Calls for an overhaul of the valuation industry
In response to Property Observer's story yesterday about valuations coming in 15% below purchase price on a number of off-the-plan properties in Sydney, an industry spokesperson has called for a shakeup in the valuation industry.
With a background as a valuer, CPM Realty managing director, Sam Elbanna, has said that while Just Think Real Estate's Edwin Almeida said yesterday it was an issue related to the buyers overpaying, he thinks it's more an issue related to the valuers themselves.
“The fact that this is happening warrants the whole valuation industry is in need of a shakeup. Valuers always come in low when the market is hot. This always happens at this point in time in the property cycle," Elbanna said.
“You will notice that the conservative banks will always do two or three valuations and you will see in these that in these cases that two out of the three will get it right and the odd one out will come out well under the market rate. You can read into the odd one out that sits 15% lower which will always favour people selling existing stock. As project marketers selling new stock we need to make it clear that this is rarely the case when settlement valuations are correctly looked at on new stock.”
After all is said and done, a valuation is determined by what a buyer, and subsequent buyers, are willing to pay.
He pointed to a unit in Roseberry that was bought off-the-plan for $519,000 in 2010. In 2012, it was then given a $490,000 tag from a valuer. The same unit, a day later, was given a second valuation for over $590,000. It sold for just under $600,000 a week later.
"I am suggesting that in the article, we had an agent saying that people are overpaying for properties. It's not overpaying, it's the market," he said.
One buyer may be seen to overpay, but if this happens from a number of buyers, this becomes the new market value.
The number of sales actually occuring to overseas buyers are also up for closer attention.
Elbanna said that it's a very small percentage of the market still.The real issue isn't buyers overpaying, it's valuers being underpaid and not having enough time to undertake the research required.
"They need to be given time to do the valuations, and they need to be paid for them well," he said.
"I think the whole valuation industry needs a massive overhaul. They don't get paid enough, they rarely go to the property. They do desktop valuations. Some of them do inspect the property, see it's brand new and still compare it to 10 year old properties."
Tips for those wanting to get the best from a valuer:
- Provide them a list of comparable sales (potentially inside the same project, as well as some that are not). While not all valuers will use them, some will.
- Apply for finance six months before completion, not six days and if you find the valuation comes in low it gives you time to get a third and a fourth.
- Attain your own valuation, using a valuer that is on your bank's panel of valuers.
- Ask to see a soft valuation so you can check the comparables used and the comments made.
- Bear in mind that the valuer often has a different valuation for mortgage purposes as opposed to sale purposes.
But mainly:
- Do your research beforehand. Go out and look at 100 or even 10 before you make a purchase decision. If you've done your research you should be confident it will value up.
Source: CPM Realty
