One client recently bought a 3 bedroom apartment at Riverwalk using Commonwealth Bank, he did a 97% lend and they valued it at contract price of $559,000. I purchased the same unit next door (in the same building) also at $559,000 and St George Banks valuation came in $72,000 low!!

At Gemvale Glades we had identical 3 bedroom townhouses and 2 clients were both using Westpac, who used Herron Todd White valuers. They valued one at contract price of $450,000 and a week later valued the other identical unit $25,000 low. Westpac would not discuss those results and stood by the valuations.

In light of these and many other experiences its difficult to apply any “approximate percentage under” rule to ascertain your own market valuation.

Nick’s reply:

Hi Karina,

I apologise that my answer may have been taken the wrong way. I suppose what I was saying is that there really is “no rhyme or reason” to the outcomes of bank valuations. Assuming that a property is priced fairly in the market place, as in those that I have purchased and those I represent; my general rule of thumb is as follows:

Any property that is valued on contract price is fantastic and presents an occasion to celebrate
A valuation up to 5% under contract price is an acceptable outcome.
Valuations that are between 5% and 8% are disappointing but not completely unusual; especially in a tighter credit market as ours currently is.
Where valuations come in greater than 8% (I’ve only seen these in the more recent months as lenders have run scared, by the way) are pathetic and should be challenged. Sadly, I have to say “good luck” in doing so. A person’s best option would be to find another lender who will use a different valuer and hope for a better outcome the next time.

The thrust of my article was to point out the great subjectivity that seems to be applied. It’s that subjectivity that makes it almost impossible to be accurate in giving you a proper answer to a very legitimate question. In more normal times I would say to people that they should EXPECT a valuation of between 5% and 8% below contract price and anything better is a bonus.

I hope that helps Karina and I apologise again if my last answer was inconclusive.

Have a great day (and a very happy Christmas).

Nick
PS: I have opened up your query to a couple of others from my office to answer… based on their own experiences

I just read your article on valuations and have a story for you.

Recently I was looking at restructuring one of my loans and needed to have the investment property revalued. Homeside was the lender and the val came in at $1,200,000. (about right)

In subsequent weeks Homeside badly dropped the ball in a few areas, not to mention their interest rates also being off the pace. ANZ offered me a very good deal so I decided to go with them.

This meant getting the place valued again, but this time it was done by a different company. I met the valuer at the property and got a bad feeling straight away. You can’t judge a book by its cover (but this one you could). To cut a long story short, the val came in at $1,000,000; $200,000 less than the first company and within the space of 3-4 weeks.

There were lots of comparable sales to support a valuation of even more than $1.2, but a val of $1m was absolutely ridiculous. It highlighted this valuers complete lack of confidence and experience.

In the present market we are finding it is the valuers running scared, not so much the banks. The banks can just reduce their LVR or tighten there lending criteria if they think that they are a little exposed in certain areas but the valuers are terrified of a forced sale that could come back on them. Note, we are not having the same level of problems with val’s on purchases as we are with refinances.
Speak soon.