All Topics / General Property / Bank valuation VS Independent valuation

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  • Profile photo of siewlinsiewlin
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    @siewlin
    Join Date: 2012
    Post Count: 19

    hi there,
    I would like to purchase a property and the bank valuation was done. Should i get an independent valuation so as to compare with the bank? If the bank valuation is sufficient, i would not waste money on getting independent valuation. What do guys suggest?Could anyone analyse the differences between Bank Valuation and Independent valuation?
    Regards,
    Lyn

    Profile photo of crjcrj
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    @crj
    Join Date: 2004
    Post Count: 618

    I would think if you are not using any other property as security that the bank vsluation would be sufficient unless you are not borrowing a high percentage of the purchase price. I think in the past some people who borrowed using two properties as security were trapped because the value of the property they were buying was less than the purchase price but they didn’t know as the bank didn’t tell them and as far as the bank was concerned the total value of both properties was sufficient to get the loan. Are you using a broker?

    Profile photo of PHPPHP
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    @php
    Join Date: 2014
    Post Count: 111

    Hi Siewlin,

    Every time a property is being purchased with a mortgage, the lender will send in their own valuer for their own security. This can be a desktop valuation, drive-by or full valuation. Nothing’s stopping you from getting an independent valuation but bear in mind that the lender will honor their own valuer’s report. If there’s a really large difference with your independent val vs the lender’s val, you can challenge your lender’s val. Most of the time they will still stick to their own valuation though.

    Alternatively ,you can check the comparable properties around the area if you want to know the rough estimated value of the property you want, or get your broker to order a valuation for you, some lenders charge a small amount for a full val.

    PHP | Mortgage Station Pty Ltd
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    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hi Lyn

    Are you wanting your own valuation done for peace of mind?

    As has been mentioned above – the bank will only lend against the valuation that they arrange….and the vast majority of the time, those valuations come back at the purchase price.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Vestarna
    Participant
    @nomasonto1
    Join Date: 2014
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    I was recently left perplexed as the lender valuation came 20k under the purchase value.Bearing in mind that it was done 3 months after settlement. Before approval they had sent a valuer who valued it at 425k, 12 weeks later, same valuer 20k less. Sounds like bank robbery considering that similar properties have appreciated by 40-50k.

    • This reply was modified 7 years, 9 months ago by  Vestarna.
    Profile photo of MaxMax
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    @powerlifting
    Join Date: 2015
    Post Count: 1

    If the lender (bank) only has to recover 80% of the Purchase price plus selling costs, they shouldn’t be too fussy if the valuation is not quite up to the selling price. If the borrower’s capacity to repay is strong then the risk is low for them. So why wouldn’t they approve a loan even if the property was valued at 90% of the purchase price. So unless you get the lender to confirm the valuation was 100% of purchase price you don’t know what they valued it at. When using a lending broker the broker can sometimes discreetly mention the valuation because they have seen it.

    If you had an independent valuation can you expect that the independent valuer will not look at the asking price as,part,of,their,research to establish the value. I think they would look at the asking and purchase price. I would be keen to hear experienced players comment on the differences between lender valuations and independent valuations.

    If you look upon the independent valuation as another insurance then it may be worth it especially if it is something you will worry about. Small cost for quality sleep. However for an investor who has to balance risk and costs there is the question of how much confidence do you have in your ability to compare similar properties. And how much insurance do you buy before it becomes uneconomical.
    For lower cost housing the reports and valuations can represent a more significant cost than for a median Sydney property. i.e. $400 is a more significant percentage of a $200,000 unit in a regional city in NSW than a $600,000 unit in Sutherland Shire in Southern Sydney.

    Profile photo of JBCJBC
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    @jbenjamin
    Join Date: 2014
    Post Count: 34

    The lender’s valuer is not there for the purchaser’s benefit. That valuer’s role is to sign off on document which guarnatees to the bank that if the purchaser defaults, the bank will be able to sell the property for the stated price. Therefore these valuations are always pretty conservative.

    Unless you can point to an actual mistake in that valuation (eg a calculation they got wrong, an important fact that they did not take into account etc) you will struggle to convince the bank otherwise.

    If you spend a bit of time looking at comparable properties or even speak to real estate agents you could get a fair idea of what your property’s worth without having to pay for a valuer.

    Profile photo of siewlinsiewlin
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    @siewlin
    Join Date: 2012
    Post Count: 19

    hi guys t , thanks for your help.
    i have just purchased a unit in Innaloo Western Australia! I used real estate investar for valuation , it’s a computer generate valuation. it says that my unit is worth 540k to 560k and i have compared with other houses in the areas , i think my unit is worth at least 540k . Some purchasers are willing to buy the unit for 540k. fortunately , the seller was desperate thus, he sold to me at 525k on the first inspection day. The median price is 600k for Innaloo. I thought i have bought at a good price but the bank valuation came back at 525k which is my purchase price. Do you guys think i can use the real estate investar valuation to convince the bank to increase the current house value?

    • This reply was modified 7 years, 4 months ago by Profile photo of siewlin siewlin.
    Profile photo of Kinnon BellKinnon Bell
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    @kinnon
    Join Date: 2014
    Post Count: 151

    The majority of the time the bank val will come back at the contract price for a purchase. If it were to come in higher (or lower) the bank would take whatever is the lowest.

    RE using the real estate investar to dispute val – in a word, no. After settlement you could request a full val but unlikely it will change too much unless you do something to the property ie renovate as by purchasing the property at that price, you are setting market value and unlikely the valuer will vary it too much unless there’s supporting evidence to do so.

    Kinnon Bell | Kinetic Funding
    http://www.kineticfunding.com.au
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    Mortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.

    Profile photo of Corey BattCorey Batt
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    @cjaysa
    Join Date: 2012
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    The valuer will 99.9/100 revert to the purchase price at sale, even if they believe the property is at a higher value. There is no effective benefit in you trying to achieve a higher value at the contract date, as lenders will take the lower of the two values – as Kinnon has touched on.

    In practical terms, after 6 months you can order another valuation, by which time the valuer will be more likely to value the property on the comparable sales in the area, than referring the recent sales price.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
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    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of Don NicolussiDon Nicolussi
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    @don
    Join Date: 2005
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    Strange formatting issue mods please delete.

    Don Nicolussi | Mortgage Broker - Home Loan Warehouse
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    "I think of finance as a technology, a way of getting things done." Robert Shiller

    Profile photo of Don NicolussiDon Nicolussi
    Participant
    @don
    Join Date: 2005
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    What to do if your valuation comes in low? I agree with the comments that in the majority of cases the bank assigned valuation result will be the same as the contract price. In fact, at loan to valuation ratios of 80% and in some cases 90% lenders will accept the contract price as the value and not require a formal valuation at all.

    However, this comes with certain cavets such as property use, location and property type.

    But what do you do if you are all ready to go and the bank valuation is low. First and foremost this is an issue that hopefully you have addressed before the purchase is unconditional. That is, your broker may have ordered and received the bank valuation for you prior to you committing to the purchase. This is available free with most lenders and for a small fee with others. However, if it is low you can a) form and argument about why it is wrong – some people will say this never work when it does work in strong cases but only if you have a very strong case or b) Simple go to another lender.

    In all cases time is of the essence re valuations. You need time to dump and move on if you a result that is just plain out there.

    Valuations are necessary to gain our finance but as investors it is important for us not to treat them as anymore than a tool for us to buy the property we need and to get out the equity we need to buy other property or in fact simply create liquidity pools that can be used as a rainy day reserve.

    In niche areas of property investment valuations can be problematic. This is why you need to give yourself time and if using a broker give them the call early in the negotiation process to get your upfront valuation done. In rare cases real estate agents may stall access for various reasons in the early stages but usually getting your valuer through will not be an issue.

    • This reply was modified 7 years, 3 months ago by Profile photo of Don Nicolussi Don Nicolussi.
    • This reply was modified 7 years, 3 months ago by Profile photo of Don Nicolussi Don Nicolussi. Reason: having a lot of trouble on this keyboard

    Don Nicolussi | Mortgage Broker - Home Loan Warehouse
    http://homeloanwarehouse.com.au
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    "I think of finance as a technology, a way of getting things done." Robert Shiller

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