Valuations Again

[MTR]

Hi All

Are you getting property values come in well under purchase price at the moment?? What State/area?

I spoke to a friend yesterday who is a Perth MB he mentioned that at the moment valuations on development sites in Perth are coming well below purchase price, he gave me an example where a client purchased in Nollamara for $600K came in at $540K, I think its a case of the market moving too fast and no available stats.

I will be developing shortly and will be organising stats prior to valuation, however I am pretty much in the same situation. What to do??? I am stuck

MTR

 

[Ausprop]

but you can bounce off their $600k now, so it shouldn't be a problem?

 

[MTR]

but you can bounce off their $600k now, so it shouldn't be a problem?

You need 3 comparable sales I believe within the last 3 months.

 

[sanj]

Hi All

Are you getting property values come in well under purchase price at the moment?? What State/area?

I spoke to a friend yesterday who is a Perth MB he mentioned that at the moment valuations on development sites in Perth are coming well below purchase price, he gave me an example where a client purchased in Nollamara for $600K came in at $540K, I think its a case of the market moving too fast and no available stats.

I will be developing shortly and will be organising stats prior to valuation, however I am pretty much in the same situation. What to do??? I am stuck

MTR

I had one come in recently at $780k that, no word of a lie, id have been able to sell for $1.05-1.15m within a week. 994sqm R40 site, steeply sloping but with 2 fully renovated 2x1 duplexes on them and plans approved for 5 apartments on the balance 6km from the city.

yes, $780k for that. Id be embarrassed to call myself a professional valuer if i came in with that, $780k is land value alone

the valuer came in at land value for R40 land in maylands at $550/sqm. when i asked for justification they refused. when i provided countless of examples showing land value within 200m of being $800-950/sqm (including one sold 4 doors down) they still refused. AMP also refused to allow another val, claimed their policy was that once a valuer has been assigned they dont allow another valuer, not sure how true it is.

i told them to shove it, borrowed private funds at 9% to complete my earthworks etc, will be paying out the loans when i sell the front 2 homes

ive heard of a few other coming in below vals recently, even for single res products like villas etc

 

[Jamie M]

It's not that uncommon for OTP valuations to come in lower.

I haven't seen many purchase applications for established dwellings come in lower than purchase price recently. I think there's been one - and we sorted that out by using a different valuer.

For refinances - the valuation often comes in lower than the customers estimate.

Cheers

Jamie

 

[MTR]

I had one come in recently at $780k that, no word of a lie, id have been able to sell for $1.05-1.15m within a week. 994sqm R40 site, steeply sloping but with 2 fully renovated 2x1 duplexes on them and plans approved for 5 apartments on the balance 6km from the city.

yes, $780k for that. Id be embarrassed to call myself a professional valuer if i came in with that, $780k is land value alone

the valuer came in at land value for R40 land in maylands at $550/sqm. when i asked for justification they refused. when i provided countless of examples showing land value within 200m of being $800-950/sqm (including one sold 4 doors down) they still refused. AMP also refused to allow another val, claimed their policy was that once a valuer has been assigned they dont allow another valuer, not sure how true it is.

i told them to shove it, borrowed private funds at 9% to complete my earthworks etc, will be paying out the loans when i sell the front 2 homes

ive heard of a few other coming in below vals recently, even for single res products like villas etc

That's bloody minded, you had the stats, no choice but to move, considering how low it came in at, 9% is high though?? I guess you just have to do what you have to do.

 

[Ausprop]

I thought 9% for private funds sounded really good?

 

[sanj]

I thought 9% for private funds sounded really good?

unsecured too, just a gentlemans agreement. i was pretty happy with it. ive done other stuff with them before though so we know and trust each other

i also gave someone a small stake in the project but ultimately it will be worth it

 

[thatbum]

Sounds like a Perth thing. I had one about 6 months ago on my duplex pair in Hilton on 799sqm, R20/R25 come in at $450k. I couldn't believe it since I could easily offload it for $600k+.

I just drew equity from my other property in Langford instead (which they did recognise the recent growth) so I couldn't be bothered disputing it.

 

[INVSTOR]

I just got a valuation I wasn't happy with a year ago revalued. I told them I wasn't happy with last Val. (maybe not a good thing to do). they said they won't take expensive builders into consideration, they will use the average building cost. So it doesnt really matter if you have a cheap built house or expensive. They said they would take individual improvements/features into consideration but they clearly haven't. Looking at building myself Bullnose veranda's or any veranda's and quality red brick costs a lot but clearly they haven't taken that into consideration. Grumpy Invstor! Other 2 Val's came in Ok.

 

[Marty McDonald]

Had one yesterday gold coast purchase. Beautiful house too. Purchase price $750,000 valuation $715,000. Last sold in 2008 for $700,000 (new).

 

[MTR]

Sounds like a Perth thing. I had one about 6 months ago on my duplex pair in Hilton on 799sqm, R20/R25 come in at $450k. I couldn't believe it since I could easily offload it for $600k+.

I just drew equity from my other property in Langford instead (which they did recognise the recent growth) so I couldn't be bothered disputing it.

That is shocking.
I don't believe it is just a Perth thing, Syd West is booming went to revalue and came in well under what I could sell for.

I just sold a property in Perth, just found out the RE agent colleague who actually sold the property, well his wife was the person who was asked to value the property, came in at the right price .... What a mouth full, hope that makes sense

 

[MTR]

Had one yesterday gold coast purchase. Beautiful house too. Purchase price $750,000 valuation $715,000. Last sold in 2008 for $700,000 (new).

Perhaps Gold Coast is still flat, but I think this is about to change as am told there are now investors in the market.

 

[INVSTOR]

+ my valuation did imProve though.. Was at least $70000 undervalued a year ago, about $20,000 - $30,000 undervalued now.

 

[Rolf Latham]

Perth raw sites are ok.

TOC IOL vals are typically discounted by 15 to 30% but thats not a Perth thing, thats just a market perception thing and is generally seen as valid discount

t
arolf

 

[RightValue]

I spoke to a friend yesterday who is a Perth MB he mentioned that at the moment valuations on development sites in Perth are coming well below purchase price, he gave me an example where a client purchased in Nollamara for $600K came in at $540K, I think its a case of the market moving too fast and no available stats.

I will be developing shortly and will be organising stats prior to valuation, however I am pretty much in the same situation. What to do??? I am stuck

MTR

For a development site you need to get a commercial valuation done and probably borrow on commercial terms.

Valuation standing instructions for residential mortgage valuations are to IGNORE all development potential and value as a single dwelling site only.

This includes sites with development permits.

May I suggest that the MB's concerned may not be making the correct valuation applications if they are applying for residential mortgage applications for development sites.

Only the other day I valued a place that sold at Auction. A corner site, clearly the price reflected the development potential. If I was doing a development valuation I would not have a problem with the price. Unfortunately I was doing a residential mortgage valuation so I had to ignore the fact that it is a 3 unit corner site and easy to cut up.

In such cases I always mention this in my reports. Often when valuing a property that has development potential for refinance purposes I state that the property would in all likelihood sell for a figure in excess of my valuation figure due to the development potential that must be ignored.

BTW this is a requirement of the banks. It is no good saying that it should be valued at it's highest and best use (as the market price does/would reflect this) as if you want to borrow and you borrow on their terms not yours.

I trust this helps clarify things.

 

[RightValue]

Sounds like a Perth thing. I had one about 6 months ago on my duplex pair in Hilton on 799sqm, R20/R25 come in at $450k. I couldn't believe it since I could easily offload it for $600k+.

I just drew equity from my other property in Langford instead (which they did recognise the recent growth) so I couldn't be bothered disputing it.

In another thread I explained how two or more dwellings on one title are valued for mortgage purposes for the bank.

It is not just a case of each unit being worth $300k on separate title so it is valued at $600k.

Remember this is a mortgage valuation not a market sale valuation and there sometimes can be a big difference.

There can easily be a 20-30% discount once the expenses that have to be allowed for are subtracted.

 

[sanj]

RV - i agree with what youre saying but it isnt just about highest and best use, market value is bloody market value.

every man and his dog is paying a certain price in perth, like i said on my street literally 4 or so houses down was a property that sold for 850/sqm and yet this monkey from CBRE came in at 550.

youre talking a 35% discrepancy. that is incompetence straight and simple. nothing more and nothing else. $550/sqm for land 6km from the city? those prices havent existed in around 7 or so years, they didnt even drop that low during the post GFC perth trough

 

[RightValue]

RV - i agree with what youre saying but it isnt just about highest and best use, market value is bloody market value.

every man and his dog is paying a certain price in perth, like i said on my street literally 4 or so houses down was a property that sold for 850/sqm and yet this monkey from CBRE came in at 550.

youre talking a 35% discrepancy. that is incompetence straight and simple. nothing more and nothing else. $550/sqm for land 6km from the city? those prices havent existed in around 7 or so years, they didnt even drop that low during the post GFC perth trough

Is it incompetence really?

You are confusing market value with the valuation conducted for mortgage security purposes within the valuation instructions or standards.

Do you have the instructions?

Do you have the report to read in this case which probably states the reason for the discrepancy.

Like I said, there is no point in arguing the basis for the valuation. It is not a market valuation when it is a development site or a multi unit on one title residential valuation.

I do lots of them. We clearly state that the market value as if on separate title is say $1.1m, but the end value for residential mortgage security purposes is $800k and all the deductions and calculations are included in the report.

Remember this, the valuer is valuing for the mortgagor and has the liability to them, not to the borrower, even if they instruct the valuer directly.

Borrowing is not a right and you borrow on the lenders terms. Yes market value is market value but I stress again, these are generally not valuations of current market value in the final valuation figure.

 

[tang]

what do the valuers do differently for mortgage valuations? i have mine on next week. what do they base it on ,if not market comparables