Valuations Again
- Thread starter MTR
- Start date
yes it is incompetence. here is why.
land value = $850/sqm (based on dozens of sales around including 1 3 doors down) x 994sqm = $844900
improvements valued at $230k by the valuer based on the 2 properties being on 1 title etc and not taking into account any development potential (which i completely understand)
this guy ended up at a value of $780000, which is LESS than land value alone. Note, there are 2 fully renovated 2x1s on the block, each capable of getting $430/week rent and which each had $70k spent on them
I will repeat in case it wasnt clear before, it came in at under land value despite having 2 significant homes on them.
This was downright incompetence. If youre completely bored feel free to find any sales evidence supporting a $550/sqm land val in maylands for a single res site (which is what it has to be valued as).
Just 1 will do.
I get that you have to defend your profession as quite often you guys are unfairly criticised. In this case though your faith in this clown is misguided.
btw i did have the report to read, the comparables themselves were a disgrace. he compared this property with a 3x2 townhouse on 300 odd sqm.
agreed, thanks for detailed post.
In Sydney, a bank valuer used Low Density comparable to subject Medium Density. When I dispute this, the valuer advised that they do not look at development potential ( or rather she told the fee bank paid for the valuation does not allow her to get into development valuation) though only some considerations given . This is what RV was telling us..
So properties with a twist such a development, corner, studio/teenage retreat, granny flat that you as buyer realize the potential ( an possibly pay more to secure the sales) but on the other hand the bank valuer may not.
So properties with a twist such a development, corner, studio/teenage retreat, granny flat that you as buyer realize the potential ( an possibly pay more to secure the sales) but on the other hand the bank valuer may not.
meh, just like amny brokers arent really in the game, many valuers arent
Move banks.........usually pretty simple unless your equity position doesnt allow
In closing , had a corker response to a cba Valex repsonse this week
this was for a property that was valued at 850, and could be sold today at 950, and in defence of the valuer, the settled comps are lame, because they are up to 6 mths old.
part of our data included a residex report, in amongst some unsettled comps,
valuers response
your residex report of 950 is below the estimate of 850.
That left the balance of the response with the same afterglow.
ta
rolf
Well this is certainly becoming an interesting thread.
I will be looking at financing shortly, 3 unit development, site cost me $530,000 have plans and permits approved, purchased 7 months ago and the same product sold recently for $100,000 more, same street, same size block. Building costs will be approx. $600,000.
RV
Thanks for the feedback, now I probably need to revisit all this stuff.
My MB has advised that he will be sourcing resi loan, so are you saying that I would have better luck securing more $ using a commercial loan?? Problem with this is I may have to sell OTP, this is not an option that would suit as the would have to be discounted.
MTR
I will be looking at financing shortly, 3 unit development, site cost me $530,000 have plans and permits approved, purchased 7 months ago and the same product sold recently for $100,000 more, same street, same size block. Building costs will be approx. $600,000.
RV
Thanks for the feedback, now I probably need to revisit all this stuff.
My MB has advised that he will be sourcing resi loan, so are you saying that I would have better luck securing more $ using a commercial loan?? Problem with this is I may have to sell OTP, this is not an option that would suit as the would have to be discounted.
MTR
I do not work for a bank, I just value as instructed however I will say that my impression of this is thus.
A residential loan is for a residence, this is considered low risk for a bank. Most residences are single dwellings, many banks will accept two dwellings on one title, but thereafter they get nervous.
You are doing a development, not for a residence, but to make a profit, which could be considered a commercial enterprise and thus has higher and different risk than a lend against a single family residence.
Commercial loans are usually on different terms and with lower LVR's so you may not get any higher amount of funds.
The easiest way to get these things through, is to put the services in and then subdivide first. Therefore every unit is a single residence on an individual title and should not encounter this problem, hell you may even get a 90% TBE lend!
I will say that the cost to purchase the land or it's current market value are irrelevant to the valuation of a 3 unit development on one title upon completion as the vacant land is not being valued.
The valuation should reflect the sum of the end value of units, less:
Cost to subdivide,
CGT liability for the newly created sites,
GST on the dwellings,
Disposal fees,
Holding costs,
and
Profit and Risk. (can range from 10% to 25% of the end value before deduction of all the other costs)
It is the figure after all these deductions against which the bank will lend at the appropriate LVR.
Have a read of my post in the Sunshine Development Thread where I have spelt all this out in an example.
No I do not defend the profession. Nor do I have faith in another valuer I do not knbow. There are lots of incompetent valuers out there, trust me I know this. We have a difficult time finding new competent valuers. It is one of the reasons why our office has not grown, but is well regarded by the people who count.
What I do is try to explain the situation . Valuation is very poorly understood and there are a lot of myths out there given as facts that are just plain wrong. I never defend or comment here saying another valuer is right or wrong, I just try to demystify and explain things from the valuation perspective.
Yes it could be incompetence, however a valuation such as this would /should be reviewed by a manager prior to going out.
In addition I will say to your point about the valuation coming in under land value.
Yes it is possible for the valuation to come in under the value of the property as a vacant development site.The property was not being valued as such. It was probably being valued as a single residential site with two dwellings on it with lots of liabilities such as CGT, GST and other expenses (refer to my post above in reply to MTR), as per instructions from the bank.
Without the report you cannot really make your claim as you do not know the basis of the valuation and the assumptions contained therein.
If it was a commercial valuation, then it should have reflected a higher value, however those Commercial guys often mess up residential when they do it.
Interesting Points RightValue, never really thought of it from the banks perspective! Now I get why if I have just paid a valuer for a valuation the bank won't accept it! All making a lot more sense now.
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
That's pretty spot on to how my bank manager told me they value property, he said they knock 10% off. They account for a discount for a quick sale, they wont hang on to a property for months to get top dollar if they decide to sell they just want to get rid of it as soon as possible.
This release from the department of commerce will explain the problem:
I have had a site or two in Morley where the sales evidence can include a 350sqm split block.
I have had a site or two in Morley where the sales evidence can include a 350sqm split block.
i have the report so i can. the guy is an idiot (i hope he reads this one day).
valuers have a very important job to do, their competence (or lack thereof) can have a huge effect on people. this guy should be in an entirely different career
Thats why the banker is a banker and the valuer is a valuer.
In a normal market the valuation is usually within 2 to 5 % of the price the place could obtain on market. Obviously that based on my smallish sample
ta
rolf
Be careful what you ask/wish for
I posted something on here about a lazy RE agent and guess what, I got an email from him with the link, not a happy chappie, perhaps he will learn something from the experiencehasn't been my experience in my smallish sample.
I think they should crack down on undervaluing - it does have serious consequences for those relying on these reports
I rarely have a problem with low valuations for new purchases, perhaps 1 in 100. We do try to give clients a lot of help to at least pay a fair value for the property.
Refinances are another thing however. They rarely come back at the expected price, usually at least 10% under or even more.
I just had a conversation with a client that the valuation is 15% lower than the valuation that was done 18 months ago. Property prices in the area have actually risen about 10% in the area since then. I have this conversation constantly and frankly I'm getting a bit tired valuers throwing out grossly conservative results.
Refinances are another thing however. They rarely come back at the expected price, usually at least 10% under or even more.
I just had a conversation with a client that the valuation is 15% lower than the valuation that was done 18 months ago. Property prices in the area have actually risen about 10% in the area since then. I have this conversation constantly and frankly I'm getting a bit tired valuers throwing out grossly conservative results.
sorry MTR but that's pretty funny
I think I have "stupid" written on my forehead, I actually mentioned his name, I guess I can't use him again... damn it
yep wish they would just get the F out of the way sometimes.
