Valuation Calculating

I will use some hypothetical numbers here:

Lets say an apartment is listed to sell for $500,000 and a few offers were recieved.

• Another similar apartment in the same complex sells for 430k 4 months ago in a rushed sale due to urgent issues by the owner
  
  
• Another apartment that is in a slightly better location down the road and has a few more features sells for 570k 1 month ago
  
  
• Another apartment that is in a slightly better location down the road and is a bit better quality but similar features sells for 630k just over 1 week ago

What do you think the valuation would be based on the above info? if the buyer wants to buy it for 500k do you think the bank would allow it on the above facts?

 

It would come down to what a value assesses it at using comparable sales.

 

yeah that is what I'm trying to do, work out what the valuer might say it;s worth.

 

thanks Rolf for your wisdom, glad to see you are also still around these days.

OK, lets simplify this....

Should one be worried that the bank won't finance the sale on valuation?

 

What about when the valuer does the valuation, should the vendor bring up the sale of the similar apartment and explain to them why it sold cheap. If one had spoke to the agent who sold the other one and the agent explained it was a rushed sale because of urgent circumstances should the vendor tell the valuer that and also let him know there were higher offers after it went into contract? Or would he just shut his ears and not use that info in any way to make his valuation?

Would offering a nice cup of coffee help ?

 

A valuation should be called an opinion as thats what it really is except its the opposite to a real estate appraisal as it is usually less than required.

 

If it's a purchase, an on market transaction with an estate agent and all parties in the same state, it'd be unlikely for the valuer to disagree with the sale price for the valuation.

 

Spencer v Commonwealth circa 1917 is the test of market value.

 

sounds good, that was the answer I was looking for, thanks!

So would they go back to the buyer and say something like "we think it is worth $480,000 to $495,000 but $500,000 would be a fair price"?

 

@Gonz is your sale contract subject to finance? What is the impact if the valuation comes in low? Will the contract fall over or does the buyer have to keep seeking finance to their satisfaction?

 

I'm not sure Scott, I do not have a copy with me yet but I expect a copy today. From when I was talking to the agent it would seem it might be subject to finance since the bank is asking for the valuation I think, it's a good question I would like to know myself now. They do have pre approval but apparently from what I have been reading that means nothing these days.

 

Relax. It'll be fine. If you are really concerned, send the contract to your broker and ask them for an upfront val, just for your peace of mind.

 

Should you only be looking at sales within the last 3 months?

 

Much ado about nothing. Don't stress - I would say less than 1 in 100 valuations I see for purchases come less than purchase price, but in reality it's even less.

Valuations are more an art in massaging the stats/numbers to fit their expected goal - which throws a lot of people off. Hang tight and you'll find it probably all falls into place nicely.

 

i've been thinking about valuations a lot after reading many of the forums. what do you all do about valuations?
do you use the bank valuations which seem to always come in very low, or arrange an independent valuer? or calculate yourselves using online tools, assessment of recent sales etc.

 

Use the bank ordered ones cause thats all they will accept and 9/10 only vals ordered via their internal system, so no choice really.

Resi deals are controlled by bank as per above comment. Commercial deals you can use a valuer of your choice on the lenders panel, usually.

 

If we're talking desktop vals - from my experience i'd probably say the valuations from 4-5 different banks that offer desktops on call to have results that have a 10% variance in range. If you were seeking finance and maximum equity results, i'd suggest doing this with suitable lenders and letting results guide your outcome.

Full vals will just do a side by side comparison of your property vs others nearby to come to their assessment.

I have no concrete empirical evidence to say this is true, but from running hundreds of vals ofver past 12 months, i'd guesstimate that desktops>full vals for units more regularly than houses. I think it may be data quality that does this (differentiation between units harder to measure than differentiation between houses/land sizes for a computer).