Low Valuation - Central Coast vs. Sydney

Hello PCer's,

I previously owned properties in Sydney and never had an issue with valuations being close to the market values of the time (pre-2010).

I purchased a property in Copacabana in 2014 and valuation came in at purchase price of just over $800k. I put close to $80k in cosmetic renovations (new deck, driveway, flooring, curtains etc).

The house next door has a similar view (water view filtered by trees) and land size. It is half the floor space of mine but a superior fit out. It sold on Dec 2014 for close to $1.1mil.

My first re- val was in March 2015 through CBA and came in at $850k. I appealed due to a numer of errors and it came back a second time at $910k. I had another val done by Aussie a few months later which came in at $940k. A third val by Qantas CU was done last month and came in at $885k.

The local agent gave a conservative opinion on the house at $1mil+

Are the valuations coming in lower due to it being on the coast, market flucuations or just different valuers opinions? All except for the Aussie HL value are a fair way under a conservative market estimate.

Thoughts?

TC

 

I real estate agent val and a bank val are different things. Bank val is usually conservative and have heard some coming in way under the value a agent would give. Agents will usually give you higher price due to the nature of the beast.

 

Only a valuer can give you a valuation, agents submit appraisals as their vying for the sale

 

I understand why the agents go higher however the same agent sold next door close to the $1.1mil mark so her opinion was backed by a recent sale, which is also what the valuers look at.

I'm trying to figure out where the $160k-$215k difference in my valuations compared to next doors sales price comes from given that they are comparable properties. I'm wondering if this is an issue I will always have because it's a coastal and not a metro property?

 

Remove the agents opinion from the equation:
We still have a comparable property next door selling for $1.1m and my value coming in 15 - 20% lower.

 

Have a look here and see what more recent comparable have sold for - Copacabana, NSW 2251 Auction Results & Sold Property Prices in Copacabana, NSW 2251 (pg 1)

It looks like a lot sell in the areas for the $800ish mark.

 

Properties with ocean views can go for $2m+ (highest I've found is $2.7m) and there is a 1 bedder up in the hills with no views that sold for $480k so there is a massive range dependent on view and location. I'm not sure what the median price is however $800k sounds about right.

A block 4 doors down recently sold for $950k and had ocean views. Keeping that in mind my values seem very low (my house is a 5 bedder).

I guess my question really is this: Is a 15-20% below a comparable sale price value normal for the Central Coast/Copacabana? or is it due to fluctuations/concerns about the current market?

 

If you can get your hands on a copy of the val, have a look at the environmental rating. It might say something along the lines of a recent 2 year boom in prices and in the valuer's opinion .....blah blah blah. So let's ignore the fact that prices have gone up and let's all worry about them being unsustainable

 

I managed to get a copy of the $850k valuation report (because the broker didn't want to contest it) and part of my argument that got it increased to $910k was this:

3. Valuation & Assessments Summary

Land: $650,000 - The vacant land next door at __________, Copacabana sold in December 2012 for $645,000 and is a block of the same size and views. In Section 8 of the report the valuer makes the statement - 'in recent times strong buyer demand and limited supply has seen the market experience a noticeable increase in property values' . Inflation was 2.5% in 2013 and 2014 which means if the market had only moved with inflation the comparable land value at __________ would now be $677,250. If market demand has been strong in recent times I would have expected the land value would be well in excess of $677,250.

 

@Jess Peletier , in your line of work would you normally expect to see valuations on a refinance coming in at 15-20% lower than market value?

 

I would point to a flawed valuation methodology if the valuer has used CPI as his guide to the adjustment of prices for vacant land. What other vacant land sales have occurred in the area if that is the basis of the val? Is the house only worth $230k?

Is the block affected by geotech instability/rockslip as noted on the S149?

 

It's not unusual for clients refinance valuation expectations to be dashed by a bank valuer. It happens all the time, and 20% isn't unusual. Regarding the sale next door, has it settled yet? Can you find two more recent comparable sales? Cause that's what the valuer needs to support a valuation.

Is there really something wrong with the market in that area, or the valuers? Hard to say, but you have given it a crack 3 times and still aren't happy....

Have you tried getting a kerbside or desktop? Sometimes these come in better than a full valuation.

 

The valuer didn't rely on CPI. That was my argument against his valuation of $650k for the land. He said the market had shown strong growth yet valued the land lower than the increases in CPI.
Mind you it didn't get me much further, the second valuation still had the land value less than CPI.

In 2012 the same size block next door sold for $645k. Around July this year a vacant block 4 doors up sold for $950k however this had unobstructed ocean views. There really isn't any other recent comparable land sales in Copa, most are very steep and a lot further from the beach.

No geotech instability/rockslip, no other issues identified in the 149 cert.

The house is 3 stories, double brick and suspended concrete slab construction. It is 4/5 bedrooms, 2 living areas, 3 kitchens, 4 bathroooms, 8 toilets (it used to be a holiday let of 5 flats but was converted back into a single house). One of the reasons for the low value on the building was it's 'unconventional' layout limiting potential buyers. The top level is a loft instead of a full level.

 

The house next door sold in December, settled in January, my value was in February.

Comparable sales is one of the issues I think may cause the fluctuation in values. There are only 2000 permanent residents in Copa and while the cheaper properties in less desirable locations turn over fairly regularly the better located ones don't.

Another factor that comes into is my serviceability. I suspect the last valuation from Qantas CU was done on the basis I was maxed out at $680k so it didn't matter if they made the value more conservative.

I've had both kerbside and desktop mixed in with those.

What I'm trying to figure out is the reason why the values are coming in low and if it's worth having another crack when my serviceability improves. If 20% lower is the norm then I won't bother having another crack later because the result will be the same. If 20% was unusual then I would try again next year when my serviceability is better.

 

Valuers have no idea what your servicing is though so its really down to the valuers opinion on the day

 

I'm thinking timing will be everything if I want a higher value on the house. Further down the street there is a listing for $1.4m, might have to wait for something like that to sell before I revalue again. Not that I want to drag this out any longer - it's gone on long enough!

 

Having less population and less sales means less comparables for the valuer. So that's why valuations in Sydney may have been different. I'd suggest keeping an eye on the market and waiting for another comparable sale before trying again.

Get upfront vals done ( so you don't fry your credit score by multiple applications) by a broker and keep a record of which valuation companies and valuers get used. There might only be 3 or 4 valuers that service that area anyway.

Having unique features doesn't help unfortunately, it gives them a reason to be more conservative.

Cpi, average growth rates, vacant land values are all irrelevant. The only thing that is relevant is recent comparable sales. Recent means 3 to 6 months old. Comparable means same number of bedrooms similar block size views, location, age of house etc. It can look a bit more like art than science.

 

I've been told there aren't many valuers up there.

How big is the impact on the credit rating? I've had four:
* September 2014 for initial purchase with CBA mortgage.
* February 2015 for refinance from CBA through an Aussie broker - didn't proceed with application.
* Mid 2015 for refinance with Aussie HL - Couldn't meet serviceability (I actually don't know why the broker proceeded to value, I didn't learn about the serviceability issue until after valuation)
* November 2015 for refinance with Qantas CU - waiting for settlement to occur now.

 

No, not really, but that's because I get valuations from a few places and often where possible it's a desktop val which can reflect any amount of madness - usually to the clients advantage.
If you think under $1M is about right, it would pay to get some deskies to see how they come up.

 

The low numbers of sales (largely due to a low number of dwellings) seems to be my main issue. Desktop valuations were coming in on the low side, kerbside values went higher due to the reno's.