Join Australia's most dynamic and respected property investment community

Strange valuation or am i missing something

Discussion in 'Property Finance' started by WinDyz., 1st Aug, 2015.

  1. WinDyz.

    WinDyz. Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    155
    Location:
    Hidden Leaf
    Hi all,

    I'm experiencing a strange valuation. Just got my newish 2/2/1 apartment (5 years) with total internal of 94 sqm in Westmead last month valued by St George and valuation come up 550.

    Relative recently just refinance his apartment (30 years old) 2/1/2 with internal area around 80-85sqm and it was valued 690k. Apartment was purchased around 350 in 2010.

    I wonder what makes is so much different in valuation? There has never been any apartment/unit sold in Westmead area for 2bed above 650k. Even for 3 bed prices are less than that. Is it possible that this is valuation mistake? I thought they are suppose to be conservative
     
  2. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    2,458
    Location:
    Sydney & Gold Coast
    Lots of stuff can affect a valuation but ultimately, it's one person's opinion at one moment in time so there are naturally strong variations. It's not at all uncommon for variations of 10% or more between valuers on the same place on the same day.

    One of the biggest factors that can have an impact are recent, nearby, comparable sales, too. This is true for all vals, whether desktop, kerbside or walkthrough but can most heavily impact desktop vals in my experience.

    If something that looks similar on paper just sold next door, it can heavily weight the valuation in that direction which may work for, or against, you.

    Perhaps the difference here was parking. Did your relative's apartment have a lock up garage and yours a car space? That could be where most of the difference comes from. Could also be risk factors etc. Maybe your place is on a main road and your relative's is in a quiet street? Maybe yours is further from amenities, in a high rise instead of a small complex..bla bla. Maybe it was a desktop valuation and there was a bug in the system...

    FYI, CBA's desktop val system had one of my properties coming back at nearly $200k over market value for a while (which was more than 1/3 of its total value). Shame I couldn't service a big top up or I'd have pulled out deposits for another $1mil of IPs.
     
  3. Redom

    Redom Mortgage Broker Business Member

    Joined:
    18th Jun, 2015
    Posts:
    853
    Location:
    Sydney (West) and Canberra
    Sydney and regional NSW desktop vals are often showing results well and truly above market value.

    It may have been a difference between the type of vals between the two properties - the 690k val is likely a computerised one, and the 550 one may have been an actual conservative valuer.

    Investors can use such differences in valuation models to their advantage (i mentioned it in the 'building deposits' thread) to release equity. Only certain lenders, usually the bigger ones, allow it though.

    Cheers,
    Redom
     
  4. WattleIdo

    WattleIdo renovating Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    1,811
    Location:
    Central West NSW
    As a high-risk type person, I'd rather deal with conservatives. Forces me to stay within my means and work smarter. Feels like driving behind someone sitting on the speed limit when you just want to floor the pedal but ...
     
    Kael likes this.
  5. WinDyz.

    WinDyz. Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    155
    Location:
    Hidden Leaf
    Right thanks for the input. I would love to have the higher valuation though. As having money in offset as buffer is better.
     
  6. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    2,458
    Location:
    Sydney & Gold Coast
    This is where "val shopping" can be helpful.

    Naturally, depends on which lenders you can service with but basically:
    1. Have a few lenders do an upfront val.
    2. Refinance to lender with best val.
    3. Win.
     
  7. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,141
    Location:
    Canberra and Sydney
    It's a really good point.

    There's a general emphasis on the forum to valuer shop and go with whoever will allow the largest equity release. It can be a great strategy - and one that I've adopted many times for clients. However - this may involve leveraging a property beyond it's true value which can place some investors in a risky position.

    Brokers may also need to be careful when ordering multiple upfront vals on a regular basis - at some point in time you may get lenders questioning why valuations aren't being converted. I recall one of the large banks (around 5 years ago) removing upfront vals for some brokers who had a disproportionate value to application ratio.

    Cheers

    Jamie
     
    Corey Batt and jins13 like this.
  8. WinDyz.

    WinDyz. Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    155
    Location:
    Hidden Leaf
    Thanks mate. Will do next time. Did not know the difference can be this significant.

    Even my 2 bed unit in hurstville was valued lower last months than my relative unit in Westmead
     
  9. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    2,458
    Location:
    Sydney & Gold Coast
    Keep @Jamie Moore's points in mind too and talk to your broker about the implications.
     
  10. jins13

    jins13 Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    939
    Location:
    Sydney
    Currently, need to do a val shopping. The silly sausage was using old data and properties that weren't compare and using their term 'inferior'.