A property “Valuation” is where the buyer’s Financial Institution sends an independent Valuer to property as part of the sales process. The valuation is a very critical step in a transaction in any market, but particularly while we’re in this current market.
At the very core, a Valuer’s job is to provide what’s considered to be ‘fair market value’, and a contract on a property when taken to the market is proven to substantiate ‘fair market value’. A Valuer’s job is not necessarily easy, and they need to substantiate their figure based upon recent comparable sales, but when the market has moved so fast, how do you find comparable sales when there aren’t any?
There is nothing more frustrating when the owners spend countless hours and plenty of money preparing the home for sale, the agent works hard to list it, market it, handle enquiries, run open homes and inspections, negotiate the sale, facilitate the building and pest inspection, etc just to have a “Valuer” blow in and out of the property in 10-15 minutes and prepare a report that states that the property is not worth what the buyer has paid for it.
The result is the finance is often declined (even if the buyer has the ability to facilitate the purchase) leaving the buyer often feeling concerned that they’re paying too much for the property and either ask for a price reduction to the valuation figure or just walk away from the deal altogether.
One of the reasons a low valuation can be catastrophic to the process is because the valuation is stored on record and, often, when an agent sells the property for a second time (or more), the same Valuer may be engaged to undertake another valuation…and like an umpire or referee on a sporting field, they will not change their minds.
A bank will normally only have a limited number of registered Valuers on their panel and, as such, the likelihood of being assigned the same Valuer next time around is pretty high. What happens when a Valuer brings the figure in low despite every effort made to protect the price? This has just happened to us.
A property we recently sold was valued almost $100,000 under the sale price! Why? Because the Valuer was not using recent or comparable sales in the area as the basis for the valuation. Coincidentally, the property was also being valued for business purposes and it valued up to the sale price with no issues. Despite our complaints, once again, the Valuer refused to adjust their valuation for the contract sale.
If we had accepted the initial valuation, the contract would not have proceeded. Instead, after lengthy discussions with the Valuer, it was decided a different Valuer be engaged to do a separate and new valuation. This time the valuation met the contract price and the sale went through to settlement. Had we not worked hard to get this valuation up to correct level, it would mean the initial Valuer would have cost the seller $100,000 (which is a lifechanging amount of money) and the value of the whole suburb would have been affected.
A comment by one Valuer was “We feel that this entire suburb is over-valued right now and so are the suburbs around it” which is basically admitting they’ll be bringing the valuations in low. What a stupid statement to make! Telling me that “the suburb is over-valued” means they thinks everyone that buys a property in this suburb is not paying fair market value.
Remember, if you need any real estate help or advice we are just a phone call away.
All the best, Simon.