Valuation?

[Player]

Good insights RV as to the process and mechanics.

Anectdotally, I have known of a couple of recent examples where vals came back at approx 20 % below comparable sales. The figures used for CMA were settled, not just sales listed on REIV or The Age and the valuer would not accept the further evidence provided to amend the figure they gave and the bank would not revise the situation.

They were not my loans, however putting the borrower behind the eight ball was the fact that they wanted to suck out some further equity from a fixed interest term loan. The bank therefore has them over a barrel. Break (pay) and walk or we'll deal with you walking later.

I had a couple of vals done recently for my own purposes however making it very clear to my lending manager I had CMA's and Residex data, they came back at around under 4-5 % what I anticipated. This I can live with. Perhaps being informed changed the instructions....the customer will never know.

I still believe the lending climate has changed. Perhaps my nomenclature earlier of "fire sales" was a bit strong, however lenders (some far more than others) are being more conservative and how much this is impacted by LMI's I don't know as I am not from the industry.

The case outlined by Rob Williams is probably familiar to others on this board. The climate has changed and with that we need to be more aware and informed. We need to play smarter and with different rules..........doesn't mean we need to like those rules though.

Thanks again for your insights RV from your posts in this thread.

 

[Rob Williams]

The case outlined by Rob Williams is probably familiar to others on this board. The climate has changed and with that we need to be more aware and informed. We need to play smarter and with different rules..........doesn't mean we need to like those rules though.

Yet, my other recent valuations have come in way ABOVE expectations.
If there was some consistency, I could play smarter

 

[Token Funder]

*snip*
I had a couple of vals done recently for my own purposes however making it very clear to my lending manager I had CMA's and Residex data, they came back at around under 4-5 % what I anticipated. This I can live with. Perhaps being informed changed the instructions....the customer will never know.
*snip*

Player, I suspect the reason you and the valuer came to a similar $ figure was that you had done your research and come to an informed view.

We see a lot of valuation disputes where the borrowers view is basically a function of either (a) "in order for my plans to succeed it *needs* to be worth X, therefore, it must be" or (b) "but that one house down the street sold for X 9 months ago therefore my place *should* be worth x plus 15%".

 

[Albertus 6]

Wait! - then go back - the sold sticker takes a while to filter through all the government departments - LTO etc that the valuers consult. Trends are your best friends.
2 months from now those sales will be on the "radar" for the valuer and will indicate a rising market trend - at the moment they are just anomollies...
The other thing to always keep in mind it the Bank valuer is looking at the property and if the Bank took psession and sold it in the next 60 days what would they get? If the two recently sold properties sat on market for 6 months they are a poor indication of the price you would get by just listing in the next 60 days.
Find properties that sold quickly, 30 days of marketing or less - they are a much better indicator.

 

[Blackie Dobson]

Just got my first IP refinanced with a new lender (westpac) and basically guestimated that it was worth $400k. Sweated rather profusely for a few days while the bank processed the application in the knowledge that in recent weeks there were a couple of examples of similar properties on the market/sold for 10-20k less than my guestimate. When news that Westpac had given the thumbs up based on an el-quicko desktop valuation arrived I was a very happy chappy!

 

[RightValue]

Wait! - then go back - the sold sticker takes a while to filter through all the government departments - LTO etc that the valuers consult.

you are quite wrong here.

I and most valuers use the same database that REA's use. As soon as they report a sale it is on the data base we use .

Many a time I am using sales that are less than a week old for comparables. I also drive the area and if I see a sold sign that is not yet reported and looks comparable I ring the agent to get the details.

I never consult old databases .. I am paid to provide a current market valuation and that is what I do. Most valuers that I have worked with do the same.

The time on the market is immaterial to the fact it sold. A property on the market for 6 months was probablly overpriced at the start and the market rose on the meantime to the vendors asking price or their price dropped.

If a property sold in 3 days ..a quick sale, I generally find it has sold a bit cheap.

Depending on the market the time a fairly priced property takes to sell varies. Currently in the markets I value, a fairly priced property should sell within 4 weeks.

cheers

RightValue

 

[Propertunity]

Many a time I am using sales that are less than a week old for comparables. I also drive the area and if I see a sold sign that is not yet reported and looks comparable I ring the agent to get the details.

Hi RV, this I think is perfectly acceptable and the right thing to do. I do the same thing when establishing our recommended or estimated price that it will take to purchase a property.

HOWEVER, in light of this comment, how do you reconcile your earlier comment?:

Believe it or not often recent evidence is not accepted by the mortgage insurers .. sometimes they only want settled sales ... so I throw in both the most recent and a bit of older stuff to support my figure.

Does it all come to naught if a MI will not accept exchanged but not yet settled sales?

Apart from being a PITA, are the MIs trying to manipulate the market downwards (back to sales prices of 3 months ago) or just making life difficult for purchasers by making them tip more of their own cash into a deal (thereby reducing the risk of a future claim against the MI by the lender if the borrower runs into trouble)?

Perhaps this is a Q better directed to Token Funder?

 

[RightValue]

HOWEVER, in light of this comment, how do you reconcile your earlier comment?:

It is reconcoled in that second comment.

I put in the new sales that I use to arrive at my valuation figure and then throw in a couple of older sales in that justify the figure and placate the MI's. They may not be settled but at 60 to 90 days old they look settled.

Note that this MI problem is really only when I am doing vals for the second tier lenders. The bigger banks tend to just accept out figures .. the MI's are a f..ing nightmare...

here is one query.

A couple of years ago , only just back into valuing after a couple of years off, I Valued an 11 square 1 bed house in a good area of Mebourne - Ashburton ... it was a sale that went for land value only, like many older houses in the area ... back came the request... please provide one bedroom houses as comparables!

They are clerical monkeys incapable of lateral thought on the whole, I told them to f..k off .. well that was my reply that went to our office ... I'm not really allowed to reply to them directly any more, because I tend to call them morons in as many words.

If I am valuing a 140sqm 4 bed house and use a 150sqm 3 bed house as a comparable .. they get upset ... and then wonder why the 180sqm 4 bed houses that are given as comparable (all labelled as superior) aren't within 10% of the valuation figure!

I may get paiid a bit more to do these valuations, but I prefer the lower fee lower hassle of the Bank jobs thanks!

I never borrow more than 80% myself.. just not worth it!

cheers

RightValue

 

[bradje]

Thx RV.

Would it be correct to say that most Bank valuations would come in at +/- 10% of actual sales figures? Or is the variation greater?
Thx,
JB

 

[RightValue]

Thx RV.

Would it be correct to say that most Bank valuations would come in at +/- 10% of actual sales figures? Or is the variation greater?
Thx,
JB

which "actual sales figures" are you referring to?

 

[bradje]

Sales figures i.e. the actual price of the sales.
thx
JB

 

[RightValue]

Sales figures i.e. the actual price of the sales.
thx
JB

Do you mean the sale price of the property being valued or the sale price of the comparables used?

If it is the former, well I would say that 95% of the time the sale price of established properties is the valuatio figure, rarely would it be more than 10% difference...

If I think a property has be purchased for a bit too much, most of the time may just increase the risk ratings on the property to warn the lenders that it is a very full price.

..although in saying that I did value one purchase at 40% under purchase price .. but that was on the edge of a shopping strip and the price paid reflected the commercial rezoning possibility or uses etc, not the actual residential use/zoning.

For off the plan purchases, especially to interstate investors I would come in under the total price about 50% of the time in my area at the moment, often by well over 10%.

If it is the later .. we try to use comparables within 10 to 15% of the valuation figure but this is not always possible.

cheers,

RightValue

 

[bradje]

Thx RV...So I can be confident, that with a good Valuer, I would be pretty sure that the price they put on a property would be close to what I should pay for it, or sell it for, if I own it.
Seems like it would be money well spent if I wasn't sure about the market.
Cheers,
JB

 

[tobe]

Hi RV. I'd just like to thank you for sharing your insight and thoughts. I have sat through quite a few talks at conferences etc by valuation companies over the years, but none of them compare to the information you have given in this thread. many thanks.

 

[RightValue]

Thx RV...So I can be confident, that with a good Valuer, I would be pretty sure that the price they put on a property would be close to what I should pay for it, or sell it for, if I own it.
Seems like it would be money well spent if I wasn't sure about the market.
Cheers,
JB

JB,

That should be the case.. but remember this..

The Valuation profession is like any other profession ..you have your good ones, your mediocre ones and your dud ones!

I would say that the firm I work for, has a mix of all three but with the weighting in the good ones and the dud end.. well not too bad really but maybe just a bit too conservative. I have seen some shockers come and go pretty quickly in the past.

If you are having the property valued for mortgage purposes and you intend to put the property on the market in a rising market, then extect it to sell for a bit more when the property actually goes up for sale in a couple of months .. the opposite is true in a falling market.

A valuer can value anywhere provided they have the sales evidence, but you really want a valuer that specialises in your area. For example 75% of my work is in just 4 postcodes in one relatively homogeneous area in Melbourne. I inspect/value a lot of the sales I use as comparable evidence and don't need to look at too many comparable sales .. quick, easy and accurate.. Get me out of my area and I take twice as long to do the valuation and am less confident of my figure. .. but I will always be able to substantiate it in court!!!!

However as a genaral rule, yes Valuers should be within 10% of what a property is worth based on the willing buyer/willing seller definition of market value.

cheers

RightValue

 

[RightValue]

Hi RV. I'd just like to thank you for sharing your insight and thoughts. I have sat through quite a few talks at conferences etc by valuation companies over the years, but none of them compare to the information you have given in this thread. many thanks.

Thank you tobe, I appreciate the thoughts .. just trying to help and to correct some of the many ill informed myths I often hear about valuers and valuations .. unfortunately our profession is not too well understood.

I used to run property investment courses for financial advisers .. mostly focussed on REIT's and Property syndicates and trusts.

One thing I have been intending to do for ages is to develop a course in property investment and valuation for investors (how to value a property and thus how to analyse sales and present them to a valuer) and the like .. a potted version of what a valuer spends 3 to 4 years at university to learn and years to practice.

It won't be cheap but it also won't be trying to sell an investment property or a boot camp, or promising rags to riches and $1m portfolios in 1 year. It'll also be offerred offshore so the week in Phuket or the like is tax deductable...

one day I'll find the time.

cheers

RightValue

 

[Rickardo]

75% of my work is in just 4 postcodes in one relatively homogeneous area in Melbourne. I inspect/value a lot of the sales I use as comparable evidence and don't need to look at too many comparable sales .. quick, easy and accurate.. Get me out of my area and I take twice as long to do the valuation and am less confident of my figure. .. but I will always be able to substantiate it in court!!!!

If you don't mind sharing, what are your suburbs of expertise?

 

[RightValue]

If you don't mind sharing, what are your suburbs of expertise?

I mostly do the NorthWest which is an area bounded by the Western Highway to the south, the Western Freeway to the East, the Calder Freeway to the North and the Green Wedge to the West. This is my patch for a major bank. I live right in the middle of the area.

I also do the $1m plus stuff in Essendon, Moonee Ponds etc

I do a fair bit in the South West.. Altona across to Wyndham Vale (lots of off the plan stuff in Tarneit and Truganina)and service other parts of the West when there is work there. I have been pretty much specialising in the West since I returned to Valuing 2 years ago.

Most of the porperties I value are under $400k in value .. it has been fun during the FHB boom, while my colleagues covering the East were working how much their area was tanking .. I was watching mine rise weekly. Hence I have had a busy couple of years.

cheers

RightValue