Desktop valuation

Hi Guys,

What are the advantages/disadvantages of buying a property with a good desktop valuation?

Obviously, it is equity in the property to buy more houses in the future already.

The dream house for an investor is to have a go desktop valuation previously on the property?

Ta

 

CBA 4.79%

The reason I am asking is that I have bought a property for 235K, and the valuation is 362K.

I didn't have such a significant valuation in any of my properties... How luckily will CBA approve this valuation?

My Broker told me it is a chance the lender will not give me that money. Just trying to find someone with similar experience.

 

Given the 4.79% interest you have been quoted, it's highly unlikely.

Lately, banks aren't that keen to use desktop valuations except in low risk 20% lends.

And lastly, desktop valuation is heavily based on recent sales and doesn't take into account factors like floodzones etc.. so your valuation can drop significantly the minute a flood prone structurally unsafe house sells anywhere near your IP and has same area/number of bedrooms.

 

The prob with desktop vals is that when you purchase the property at a lower amount you’re likely influencing the future desktop val amount - so whilst it might be high now it could be lower shortly after you settle.

Cheers

Jamie

 

True, although seems like it takes a few months for that to happen so if an investor is quick he can enjoy instant “equity” this way.

Another problem is that there is no guarantee that the lender will accept the desktop val, for whatever reason. They have the right to order a full val if something even just feels off to the assessor

 

You've already bought the property and the val was much higher than the purchase price, isn't that the dream?

 

Getting very unlikely the lender will lend on the desktop ordered pre-settlement. They can see the significantly lower recent settled price and can require a full report instead, which will generally mirror your purchase price. (even if you think you bought a steal)

Desktops can be wildly inaccurate and lenders are aware of it - they're not in the business of leaving themselves open to losing hundreds of thousands of dollars.

 

If it means anything - it shouldn't be the sole reason you buy the asset. It doesn't change the fundamental value of the asset.

The desktop val is clearly an inaccurate reflection of the value of the property, otherwise others will be buying it at a higher price. Its not 'instant equity', its potential paper equity. 'Instant equity' is spruiker talk from someone selling you the place.

From a finance lens, yes it can sometimes work. We've had this scenario a few times and lenders have accepted it (CBA). We've also seen cases where they bumped up the val to full and the full val came in at contract price. I suspect now it's increasingly likely they'll require a full val, but i'd hypothesise there's still a good chance they'll take it.

Also consider the downside of having an asset thats loan is ~120% above its true value.

 

Even if they do accept - you're entering dangerous territory borrowing above the likely true value of the property.

Cheers

Jamie

 

Definitely. That’s why I wrote “equity”

 

Hi Redom,

Should this approach be considered for someone who is equity/cash poor but has strong servicing, as it could allow to increase the asset base.

 

Thank you, Rolf.

 

On the topic of desktop valuation, which are the lenders that accept these valuations other than the major 4?

 

Most lenders have their own AVM / valuation portal

 

I should rephrase. Other than the major 4 banks, are then any lenders out there that would consider a desktop val for a sub 80% LVR lend?

 

Thanks mate