Valuation before or after auction?

Hi all, first home buyers here. We’re looking to bid at an auction in a couple of weeks and need some advice.

The house is from the early 1900’s, fully refurbished/modernised in an established suburb close to the CBD, with attractive features and amenities nearby.

We would be owner occupiers, have pre-approval and plan to stick to a 80% LVR to avoid LMI.

Building & pest inspections all look fine, and our conveyancer has looked over the auction contract with no red flags.

Now to my my question: what are people’s opinion on whether to do a valuation prior to auction or not? Do we go ahead and pay to have one done, risking it will be extremely conservative and come in below what the house is likely to sell for? Or do we wait and get it done afterwards (should we get the place), counting on the fact that most auction valuations tend to match the quoted sale price?

I’ve heard some horror stories about valuations coming in way below the sale price, which is clearly concerning with an unconditional auction. We would likely be able to get the cash organised, or alternatively increase our LVR and pay LMI, but it’s certainly not ideal.

At the same time, I guess the pre-valuation would potentially stop us from bidding any higher than the quoted value and could mean we’re more likely to miss out on the property?

We’re definitely leaning towards paying up and having it done beforehand to minimise risk, but curious to hear everyone’s thoughts.

Thanks in advance.

 

For finance purposes you would generally need to wait until after the auction, but nothing stopping you for ordering your own valuation - but it may not reflect what the final price is.

 

Thanks Terry_w, that’s exactly what I’m worried about - that it’ll come in way below the final sale price.

We’re in SE Qld where auctions are still not as common as private treaty sales. We’re not lending through one of the big 4 banks, and it’s actually the bank who has suggested we do a pre-valuation (through their valuer - we pay) to minimise risk given it’ll be an unconditional sale.

 

@ktv - do you believe that the property has been underquoted by the agent?

Do you have the additional borrowing power If it goes higher than you expect?

 

I've only had two valuations come in under an auction price in a sample size of probably over 1000 over 13 years. In both cases there was something very unusual about the property.

If you get a valuation prior to an auction, it will almost certainly be below what the actual sale price is. Valuers tend to be conservative and their estimate will reflect the, not the market.

If you get a valuation after purchasing it will almost certainly reflect the purchase price.


First time purchasers often worry about the valuation. In my experience this is the least likely thing to go wrong in the finance process.

 

Haven’t received a quote/price range from the agent, they’re not allowed to give price guides in Queensland for auctions unfortunately.

However we’ve looked into each comparable property sold within a 1km radius in the past year (decent number of properties for comparison). The absolute max price we’re willing to pay (whilst sticking to 80% LVR if valuation equals purchase price) is probably slightly above (~10k-15k) what I imagine the bank might value it at pre-auction (my guess only). It’s above the median but below the average sale price for the area.

 

If the bank is getting you to pay for a val, are they going to accept it when it comes to putting in your loan application?

Will they reimburse you the cost of the valuation If you go ahead with the loan?

 

Good questions. They should surely accept it since it’s their affiliated valuer, but worth confirming.

With the cost I will definitely ask if they’ll reimburse us. Just to clarify, are post-purchase valuations usually free through the bank as part of your loan application, or do they on-cost it and add it to your overall mortgage? Haven’t been through this before...

 

The bank won't be able to use a valuer you instruct, even if it is the same valuer. They will need to order a new valuation after the auction and the value may be different.
Most lender vals are 'free' or built into annual or application fees.

 

This is on point. @ktv read this and don't worry about organising a valuation prior to auction.
The bank will not charge you for a valuation if it is part of a loan application.

 

One thing I did prior to purchase was see if the lender had a black mark for the postcode.

If they do, look elsewhere.

Otherwise with a hefty deposit, unless you are buying a farm/agri or a tiny place - it should be fine