Valuation: 'as is' Market Value vs Projected Future value after development. Dispute

Discussion in 'Legal Issues' started by sharynl, 28th Jul, 2014.

  1. sharynl

    sharynl Member

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    Hi,

    I am hoping for some feedback about this situation.

    I have been working towards buying the other half share of a property inherited 50/50 by myself and my brother.

    I've had an unconditional loan OK'd but the amount l can get and what is a fair market value price I am willing to pay is less than what he wants.

    Besides being influenced by real estate appraisals (of the buy-your-listing variety) he has recently supplied me with a valuation by a 'big' valuation company.

    This valuation initially shocked me as it was about 1/3 again higher than mine. But when I read it (luckily I read it!!) on page 12 the valuer stated that the property would be worth this amount after development which they said would involve subdividing it into two blocks then selling one vacant block and the other with the house (fixed up also - not 'as is') on it.

    I really don't see how this is an 'as is' valuation and this is the response I have made to his lawyer.

    Is there a regulatory body which polices these things?

    They have stated one amount only - 'as is' but they state "We have undertaken a hypothetical development of the site" citing highest and best use (which it isn't anyway) and their 'net realisation' is the 'as is' amount .. which is clearly not correct as it is a projected value and not what it would be sold for if put on the market 'as is'.

    I'm in SA. The property is not a cattle station by any means. We are not executors, we are joint owners. He has always been clear that he doesn't want the place and doesn't want to do the work and wants me to buy him out.

    I've advised his lawyer that as he has already threatened me with Supreme Court action (sadly the true colours I never would have expected have come out since about March this year) then if he won (at unnecessary cost) then it would be auctioned and it would not get projected value, but the true 'as is' value.

    Any advice would be welcome.
     
  2. Terry_w

    Terry_w Member

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    You can come to some sort of agreement or get a trustee appointed to sell the property. Each party has a right to ask for whatever they want but the other party also has a right to refuse.

    Sometimes it might be better to just get a trustee appointed and get it sold - fees maybe $10k to $20k depending on several factors.
     
  3. Ausprop

    Ausprop Member

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    why the desire to buy him out? sell it up, no quibbles then and save yourself a whole world of grief in the process
     
  4. TMNT

    TMNT Member

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    What a joke

    You can't get a good result out of idiot valuers who seem to have the logic of a Christmas turkey

    Yet when it doesn't suit you, they valu it based on potential!!!!
     
  5. sharynl

    sharynl Member

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    "Ausprop why the desire to buy him out? sell it up, no quibbles then and save yourself a whole world of grief in the process "

    Because I want to make money on the property rather than watching a property developer do it.
     
  6. sharynl

    sharynl Member

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    TerryW,

    Is it legal for a valuation company to claim a 'potential value' as 'market as is value'?
     
  7. sharynl

    sharynl Member

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    TMNT - Yes I agree! But in this case do you think it's even legal?
     
  8. Terry_w

    Terry_w Member

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    yes why not, happens a lot.
     
  9. fernfurn

    fernfurn Member

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    Pay for an official valuation from a legal Valuation company. If he wont accept that tell him you have lost interest and will rent it out, half the rent, half the rates, water rates, maintenance payments, broken hws etc. tenant demands, watch him lose interest
     
  10. Brady

    Brady Big 4 Banker

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    What would the property sell for on the open market?

    If you believe you can make some money out of it, is that because of the price you're paying?

    Valuers will often exclude development potentional, but not in all cases.
     
  11. Terry_w

    Terry_w Member

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    Whoever orders the valuation instructs the valuer. They valuer will value as per instructed - firesale, open market sale, end value of development etc

    You should be instructing your own valuer to find out the value to you.
     
  12. sharynl

    sharynl Member

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    Thankyou all for your input. As these are my first posts I don't have the copy/paste to particular responses worked out yet..

    Yes, I already have a valuation TerryW. Also this valuation is stated clearly as 'as is' and market value on the valuation summary - are they allowed to do this even if they are allowed to do potential valuations? Can they pass these off as 'as is' market valuations?

    Brady, my valuation and offer is the price it would sell for on the open market. His is an estimate of price it would sell for after development and fixing up. I believe I could make money out of it because I'm prepared to put in the hard yards of work and planning over a number of years. He isn't and wants money up front. The price I'm prepared to pay is because I'm prepared to do the work. I would make money from my own investment and being prepared to plan and wait, not on the purchase price I have offered which is fair and reflects it's CURRENT market value.

    FernFurn, I really would like to have it rented by now, but I respected his initial request not to rent it out - which also put me behind in getting finance. And now - with the way he's acted - I don't trust him because he would allow me to do all the work to make it liveable (it needs a LOT of work) and then still want half improved value and rent.
     
  13. wylie

    wylie Member

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    Could you agree to both get two or three appraisals from local agents. Enzure you tell "your" chosen agents you will not be selling or you risk at least one of them "buying your listing" by giving a higher appraisal than they might if they know they will not be getting a listing now.

    Your sibling gets two or three too and you should get an idea of true value "as is".

    Or... You list it and buy it in a trust or another other entity. Lots of things to be aware of if you do this, including paying stamp duty.
     
    Last edited: 28th Jul, 2014
  14. sharynl

    sharynl Member

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    Thanks Wylie, but I am happy with the 'as is' and not 'potential' valuation I have. It actually supports my valuation if it is taken as 'potential' and not 'as is'.

    I have offered two settlements and with the second one he came back with this 'potential' valuation. He seems to want to waste money by fighting about it.

    Does anyone know what he can try to force me to do? Besides bluff (and I called it), I don't think he's got much going for him.
     
  15. cu@thetop

    cu@thetop Member

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    Terry W is right. If you can't agree appoint a trustee. You can always bid at the ensuing auction.
    Alternatively let your brother buy you out for half of his chosen price.

    I think you should lawyer up.
     
  16. S.T

    S.T Member

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    Let it go to auction then buy it yourself?
     
  17. TMNT

    TMNT Member

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    I'm sure with your experience clay, what it sells on the market is irrelevant to the valuation

    It's a combination of what the valuer had for breakfast, which side of the bed he fell off, whether his wife is happy and the colour of the socks ob the next door neighbour cat
     
  18. SOP

    SOP Member

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    No need to attack the Valuer.

    They would have been acting off the instructions from your Brother.

    If your brother asked them to value the property as being subdivided and renovated then thats what they would have done.

    Personally I dont think you and your brother will be able to agree on a price and keep things happy. Better to just sell and use the profits for a new project.
     
  19. sharynl

    sharynl Member

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    Yes, I've been thinking I'll bid at auction. I may even get it cheaper than my offer but this will be eaten up by fees. Seems a lot of pointless mucking around to get him to accept market value price. But I would have thought a couple of valuations would make him see reason, not fuel his fantasies of what the place is worth.

    I'm definitely having a go at the valuer, SOP if they think they can put a potential value as the market value of the place. In what universe does anyone pay for a property as if it's already developed and then also pay to develop it? And what standards does a valuer have if they state the potential value is the as-is what-it-would-bring-in-current-condition value.

    TMNT - yes I'm beginning to agree with that description! ;)
     
  20. SOP

    SOP Member

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    Are the instructions from your brother attached to the back of the valuation?

    Contract the valuation firm directly and ask how they were instructed to value the property?