Valuations catching out property investors at settlement

Price dives are resulting in increased incidences of buyers inadvertently offering above market rates to secure a property, while banks lean towards the more conservative end of the scale with their valuations to sure up their security.

“I’m hearing up to a 10 per cent difference between the buyer and the bank valuation,” Mr Handler told Smart Property Investment.

This issue is particularly pertinent with off-the-plan purchases, when finance is settled after building completes. The time gap between the initial offer and settlement can be several months or years, meaning the property’s market value has a chance of declining.

National accounting network, H&R Block, has been issuing warnings for several months about off-the-plan purchases. Director Kimberlee Brown has found an increased instance of clients using their savings to provide additional security to their lender, as valuations come in below expectations on settlement.

Steps for property investors

Although valuations are a challenge of a softening market, for Mr Handler they’re not an obstacle for purchase.

“You just have to be aware that the banks are trying to protect themselves, and be prepared to push for what you believe your property is worth,” he said.

For example, investors can:

• Request a different valuer to assess their property if they’re not satisfied with the initial one.
• Prepare a comparable analysis independent of their lender, and present it to the valuer at the time of inspection.
• Challenge the valuer on the spot with their assessment at the property.

Mr Handler has personally challenged valuations from lenders, with success.

“I bought a property off-the-plan, which is something I’ve never done before. I asked someone else in the building for their valuation, and handed that to the valuer,” Mr Handle said.

“Or, in a Word document, you can just hand pick properties that are comparable, and submit that to the bank or valuer. Make their job easier and state your case,” he said.

“Some valuers love them, because they are just lazy, and you’re doing their job for them,” he said.