Property Valuations a waste of time and money article by T. Ryder for your perusal and information only, compliments of LJ Gilland Real Estate Pty Ltd

Property valuations a waste of time and money: Terry Ryder

By Terry Ryder
Tuesday, 06 November 201 2quote

Until recently all the reports on the hotspotting.com.au website advised investors to get a valuation before buying real estate.

I have now removed that from our reports. I think valuations today are a waste of time and money.x

I’m sure there are plenty of competent valuers out there who care about accuracy and professionalism. It’s just been a long time since I encountered one who fits that description.

All my recent experiences with valuers have been frustrating,and the feedback I’m getting from consumers around Australia suggests many others are having the same disappointments.

The problem is that valuers are killing real estate deals. Whether it’s conservatism or incompetence, many valuers are under-valuing properties to a degree that’s plain ridiculous.

Real estate research has been my business for 30 years. Whenever I’m involved in any kind of transaction I do a lot of research and I consult people with good track records.

But every time this year the bank’s valuer has come in with a figure well below market value. In the latest instance, the valuer’s figure was 25% under the true value.

The valuer spent no more than five minutes at the property, took a few measurements and left. The valuation was delivered a few hours later. How can that possibly be a professional and competent job? The result showed a disregard for sales evidence of comparable properties.

Earlier this year I had a similar experience. I protested to the valuation firm and presented my research. They instantly lifted their valuation 10%. Something they considered to be worth $500,000 yesterday was suddenly worth $550,000 today.

One of the issues is that an under-valuation can mean you have to pay mortgage insurance to achieve your goal ,and this is expensive. Sometimes I think this is the lender’s objective.

Many investors are having the experience of engaging different valuers and getting wildly different estimates for the same property.

Property analyst Matusik provides this example: “One developer arranged for one of its newl completed apartments to be valued by several valuers independent of the banks. The first valuation came in at $720,000, the second at $730,000 and the third at $595,000! Why was the third valuation so low? Because the valuer had erroneously based the valuation on a distressed sale in a nearby project.”

I put my concerns about valuations out and about via Facebook last week and got a big response from people having similar frustrations.

Perth agent Bernie Kroczek said: “We recently had a sale fall over in Beldon in Perth, where the valuer put $400,000 on the property which had sold for $440,000. We resold it within days for $435,000.”

Here is some of the other feedback I received:-

“We recently had variations of 50,000 on our valuation from different lenders. Nearly killed the deal. And definitely ended up costing a lot more in LMI.”

“I had a purchase of a new house destroyed by the valuer.”

“We’ve just had a number of properties revalued and one in the inner north of Brisbane was under-valued by $50,000 easily. We know this as we are actively looking for another property in the area and have a stack of research and experience from attending auctions, etc. Getting a little frustrated.”

Inexperienced practitioners are putting too much emphasis on computer outputs instead of old-fashioned site visits and talking to people and looking at the evidence on the ground.

Whatever the reasons, I believe many valuers are not doing their jobs competently – and it’s costing people money and it’s destroying valid transactions.

T. Ryder

unquote

Removing the hassle from Sales and Rentals.

L J Gilland Real Estate PTY LTD

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