Are you unhappy with your property valuation?

One of the leading valuation management firms has come out requesting that customers stop challenging their valuations. ValEx, VMS and other valuation companies that work with the major banks receive high numbers of dispute requests however few are successful.

Additionally, a major bank that we work informed us that only 3% of people successfully challenge a valuation. In other words don’t bother challenging a bank valuation!

However, we disagree with Valex’s assessment that bank valuers are accurate as we regularly see differences of as much as $200,000 between the valuation figures for two different banks.

Valuers are only human.hey make errors and their personal opinion can effect how they value a property. The average difference we see between the valuations of two different banks is approximately 9%.

If you are refinancing then your valuation can make all the difference. If your valuation comes in low then the Loan To Valuation Ratio (LVR) will be higher, which may mean that you will need to pay Lenders Mortgage Insurance. This reduces the amount of equity that you can access and increases the cost associated with setting up your mortgage!

So what should you do if you receive a low valuation?

Find out why the valuation was low

The main reason that valuations come in low is that the valuer did not find any comparable sales to support the value that you estimated.

However there could be another reason. Some banks allow you to see a copy of the report which can help you to work out why you didn’t get the value that you expected.

Find comparable sales

You can use our guide on how to value a property to find recent sales of similar properties which can be used as evidence of the value of your home. When the next valuer comes out to see your property you can give them a copy of your sales evidence.

Forget your existing bank

If your bank has a valuation on file showing your property to be worth a particular amount then that is it. You can get a private valuation or a valuation from another lender however your bank will always use the lower of the two. Your only choice is to use a different lender.

Get an up front valuation

Don’t just put in another loan application! You’ll damage your credit score by having too many enquiries on your credit file. Some banks allow us to order a free valuation up front before submitting a loan application.

Talk to us for assistance

Do you need help to get a better valuation of your property? Call us on 1300 889 743 or enquire online and one of our mortgage brokers can help you to refinance using a new valuation from a different valuer.

Below is the article from Broker News:

Brokers need to stop disputing low valuations, as it will seldom lead to any change in the original assessment, industry valuation management firm ValEx has said.

Valuation Exchange general manager Michael Hooper has told Australian BrokerNews that while there may be a perception that valuers are being overly-conservative, their assessments are generally correct in the first instance. He said brokers and consumers need to accept the initial valuation of a property, regardless of whether they get the desired outcome.

“The honest truth is that brokers need to accept that valuation in the first instance. Generally speaking, valuation assessments in the vast majority of cases are correct, with only 1% or 2% of valuers actually changing the figure based on a dispute,” Hooper said.

Hooper does not believe valuers are being overly conservative. He commented that low valuations are naturally reflecting a stagnant or even declining market.

“I don’t think it’s a case of conservatism. If market conditions are stagnant or declining, then valuers will reflect this in their assessments based on actual sales that have occurred. I also think that given 70% of all lending relates to refinances, these customers have unrealistic expectations of the value of their properties,” he remarked.

These unrealistic expectations, Hooper said, can also extend to brokers.

“With brokers trying to consolidate debt and refinance, if the property value is stagnant, or has in fact declined, they can’t do business and it may mean the refinance can’t happen. Therefore, the customer stays where they are. No money for the broker,” Hooper said.

While Hooper said most lenders have dispute processes to challenge valuations, he dissuaded brokers from pursuing this channel.

“I wouldn’t promote this, as valuers get tired of getting disputes because the customer or broker is not happy with the valuation,” he commented.

Source: Broker News 15/09/2011

CBA have released an innovative property investment simulation that allows you to invest virtual money in property and watch the results over a 15 year period. This is designed to help investors put their toe in the water and learn about investing, without risking their real money.

We had a go playing around with the simulation, and overall we believe it is a great tool to help rookie investors to learn the basics.

We chose the “solo high flyer” profile and over our ten turns we decided to follow a high risk / maximum return strategy. This involved us borrowing to the limit (well we do work in finance!) and keeping very little money on standby.

In the real world this strategy tends to result in people facing financial hardship and being forced to sell an investment property if there is an unexpected expense or if interest rates rise. The simulation quickly left us unable to make our repayments and sold one of our properties as a result. Later on we sold a further two properties that were not performing well to enable us to invest elsewhere.

In the 10 turns that we had to build equity we turned our $71,000 starting net worth into a net worth of $5.3 million which works out to be a 15% per annum return. We purchased 24 properties and sold 3 in total. This was a great result, however in the real world such high risk strategies are rarely advisable.

However we did see some small let downs in the simulation. Rent doesn’t appear to increase after renovating a property. Sometimes the search budget was very low even though we had sufficient cash to almost buy the properties outright. There are no offset accounts so the simulation will teach investors not to have cash on standby, in the simulation it is just dead money.

We also believe that people who use this simulation will have a very rosy view of investing in property. The tenants didn’t leave no matter how much we put the rent up, property never went down in value except as a result of one off events in particular suburbs and as long as you offered 10% below the asking price your offer was always accepted and you had an instant capital gain!

In real life the majority of people do well by buying in high growth areas, which will rarely have properties sell below market value. It would be nice for CBA to do a little extra work and make the simulation more realistic. Investing in property isn’t to be taken lightly and people need to be aware that it isn’t a risk free investment.

Interestingly, our staff tended to match their real life investment behaviour in the simulation. We saw some of our staff invest conservatively, others were far less risk adverse, one purchased all of their properties in one suburb and another kept a large amount of cash available. This simulation gives people a chance to test managing their investments in a different way and to then see how things pan out.

Overall we believe this is an excellent simulation and a good introduction to investing for beginners. Property does get water damage, interest rates fluctuate and you can try to charge your tenants over the market rent. Although it would be nice to see some changes such as to have a dashboard on the side showing cash available, your borrowing capacity, current cashflow etc and it would be nice if it was more realistic, we highly recommend that new investors give this a go.

You can learn more about buying an investment property on our investment loan page. You can access the simulation on CBA’s Investorville website.

The NSW Government has just extended the Seniors Duty Exemption under the NSW Home Builders Bonus Scheme to people aged 55 years or older (previously only 65 years or older). This will effect the purchase of new properties with a contract date between the 1/7/2011 and 30/6/2012.

The purchase must meet the below criteria:

• The property must be a new property, off the plan purchase or a substantially renovated property.
• The contract date must be between the 1/7/2011 and 30/6/2012.
• The contract price must be no more than $600,000.
• All purchases must be 55 years old or older.
• The purchasers must move into the home in the first 12 months and remain in the property for at least 12 months.
• The purchasers must have owned and occupied a home in the 12 months prior to buying this property.
• The purchasers must sell their previous property either prior to or within six months after the settlement of their new property.

This scheme can result in a saving on stamp duty for up to $22,490. We expect to see many seniors and “empty nesters” downgrading to a smaller home and taking advantage of this offer.

However applying for a mortgage as an older borrower isn’t always straight forward. In particular some lenders have age restrictions in place which make it harder to borrow money as you approach retirement age.

We find many senior borrowers also consider buying specialised over 55′s accommodation such as SEPP 5 properties. These are often unacceptable security for the major banks as they can be more difficult to sell than standard homes.

If you would like assistance with your home loan then please contact our mortgage brokers on 1300 889 743 or enquire online and one of them will give you a call back to discuss your purchase.

Today St George reviewed their minimum unit size to 35 m2 for properties in some locations in Melbourne. They will not accept properties in the postcodes 3141, 3181, 3182, 3183, 3121 and 3207 up to 80% LVR. LMI is not available for home loans secured by smaller units.

Previously they announced that they would accept small units & studio apartments in some inner Sydney postcodes such as 2010, 2011 and 2021. This is a policy alignment with their owner Westpac, who has a similar policy.

In other locations St George’s minimum floor size requirement of 50 square metres (excluding balconies) remains in place. Anything with a floor size less than this is a policy exception and will require prior referral to the Bank for consideration (any applications where the floor size is 25 square metres or less will not be considered).

There are other lenders who can still consider small units down to 18 m2 for a mortgage. The loan must be for no more than 80% of the property value.