Valued 20% under auction price

[Undervalued]

Hi all,

Just wondering how common is it that your lender values property bought at auction at 80% sales price? Just going through this with my bank after a weekend's purchase. At least three other people were bidding above the price the bank valued it at.

Seems really odd as the bank loses out on the interest income of a bigger loan which was previously pre-approved. I'm not massively inconvenienced by it and can cover the difference in cash though.

Any point in challenging the bank's valuation?

Am I correct in wanting to go through a loan application with another bank to bump it up (I imagine the big 4 may be keener to grow their loan books)? Any chance that the next bank's valuers will just use the other bank's valuation?

Appreciate your help.

 

[Shahin_Afarin]

The valuer will 99% of the time go by the auction price even if you grabbed a bargain. What you could do is potentially do a touch up and re-value in 3 months so long as you there are recent sales that justify the higher valuation.

Also ANZ does system vals on some properties and Im finding that the system vals are coming back quite high. It may work if you do a refi in 3 months.

Regards

Shahin

 

[Dazedmw]

Just wondering how common is it that your lender values property bought at auction at 80% sales price?

Not very I would think but it does happen.

Just going through this with my bank after a weekend's purchase. At least three other people were bidding above the price the bank valued it at.

Seems really odd as the bank loses out on the interest income of a bigger loan which was previously pre-approved.

Regardless of how many people bid I guess the valuation has to be supported by comparable sales from the last 3 months.

The credit guys at the big banks always know they can lend more money if they want, so losing a bigger loan doesn't worry them. Getting their money back worries them and if they lend more than what a Valuation says they should they would have nobody to sue if it all goes wrong.

Any point in challenging the bank's valuation?

Am I correct in wanting to go through a loan application with another bank to bump it up (I imagine the big 4 may be keener to grow their loan books)?

Any chance that the next bank's valuers will just use the other bank's valuation?

Others on here would know better than me about challenging resi valuation but I imagine it would be difficult to do unless you had highly comparable sales at your finger tips.

Another bank would order a new valuation. There is no chance that a new bank's valuer would use the old bank's valuation.

I guess the answer really depends on if your problem is because of 1) the valuer stuffed up (in which case a new bank's valuer should come in higher) or 2) there aren't comparable sales to support the auction price and then you would be stuffed with any bank.

Matt

 

[Peter_Tersteeg]

Properties coming in below purchase price are fairly rare in my experience, perhaps 1 in 100. We also give a fair amount of assistance to clients to ensure they don't pay too much.

In my entire career as a broker I've only had one property at auction value below purchase price and in that case there were some very interesting circumstances (client bought a property in the TV show, "The Block").

I'd suggest approaching a different lender. You'll almost certainly get a different valuation result.

 

[Rolf Latham]

forget challenging the val

You have to have a very intellectual and swanky valuer to come out against the market and call "foul auction", I know better coz..........well, I just know better, coz I have the valuer badge and the bidders and you dont ( poking tongue out at same time).

Pushing the boundaries I know, but about true in most cases I have tried to contest with low auction vals, meglamaniac teenagers even aged in their 50s.

about 2 to 3 per 100 on our numbers come in short, and almosts always fixed by shifting lenders thus valuers

There is no better guide to a current market value than a well contested public auction.


ta
rolf

 

[Aaron_C]

Change lender. Simple solution. Forgetting challenging the valuation as valuers don't like to admit they are wrong because then they look like idiots - they are human.

 

[Rolf Latham]

Change lender. Simple solution. Forgetting challenging the valuation as valuers don't like to admit they are wrong because then they look like idiots - they are human.

so coming back with a valuation that is 20% below the market says its worth isnt idiotic to start with ?

While I don't know the circumstances of this specific one, the 3 that we've had in the last 18 months are clear indicators of valuers applying a little bit too much intellectual to the process.

in one case even, the agents logic for reducing the valuation $80,000 below the purchase price( approximately 10%) was that she when she spoke with the agent the agent said "there was a lot of interest in property".

I didn't bother replying with the obvious retort- and that is If you come back to me with a private treaty valuation that is low, and I go back to you and say the agent said "there wasn't much interest in the property" you would then increase the valuation - sounds like a dumb concept that's exactly what were talking about here.

in all three cases we simply move lenders where the valuers came back on the money. sometimes though, for credit, serviceability or other reasons, a borrower may not be able to do that in which case the valuer would have a really significant case to answer.

Be interesting to see the legal position there.

Thanks

Rolf

 

[Undervalued]

Thanks all for your quick responses. Very helpful.

I will do exactly that, try two more lenders and see what comes out.

The market in the area has been relatively thin (3-4 comparable sales in last 8 weeks) and there was a very quick sale on a property next door under the market value - sold before first inspection through a lazy agent (I know at least two other parties that were keen to pay 10% more but the agent never gave them a chance). My best guess is that's causing the valuation on my place to lag.

Will let you know how it goes.

 

[Rolf Latham]

Thanks all for your quick responses. Very helpful.

I will do exactly that, try two more lenders and see what comes out.

upfront vals though yes !

dont fry your CRAA file with lenders that want an app before doing val

ta
rolf

 

[Shahin_Afarin]

Thanks all for your quick responses. Very helpful.

I will do exactly that, try two more lenders and see what comes out.

The market in the area has been relatively thin (3-4 comparable sales in last 8 weeks) and there was a very quick sale on a property next door under the market value - sold before first inspection through a lazy agent (I know at least two other parties that were keen to pay 10% more but the agent never gave them a chance). My best guess is that's causing the valuation on my place to lag.

Will let you know how it goes.

They will all come back the same because the valuer will always take the auction price unless its a very unique situation. Also if you are going to try another lender do it via an upfront valuation and not a full submission. With the exception of CBA they are free (although not all lenders have upfront vals).

 

[Rolf Latham]

With the exception of CBA they are free (although not all lenders have upfront vals).

We are fortunate enough to have free COVs with CBA

ta
rolf

 

[Spectre]

We are fortunate enough to have free COVs with CBA

ta
rolf

They are nice hey!

 

[Undervalued]

Happy ending

Hey all,

Just to close the loop on this one...
So we got sight of the HSBC valuation and it was a shocker - it ignored sales data in the last 6 months where there's been an uptick.
Rolf's free CBA valuation came through much closer to auction price, and while NAB matched the valuation (even after their own 'mortgage specialist' could not do a free val, but agent could - how does this make sense??), as a CBA employee I get a higher LVR without LMI so went with them.

Thanks Rolf, for the free val and the advice!

Now to pick a good time to fix half the loan...