Bank Valuation Vs Property Report

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  dcep on 18/04/2018 - 14:33

  some banks run desktop/auto-val , some do kerbside , and finally full valuation if required.

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  KangaBanga on 18/04/2018 - 14:54

  +2

  get a "pre approval" from the bank for the loan amount you are looking for first.

  Then look for a property sold for less than how much the bank will lend you.

  It's getting very hard to get approved for loans nowadays with the banking commission and APRA rules in place. and Banks will more likely send a valuer out nowadays to make sure the numbers tally and even with pre approval they will do a complete assessment before giving out the loan.

  In any case, you will be ok since you can always use the "subject to finance" clause to cancel any contract of sale and get all your deposits back, just make sure you put that into your contract.

  Get a good lawyer and good mortgage broker and advice from someone you know who has bought property before..

  • 

    dtc on 18/04/2018 - 16:44

    +3

    Just to add - the bank will approve (say) up to $600,000 as a loan, but buried in the details will be 'subject to valuation' (or will be 'no more than 90% of valuation' or something like that). So you can buy a house for $500,000, but if the bank values it at $450,000, then it will only lend you 90% of $450,000. It may lend you the balance as a personal loan, or a second mortgage etc, but at much higher rates.

    For my first home (some years ago, fortunately), I was pre approved for $450,000 and bought a house for $215,000 (ok, many years ago!). The bank valued it at $190,000; I was able to find the difference but it basically cleared me out and it took a few months to furnish it. Sold it 8 years later for $490,000, so suck on that bank valuer.

    • 

      thatfreak on 18/04/2018 - 17:31

      thanks for the heads up!

    • 

      poboy on 18/04/2018 - 21:45

      The bank valuer doesn't care. He is too busy preparing papers for a royal commission.

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  TheBilly on 18/04/2018 - 15:53

  Well the banks 'technically' never tell you what the valuation figure is. They just say yes we are ok, or no we are not.

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  Euphemistic on 18/04/2018 - 15:55

  +2

  The free report is based on crunching local sales data and comparing listed features of the home. It isn't accurate, just a guide.

  The bank would most likely arrange a valuer to visit the property to check the 'free' report for accuracy and make sure the house is in a suitable condition.

  • 

    MrHyde on 18/04/2018 - 16:30

    +2

    Also, a lot of the free reports are behind the market by a couple of months. They have incomplete information, some have completely wrong information like number of rooms, land size, etc. They rarely take condition of the property into account.
    Use those reports as a guide (as mentioned) and look at the comparable sales in the area as well as feet on the ground research to make your own determination.

    • 

      hoey888 on 18/04/2018 - 16:49

      Agree. Most valuations do not take into account property that has been sold recently (ie past 3 months). Houses need to settle before the valuers take it into account. Hence the a lot of times it will be out of date for this reason. Better to understand and buy based on actual up to date sales history instead.

      Regarding bank valuations, bank mortgage brokers do not usually provide a copy of the bank valuations. I got my loan through a broker and was happy to provide me the bank valuation for my records.

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  thatfreak on 18/04/2018 - 17:24

  Thanks for the input guys.

  I would like to run a scenario:

  Say I am conditionally pre-approved for a home loan for up to 800k purchase. If I purchase a property at auction for $800,000 and the bank valuation comes back at $720,000, they will work off $720,000 to calculate the loan to value ratio, therefore if I wanted to keep the LVR at 80% I would have to reduce the loan to $576,000 (80% of $580k) meaning I would then need to tip in more money or borrow more than 80%, and subject myself to LMI?

  • 

    redfox1200 on 18/04/2018 - 19:32

    if it goes for 800K at auction then you are fine because someone else was willing to bid $799k, so the bank should value it at 800k

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    garetz on 18/04/2018 - 19:35

    Thats not how it works at all, if they get a valuation back at 720k, then they use that as the base to see if they can recoup their money if for whatever reason you cannot service the debt. If they think you will not be able to service the debt at 80%, then they will just refuse the loan. The 80% mortgage to 20% deposit ratio always is calculated on purchase price. So you would not have to pay lmi.

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      miwahni on 19/04/2018 - 22:14

      The 80% mortgage / 20% deposit ratio is NOT always calculated on purchase price; LVR is based on the lower of the purchase price or the valuation. Most banks use a panel of independent valuers, not internal valuers, so that there is no conflict of interest. And valuations don't always come in at purchase price either, especially if you're looking at a new construction and DOUBLY especially if that new construction is an apartment in one of the eastern capital cities. Sorry, I have worked in lending for over 25 years and I see it all the time. And absolutely the loan will be refused if you can't demonstrate capacity to service. But to answer OP's original question - the RP Data reports and the like are an estimation only and usually show a forecast standard deviation figure which is a guide to just how much guesswork went into the report. If the FSD is sitting at 10% then that's saying that the report could be out 10% either way.

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    dtc on 18/04/2018 - 21:13

    Garetz is correct. The auction value is irrelevant- people have occasionally been known to overpay at auctions!

    Your analysis is right as well

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  ozshaz on 19/04/2018 - 06:16

  +1

  I recently bought a land and the bank valuer came to the site to do valuation of a empty land of block. Not sure what he valua red but luckily the valuation was on the mark. Now a days they are bit getting strict with the lending and majority of the banks would outsource the valuation to other agencies as well.

  But having said that there can be a difference between the valuation and the online free assessment as sometimes the online information is not updated.

  Bank will always take the lowest of the numbers for the loan calculation.

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    miwahni on 19/04/2018 - 22:17

    He valued the vacant land based on size, aspect (view), location (near commercial/ industrial property? Near a main road?), environmental issues (bushfire or flooding risk? Within 50 metres of high voltage power lines?) and a few other factors affecting the general market, such as recent market direction and market volatility. Those last two are not specific to your block of course, but the others listed are.