Valuation Discrepancy

Pesty

Pesty

Hi all. We are 3/4 through building our PPOR and hope to buy an IP quite soon using equity from this home. As we needed more money to complete the build (the fencing budget was only $3k, quotes have come in at $15-$20k) we asked the bank (RAMS) to get a valuation done to finance the increase.

The val from HTW has come back extraordinarily low at $505k. Comparable homes have been selling for high $500's to $600k and land values have skrocketed here. This valuation just simply can't be justified!

As potential property investors I don't know how this is going to fly if HTW are the only valuers in the area? If we went to a different lender for the IP, would they use the same valuation figure or there own valuation criteria?

The val was supposed to be based on an 'at completion' estimate but would a new val done once the home and lanscaping were actually complete give a different figure?:confused:

A bit of a catch 22 ATM with needing the extra funds to complete the build.
 
You can contest the valuation with HTW but you need to come up with a minimum of 3 recent sales within the past 3-6 months. Your second option is to use another lender that uses another valuer within their panel for the area.
 
Hi dreamzr4u, thanks for the reply though! Yes the fencing is required by the covenant to be timber paling lap & cap to enhance the exclusivity of the Estate (Golf course frontage/cart path to brand new clubhouse etc). No colorbond allowed apparently hence the high cost as we are kind of rural here!
 
TheFinanceShop said:
You can contest the valuation with HTW but you need to come up with a minimum of 3 recent sales within the past 3-6 months. Your second option is to use another lender that uses another valuer within their panel for the area.
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Thanks so much for that little tip! 3 recent comparable sales would be a cinch as the sales records are all there for the viewing. What exactly is involved in the process of disagreeing with a professional valuer?
 
Did you go through a broker or the bank? Either you or the broker needs to come up with 3 recent sales. Obviously they need to be comparable sales and you need to provide a description and reason as to why the sales are more comparable/relevant than the ones used already in the valuation report. Do you actually have the full valuation report? If not please get this.
 
Challenging the valuation is worthwhile, but realistically you should prepare yourself for disappointment. Valuers don't like to change their opinions as it requires them to actually admit a mistake. If there's mortgage insurance involved the lender is likely to only be allowed to use the first valuation regardless of what a revised valuation states.

Whilst it's not easy to change an existing valuation result, there's a surprising amount you can do to get your choice of valuer to visit the property, or in some cases, not have a valuer visit at all. As a case in point, there's several lenders that will avoid using a particular valuation firm because they're consistantly low, but one particular lender tends to use them a lot.

Unfortunately I'm pretty sure that the RAMS process doesn't help you manipulate the choice of valuer.

I've also found that giving the valuer the comparible sales before they come to a decision tends to work better than getting them to change their mind later.
 
The bank organised the val, they are charging us a fee but the report is unavailable to us in our hands so we are told, as the bank has ordered and paid for the raminder of the report. We have not used a broker and have been dealing direct with RAMS ourselves. Still waiting to hear from them as to what amount they can lend based on the val.
 
For obvious reasons you need to see what sales have been used so you don't use those sales in your challenge. Contact RAMS and ask if they can give you the recent sales. If this is not an option then you should consider perhaps another lender and ensure that the lender uses a different valuer. Most lenders offer free upfront vals before you submit the application.
 
Pesty said:
The bank organised the val, they are charging us a fee but the report is unavailable to us in our hands so we are told, as the bank has ordered and paid for the raminder of the report. We have not used a broker and have been dealing direct with RAMS ourselves. Still waiting to hear from them as to what amount they can lend based on the val.
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The Westpac group (which includes RAMS) give you very little control over the valuation and they won't give you a copy of it even if you're directly paying for it. It's very frustraiting.

ANZ, AMP, CBA, HomeSide and a few others all of much more open processes - if you go through a broker, as they'll allow the broker to order the valuation and receive a copy of it. We even get to do it before lodging an application, which means it can be somewhat 'shopped' around.
 
Ouch. Only a broker ordered val can fix this but problem is you are halfway through construction so it limits your options. Best to stick with RAMS
 
Pesty said:
The val from HTW has come back extraordinarily low at $505k. Comparable homes have been selling for high $500's to $600k and land values have skrocketed here. This valuation just simply can't be justified!
Click to expand...

I think your core problem will be is that RAMS has the same panel as WBC

There isnt a panel........there is one valuer per PC usually.

that can work for you sometimes...........like paying for a val to the same valuer at the outset, use a co that will allow you to order your own vals( eg wbc, etc)

Usually though ( well very often) , there is a reason folks have a mortgage with RAMS that tends to restrict the use of another lender .......even ones that share the same mortgage insurer ( such as WBC, STG BOM). egs include low doc, high LVR refinance etc


ta
rolf
 
Htw are shocking in my area as well. I also had a val come in $100k short with them recently. Not sure what they are smoking. Seem to consistently be on the low side and unfortunately are the biggest player. Vals are quickly becoming a key contributor in my bank decision process.
 
It doesn't have anything to do with the valuation company, i.e. HTW - it is more related to the people doing the valuation. I have had some valuations from HTW come back pretty poor but then again I have had a couple of really good ones. I spoke to one HTW and they changed the valuation the next day and it was a 2 minute conversation. It really depends on a number of things.
 
Sorry I do not agree Shahin. It is the valuation company most of the time. The biggest culprit for me is CBRE - they are just hopeless.
 
That's nothing by the way - this one time I had a DA approved block and ordered a val and the lady at CBRE requested I show the DA approval (it was court approved) so I did but she said she required one from the council. So I spent 1 week explaining to her that the council approval is sufficient. Needless to say I told the lender and they agreed and we used a different valuer. Shambles.
 
Pesty said:
Hi all. We are 3/4 through building our PPOR ... we needed more money to complete ... The val was supposed to be based on an 'at completion' estimate but would a new val done once the home and lanscaping were actually complete give a different figure?:confused:.
Click to expand...

Hi Pesty

have you actually finished the Fixed Price Building Contract work and the non-dwelling quotes now require further funds?

I don't know of any lender which will increase borrowings during construction, so if RAMS have entered into the process of increasing borrowings in order to complete work required by a covenant / the development, rather than core work required to finish the dwelling, then the building works must be very well advanced

Remember that valuers must use completed 'market' based sales - any spec builds or properties sold from the developer are not usually considered to be an indication of the actual market

There is much to be said for negotiating a building contract with everything included. All inclusive building contracts may seem highly priced at first glance, but in my experience the sub-contracts can overtake the Turn Key quote with breathtaking speed

Hope it all works out for you - keep what you have learned in mind when you do the next property

Cheers
Kristine
 
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