How To Get the Most From Your Bank's Valuation
WBP Property Group (Qld)
Independent Property Valuations
How to get the most from your bank’s mortgage valuation
Independent Property Valuations
Prepared by Jonathan Millar, Director, JDMA Property Consulting and Valuations
It’s rare to borrow money these days without your bank needing to know the current market value of the properties they are holding, or will hold, as security. There are a number of things you can do to get the most from the valuation and increase your lending capacity.
Why does the bank need a valuation? Market values are continually changing. To ensure they are not lending more than the value of the property they are holding as security, your financier will require a current valuation before approving a new loan or loan increase.
Are you engaging an independent valuer prior to the bank valuation? Sometimes borrowers engage an independent valuer to gauge the value of their property (and their likely borrowing capacity) before they go to their lender. If doing this, be sure to engage a valuer who is recognised by the lending institution you plan to use. This way, your valuation can be “re-assigned” to the bank at a reduced fee, rather than having to pay full price for a new one. Financial institutions will only accept valuations from valuation firms which are on their Residential Valuation Panel. Check that the valuer you wish to use is on the panel of your preferred institution. A valuation report is current for three months. A new valuation may be required by your lender if all action is not settled within this period.
How can I maximise the valuation?
1) If the valuer is coming this week, you can’t perform miracles but there are still some actions you can take to maximise your valuation. Tidying the yard and de-cluttering the house will have an impact. Hacking through front yard growth to make it to the door makes it difficult for the valuer to see the property’s full potential. And it doesn’t help if the valuer can’t comment on floor coverings because he can’t see through the toys, dirty clothes, magazines and pet blankets. Fix those small things you’ve been meaning to do for months: re-attach the kitchen cupboard door, straighten the blinds and fix the crooked lamp shade.
2) Provide the valuer with a copy of the building plans if you have them available. Valuers need to know the living areas, outdoor areas and car accommodation areas for their calculations. If plans are available it improves accuracy and saves time.
3) So the valuer can come prepared with research of comparable sales in the area, provide the valuer with a rough estimate of value prior to his/her arrival. The valuer needs to conduct considerable research prior to inspecting the property. Having a rough estimate saves the valuer searching for $300 000 properties if you property is going to value in the $900,000 range.
4) Advise the valuer of any very recent sales you are aware of in your immediate area. This is because the details of properties recently sold in the area, are often not available on the central property databases until three months after the sale has settled. If you are aware of a sale in the area the valuer can then make further investigations.
5) Advise the valuer of any significant renovations conducted since purchasing the property and the approximate cost of those renovations. Renovations you hope to complete in the future will have no bearing on the current valuation.
6) Tie up the dog!
Why can’t the valuer tell me the figure (even though I’ve paid the bank for the valuation)? Valuers are legally bound by privacy laws to provide the information requested directly to the instructing party, which is the lender. Each financial institution has a different policy on providing the valuation figure to the borrower.
Why can’t I get a copy of the bank valuation? As the valuation has been conducted for the bank for mortgage security purposes it is industry standard that copies of valuation reports are not released to the borrower.
What can I do if I’m not happy with the bank’s valuation? Every lending institution and every valuation firm will have a different policy on this issue. It is rare that the bank will request another valuation. Your best avenue is to try to find sales evidence in the area in the same price range that supports your case. At JDMA, our valuers will always take into consideration any additional sales evidence provided by the client. We are happy to review reports where clients have queried the figure and where additional sales evidence can be provided.
Private Valuation VS Bank Valuation It is often commented that a bank valuation is conservative. However, this should not be the case. When a valuer is engaged by a lending institution they are under instructions to provide the “market value” of the property. The market value is “the value of the subject property at its highest and best use on a specific date as negotiated between a fully informed and willing buyer and seller who are both keen to trade but neither so eager as to overlook reasonable business principles”. Whether the valuation is being conducted for the bank or for the owner of a property who has engaged us directly, the value of the property is the same. It is the role of the lending institution to manage their risk and to implement a prudent loan-to-valuation ratio (LVR). It is the role of the valuer to provide an independent and fair assessment of the market value of the property.
Valuation VS Real Estate Appraisal Valuations are often disputed on the grounds that a real estate agent has provided an appraisal which is higher than the valuation. Real estate agents are aiming to get the best price they can for their client (the seller). This is their job. Their appraisal often represents what they hope to achieve for the property if the right buyer comes along at the right time. A real estate agent (unlike a valuer) is not required to defend their appraisal of a property’s value in a court of law. When the valuation comes in lower than the purchase price A mortgage valuation is prepared to assist your lender to make the best decision regarding lending against the subject property. If the valuation is being conducted on the property you are currently purchasing, then you should view the valuation as a valuable tool. If the valuation figure comes in lower than the purchase price then this should ring as a warning. You should consider renegotiating the purchase price or consider walking away from the deal altogether. But be aware, if you are outside of the cooling off period, you may be compelled by law to purchase the property. Ensure you add “subject to finance” and “subject to valuation” clauses to avoid this sticky situation. Alternatively, engage a valuer directly prior to signing the contract, but be sure to check that the valuation can be reassigned to your lender.
Jonathan Millar is the Director of JDMA Property Consulting and Valuations. Jonathan is a Certified Practising Valuer and Associate of the Australian Property Institute. He is a valuer of 20 years experience and was formally the National Manager for Valuations for a national lending institution. Ph: 1300 505 425 or visit www.jdma.com.au.