Valuation coming under

yeh, Terry's comment doesn't make sense to me. Valuers are instructed by the bank, and instructions can vary, like having to have 3 recent sales within 3 months, to something more open to interpretation. Having instructions to value purchases conservatively doesn't seem legit, but Maybe terry deals with liberty a lot and knows what their vals are like?
Itd be good to understand more about these deals, are they regional, specialised securities etc

 

No, I am not even accredited with Liberty. But what I meant was valuations can be conservative without specific instructing. They know that the type of client that uses these non conforming lenders are more high risk so they have a higher rate of default. Higher rates of default mean the valuer's valuations are more likely to be challenged.

Also I am not sure but the instructions may be to value on the basis of a quick sale - firesale.

I don't deal in these sorts of clients so have little experience.

 

I thought a credited Valuer's line of duty is to provide a valuation of the asset, without any influence from external distraction.... What you're saying is the Valuer can write a value depending who is the client? Obviously this could be a low and high end, that they can still justify in their valuation principle...
I known of Valuers that charges in the $10k+ to value rural/zoned properties from compulsory acquisition, that they write anything to please their client. " it is a matter of the pen and who pays for it", as they say....

 

Yes - either consciously or subconsciously.

Any valuers out there who can comment?

 

I think we had one on SS before ... Think RightValue was the alias.. We often get some good constructive conversations ...

 

I'd be really surprised if that was the case.

 

Any brokers out there that deal with a lot of non-comforming lenders?

Do the valuations come in low more often than with the major banks?

 

I do some stuff in this space and havent had issues with non conforming vals via Pepper and Liberty.

 

I've had val issues with Liberty and that was for full doc at 80% Lvr. They don't give you the val so I reckon they shave it.

 

Was that for a purchase or refi?

I may have had a lucky run?

 

They sure can ...and do ! Should they? No. Course not. Do they? Routinely/ often. Some will have rational, mature conversations with you. Others wont. In over a dozen years of lending, I could count on two hands the number of times a valuer has conceded when challenged with compelling sales evidence, especially where new stock is involved. That is over literally thousands of valuations as a bank BDM and as a broker. So the odds of getting a low val adjusted upwards are modest. Can happen, yes . More often than not it doesnt, though.

I'm sure I have said so before... valuations are like Russian Roulette. Send 5 different valuers to the same job, more often than not you wont get all 5 agreeing. I always get 2 or 3 valuations done for all client refinances, so I have a plan A, B and C to offer them, because the reality is that on any given day, valuations can range quite widely and wildly. It's not usually a huge range of variation on PPOR stock. But for new purchases it can be. So for new purchases, I also get at least 3 done, so they have a Plan A,B and C for that as well. I have to admit though, I have very few val issues ever, because before I take on the sale of any stock, I have multiple valuations done up front so I know as accurately as possible, whether on not Im going to have val issues when it comes time to organise finance , and then I negotiate the prices with the developers . This way I know whether the deals will stack up oir not. If they dont- I pass on them. It's why I have had so few issues with the hundreds of NRAS sales I have done.


To me, the valuation is the entire deal for property investors. It makes or breaks the financing structure and strategy. Nobody wants to be putting an extra 50, 60, 70K or more, into a deal to cover a shortfall. 10 or 15K is one thing, but 50K + is another. Thats a deposit , or most of a deposit, for another purchase! So I think it's crazy not to get vals done up front wherever possible. Where new stock in particular is involved, valuers can be all over the shop. Have just seen a project where we had a range of val results as follows; 528K, 560K, 580K, 600K and 645K, all for the same 2 bed, 2 bath apartment.

Here's another example. Just settled a bunch of 1 bed apartments in Port Macquarie. Contracted at 260K. Every firm valued at 260K, but one firm valued them at 280K (contract price was 260K but contracts had been exchanged over 12 months ago) But the ground floor apartments had more than 20 metres of extra courtyard space instead of balconies that all the other apartments had, and the same valuer firm ( but different individual valuer) that valued the regular balcony apartments at 280K, valued the courtyard apartments at 260K. When challenged, flat out refused to budge. So the outcome was... apartment + balcony valued 20K higher than same sized apartment + courtyard, by the same company.

Valuations are an imperfect science. There are inconsistencies and thats just how it is. When challenging, the prospects of winning the argument are remote . They are essentially a law unto themselves... simple as that.

As far as lenders instructing firms to value high or low - doesnt happen. Its a myth. Sometimes feels like its happening, I get that - but it really doesnt.

 

correct. valuation isn't exact science.

The problem is when valuer's get challenged, their ego is on Red Bull..

 

I just got a valuation came back from Liberty. new purchase. valuation is spot on the purchase price. I was concerned that it didn't stack up as comparable sales was bit edgy to say...

 

Hi Jamie

Which suburb was this? The valuers are extremely conservative particularly with apartments

Cheers Ivan

 

You might find some here;

Apartment lender 'blacklists' 140 suburbs

 

If you're buying into a market the valuer thinks has reasonable risks (oversupply, prices already coming back etc) they're more likely to val under purchase price so they don't have egg on their face in 6-12 months when the property they valued is worth less than at time of purchase, but the borrower still has the same amount of debt.

 

Not too sure. I was informed by my broker of the news. If it helps, it's with 10% deposit.

 

The properties I am considering are all established houses, not apartments and one of the issues may be that it's a growing market which is not capturing the realistic market value. Also, the other issue is the homes are old and requires abit of reno to make it look better (ie 1950s to 1960s homes)

I have to admit with the vals for the other main stream banks, I have not had any issues.

 

3.86% the comparison rate for the very basic owner occupied P&I loan at 70% or lower.

Liberty have a significantly more generous servicing policy than any other lender out there. They look at existing debts in an extremely generous manner which leads to them being able to lend money whereas others can't. Liberty have realized this and they know that within a certain market they've got a monopoly. As a result they've added some loadings on to their loans:

Start with the base rate:
3.86% < 70% LVR
4.14% >70% & < 80% LVR
4.99% >80% LVR

Then add the loadings:
+ 0.25% for investment.
+ 0.10% for interest only
+ 0.50% if this is property number 4 or higher (congratulations, you're classified as a professional investor).

As a result, most investors needing a loan from Liberty are probably going to be paying 4.99% for an 80% interest only investment loan. For a loan over 80% it would be 5.84%.

The more experienced brokers have been saying for some time that Liberty is a lender of last resort. This is why we've been saying this, we've seen the non-conforming lenders take advantage of borrowers before, especially when there's no alternatives.

 

Thank you Peter for your advice. It's a privilege to be considered a 'professional investor' lol.

Just a question, if after Liberty, what are the other options available to people if they maxed that out? Play the waiting game, pay down debt or hope that the lending criteria changes for the better?