All Topics / General Property / Firesale Bank Valuations?

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  • Profile photo of kay henrykay henry
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    @kay-henry
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    I was wondering if all banks and finance providers do “firesale” valuations. We can all have our homes revalued by RE salespeople, but if the banks are only valuing for if they have to sell a home in an emergency, then how do we only put down a deposit of 20% for the LVR?

    example:

    IP valued at 200k by RE/vendor valuer
    Bank Valuation of 150k (value in case of default)

    Instead of being able to put a 20% deposit of 40k onto 200k, you have to put a deposit of much more to make up the “value”. The bank would see it thus:

    200K loan and the bank says your property is only worth 150. 40k deposit. you now owe 160k on bank’s valuation of 150k!

    How do people work around firesale bank valuations?

    kay henry

    Profile photo of kay henrykay henry
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    oh wow- i just realised i got two yellow stars for that 50th post! It’s a bit like kindergarten, isn’t it, with those stars, but I have to tell you, i’m excited! :o)

    Steve McKnight- can I have some lollies for my birthday too? (It’s 7th August)[8)]

    kay henry

    Profile photo of Mortgage HunterMortgage Hunter
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    Kay,

    Contrary to your opinion banks don’t fire sale value properties. In fact nine times out of ten my clients valuations come right in on the purchase price.

    In the unlikely event a bank was to foreclose the property would go to auction and realise market price.

    Cheers,

    Simon Macks
    Mortgage Broker
    [email protected]
    0425 228 985

    Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

    Profile photo of kay henrykay henry
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    MortgageHunter,

    Thanks for your reply. In fact, I just had a valuation done on a place I was selling. I had the valuation done as I was buying a new place and wanted to release equity. The valuation was 45k below what the place sold for- and this was at the bottom end of that location market. The bank told me they value on what they would sell it for if they wanted to sell it immediately in any market conditions.

    I am sure others have had poor market valuations done too.

    kay henry

    Profile photo of TerrywTerryw
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    Kay

    i agree with MH. sometimes bank valuations also come in higher. I had a client that purchased an established property and the bank valuation came in 20% higher than what they paid for it.

    However, there is one lender that I know of that specifically orders a fire sale valutation to be done. This is a specialsied lender tho.

    Terryw
    Discover Home Loans
    North Sydney
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    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of BillfromozBillfromoz
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    G’day…

    Be aware that Real estate Agents do not give a Valuation. They are supposed to give you a “Market Appraisal”. The difference between an MA and a sale price is generally 90% to 94% of the MA is achieved in a Sale.

    Agents tend to tell the Vendor what he/she wants to hear to get the listing. So take most (not all) MA’s with a grain of salt. Other Agents don’t do any research and are totally incompetant.

    If you find a good agent they are worth there weight in gold and can make/save you tens of thousands of dollars. Trust your gut feeling.

    Bank Valuations are vbased on comparitive sales ie Properties sold..not the asking price.

    Cheers

    Bill

    Bill O’Mara
    Real Estate,Mortgages,Share Market Strategies.
    [email protected]

    Profile photo of Mortgage HunterMortgage Hunter
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    Kay,

    This is pretty unusual in my experience. I can only think that your valuer had little comparable sales data available to form his opinion.

    Can I ask which bank it was you used? Is the property located in a rural area?

    Cheers,

    Simon Macks
    Mortgage Broker
    [email protected]
    0425 228 985

    Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.

    Profile photo of enduserenduser
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    I recently had a market appraisal that was spot on my own estimate after watching local prices for six months. Then the bank did a valuation for re-finance and came within 4%, which is OK.

    However the bank valuer asked me if it was a new house, (it was a renovation of a 27 year old house,) and then he asked me what style was it. I said it was “contemporary” when built but that was 27 years ago. I suggested he say “modern”, which he wrote down.

    It seemed like the bank’s guy had not done many valuations, so I showed him the agent’s appraisal and he more or less gave the same figure in the end. Go figure!

    Profile photo of AdministratorAdministrator
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    >>The bank told me they value on what they would sell it for if they wanted to sell it immediately in any market conditions.<<

    Very interesting. Which bank ? I wonder whether the reason is because that bank is already running scared, ahead of the pack ?

    Or is, as Simon Macks suggests, the reason that the valuer had few comparable sales data for the property or was it perhaps the fact that the property is located in a rural area?

    And, another possibility, did you perhaps pay too much for the property ??

    >>I am sure others have had poor market valuations done too.<<

    Yes that is true as well. However if one has evidence to the contrary and present that to the valuer then more often than not the valuer will adjust his figure.

    >>Bank valuations coming in higher than the purchase price.<<

    Most unusual as generally the valuer wants to protect his backside and just falls into line with the selling price.

    Fair ? hardly but that is life.

    Cheers,

    Pisces133

    Profile photo of shaunwalkershaunwalker
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    I too have had problems with getting a valuation done actually twice, and after emailing phil jones’s partners here is what i was told to do to get a fair valuation.
    when buying an IP put a clause in the bid saying that neither the vendor nor the RE agent are to tell the valuer the asking price. Arrive on the day of valuation and if he wants to know the purchasing cost tell him that its still under negotiation and you just want to know what its worth as you are worried about over paying.
    the other problem i had when refinancing my PPOR was that there were no units built from the same materials or design in my street. In fact nothing had been bought or sold on my street for at least a year, to the valuer “guestimated” how much it was worth. I gave him copies of what 2 bedroom units had sold for in the area ie a 2 block radius but he still undervalued by about 30,000 dollars. I cant really complain, i bought the place 3 years ago for 55,000 its now valued at 150,000.
    any one else have any idea how to get a fair evaluation i would love to hear it!

    Profile photo of kay henrykay henry
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    PeterM,

    I paid 35% (when I bought the property 9 years ago) of the final sales price for that property. It is in a skyrocketing coastal area. My bank has said they always make valuations on a “need to sell” basis. Maybe it’s time for me to change banks??

    kay henry

    Profile photo of hgwellshgwells
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    We had huge difficulty with a recent valuation. We have a 3 bed townhouse, two bathrooms right on the beach/lake (limited views) which was valued at 170,000 after a total reno. We were totally shocked and queried the valuation – aparently because of the lack of properties and the fact that if you manage to grab one in this sleepy seaside town then its better than winning lotto, he had nothing to compare it to to value it against, hence the low valuation. The front 2 bed unit 1 bathroom no garage no courtyard but with views just sold for 300,000! So if there have been no sales of similiar properties in the area then be prepared for the shock. It was lucky that we were only using the equity and the 170,000 valuation covered what we wanted to borrow easily. HG

    Profile photo of kay henrykay henry
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    hgwells (nice name by the way!),

    I know what you mean. I’m buying into a place that has very few units, and all have sold for less than the next as the area is emerging in value. Valuers doing valuations on past sales means that whist prices are rising, we still get valued at the average of past sales.

    Now that the neighbour’s apartment has sold for 300k, you only need to wait until a few more are sold, I suppose, to get a similar bank valuation.

    kay henry

    Profile photo of AdministratorAdministrator
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    HGWells, look at the good side.

    If you get a low valuation then use this to get the vendor to accept a lower selling price.

    Pisces133

    Profile photo of kay henrykay henry
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    PeterM,

    Why do we want our IP’s to be worth a fortune and other people’s IP’s to be worth almost nothing so we can buy them?

    Does anyone else see the hypocrisy in this?

    kay henry

    Profile photo of shaunwalkershaunwalker
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    yes i do see your point, the problem is you make your money when you buy, so although it does seem wrong to want the valuations low when we buy, at the end of the day we are all running a business and sometimes i guess thats just the way things must be.

    Profile photo of kay henrykay henry
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    Shaun,

    It’s the way things must be if people want to operate in that way. I am happy to buy at correct value and sell at correct value. Consistency in business is another way of operating.

    kay henry

    Profile photo of ChrisHallChrisHall
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    Doesn’t Soloman say, ‘the buyer says its too much, then walks away and boasts of the low price he got it for’

    Chris (:

    Profile photo of kay henrykay henry
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    Chris :o)

    Another quote from that book- “Do unto others as you’d have them do unto you” or whatever.

    Funny that I’m an atheist, but that RE investment makes me think of these things.

    kay henry

    Profile photo of ChrisHallChrisHall
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    Kay Henry

    Yep! I think if you aim for a win-win situation in all negotiations then you will get a good name and accoding to the same book, a good name is better than silver and gold (:

    Chris

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