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

Veda Advantage, the main credit reporting agency in Australia, is rolling out their VedaScore as part of all credit reports ordered by lenders and authorised agents such as mortgage brokers. This change will mean that mortgage brokers will have an accurate credit score for customers before they submit a home loan application.

It also means that people with adverse credit will be able to see how they stack up statistically, in other words they can see how they will look to the banks. This will also be important for professional investors who may be concerned about the number of enquiries on their credit file, which is known to reduce their credit score.

If you have a poor VedaScore will it mean that your home loan will be declined? Not necessarily, most lenders take a more comprehensive view of your application and will use the same data from Veda Advantage to generate their own credit score. The reason that they do this is that VedaScore is based entirely on the information in your credit file, whereas the lender will also need to take the overall risk of your situation into account including your LVR, loan amount, property location, security type, employment stability and serviceability.

The lender’s own score is specific to your application whereas VedaScore is a general assessment of your risk for any loan you apply for. For this reason it is likely that the lender’s credit score is a more accurate measure of risk than the VedaScore on it’s own, and so lenders will use their own score not the VedaScore on it’s own.

The new format credit reports will also include a statistical risk that the customer will have an adverse event listed in their credit file in the future. In other words, the risk that they will have a default, judgement, court writ, bankruptcy or part IX listed on their credit file.

This risk is listed as their odds e.g. 12.2:1 and is compared with the Veda sub population’s risk e.g. 11.9:1. The higher this ratio is the lower the risk that this customer poses to a lender. We have seen applications from customers with a risk of 2:1 which means a 50% chance that they will have trouble in the future! In these cases we discuss this issue with the customer and help them understand how they can change their behaviour to reduce their risk of financial hardship.

For more information on credit scoring please use our credit score calculator and read the information at the underneath the calculator. This calculator can take a comprehensive view of your situation into account and include some information from your credit file as well as the information used by the banks themselves. It is specific to home loans or mortgages, however the same concepts are used when assessing unsecured finance such as personal loans, credit cards or car loans.