one that valued at $150k and soon thereafter sold for $208k I would be taking it further with the insitiute. But for most people they would be on a hiding to nothing doing this.

Our team is pretty small and often when we take on a new valuer they are let go or eased out after a couple of months due to them being too far off the mark in their valuations, yes undervaluing (as opposed to valuing it correctly but lower than an estimate) is a sin as well if it leads to lost business due to incompetence. It is a fine line that we tread. In the past two years we have only added one net valuer and we trained him as a cadet, the other two personell replacements were guys that left and came back that came back this year, both of whom were working with us in for most of the 2000's. I myself returned to the firm in 2007 after 3 years off doing something else.

Our firm/office would sooner not grow than get a bad reputation; panels are hard enough to get onto and even harder to get back onto if you are pushed off.

Finding good competent experienced residential valuers in their 30-40's with 10+ years experience who really do a good job is exceptionally hard.

I know this doesn't help your situations and unfortunately the way the lenders operate they assume that all valuers are fairly good at their job when that is not always the case. Arguing or appealing gets you pretty much no where, the only real alternative is to change lenders, that sucks.

cheers

RightValue

 

[RightValue]

Well my bank has requested a review.

What are our chances of 10k getting whacked on? Lol.

Almost 0% chance.

Unless the valuer finds some new evidence that would change their analysis as they now have to have a very good reason to change a figure.

In the older days, we would call a lender/broker up if we were short of the mark and sometimes we would push the figure up before the report went out if it was a minor amount (but very very rarely on a 95% lend). However the system has changed and thankfully we do not have to make those calls anymore.

Thinking of my year, I would say that I get valuation figure disputes on about 0.5% of my valuations and I would have moved on a figure about twice in the past 3 years.

good luck
RightValue

 

[wylie]

Another question RightValue (and also the loan brokers) .......

Our loan broker told me recently that in his experience is that it is rare for a valuer to value at less than purchase price, unless there is something really unusual about the place (maybe half-finished or something, I don't know what he meant by that).

A real estate agent told me today that having a value fall short is not that unusual. I don't know if she is talking the actual value for the purchase, or whether it is total value of several houses to support the new purchase (eg. using existing IPs to borrow 100% and total valuation may not support the new loan). This is the situation we were in about ten years ago with a purchase, where I provided comparables because I knew that with borrowing 100% for the new purchase, our security already held needed to have increased enough to enable us to borrow (or pay LMI).

I do know that with the places I was finding for our son over the past two months, there were a LOT of "crashed contracts" and the story I kept hearing was that banks were making things hard. I wonder though if properties are not valuing up to purchase price, or if the borrowers themselves had problems with servicing, as opposed to a problem with the security itself?

So, I'm curious from a valuer point of view, how often a purchase (on its own) doesn't come up to purchase price?

And to the brokers, I wonder if you see this much either?

 

[Rolf Latham]

Hi Wylie

There are our approx numbers over 11 years

On straight Private treaty purchase 1 in 100

On Auction 1 in 1000

On refinance..................1 in 5 to 1 in 10.

ta
rolf

 

[wylie]

Hi Wylie

There are our approx numbers over 11 years

On straight Private treaty purchase 1 in 100

On Auction 1 in 1000

On refinance..................1 in 5 to 1 in 10.

ta
rolf

Thanks Rolf. So with the refinances, is it because the new purchase at 100% needs the existing securities to have increased enough to support a 100% borrowing?

I know with the purchase about ten years ago, we were borrowing 100% and hoping our own PPOR renovation and existing IP security, all with the bank lending us for the new house, would have increased enough to enable us to get the 100% (maybe 106% back then).

Or can you explain why refinance situations don't value up? Are people simply changing banks, and new bank values are not as high as existing banks? Or are people refinancing to get more cash out and values not high enough for that? Or something I am missing (pretend I am blond ).

When hubby left work, I thought "heck, we can never refinance now because he is not employed".

 

[Rolf Latham]

Or can you explain why refinance situations don't value up? Are people simply changing banks, and new bank values are not as high as existing banks? Or are people refinancing to get more cash out and values not high enough for that? Or something I am missing (pretend I am blond ).

Depends a little.

Mostly due to what I term the "white picket fence" theory. Many people thing their place is worth more than a valuer will place on it. Often the owners value has some emotional attachment to it.

Then there are some valuers that cant value the middle of the market for a particular property. They have gone to a diff vals course than others.

They seemingly work off the basis that a property is worth X and then we will find comparable sales around that. The best example I have in my files is a "median" house in Logan. Normalish suburban st with river reserve. Val came back 15 % lower than expected ( that happens sometimes) but the 3 comps ALL backed onto the M1 Motorway. These were the only sales LOW enough to substantiate the sad valuation............neother bank nor valuer would see sense to use comps not on QLDs busiest road

I have had this sort of justification in Sydney too, median resi house purchase in small non through traffic street. Came in approx 10 % below purchase ( that happens sometimes) again, using comps data from one house backing onto the M7 and another from a busy arterial road.

In closing, refinancers need to do more homework, and need to have valuation/ lender options

ta
rolf

 

[Marty McDonald]

Just had two vals done on the same prop for different lenders... long story. Anyway I needed the Val to be $630k+ with the second lender and it's just come back at $600k while the first lenders one was $650k. Far out just when I thought it was going to be sorted. Thing that sh$ts me is the vals shouldn't be that different for this type of property, it's a 3 bed house in a large suburb full of 3 and 4 bed houses. Argh!!

 

[Frizzle]

I do know that with the places I was finding for our son over the past two months, there were a LOT of "crashed contracts" and the story I kept hearing was that banks were making things hard. I wonder though if properties are not valuing up to purchase price, or if the borrowers themselves had problems with servicing, as opposed to a problem with the security itself?

In our town about 18 months or so ago, 7 contracts in about a 2 week period, over a number of real estate agencies, crashed on valuation. No need to explain that we would then cringe if we heard that particular valuer's name mentioned.

Frizzle

 

[Rolf Latham]

Hi Frizzle

As I suggested there are some valuers that are consistently different to the norm.........

ta

rolf