Understanding Bank Valuations


Are bank valuations always conservative?

Well that’s what many property investors seem to think so.

In this Real Estate Talk show I spoke with  Jonathan Millar, a valuer with JDMA Valuers, to find out if this is true.

Here’s the transcript of this interview

Kevin:  We’ve spoken before on the show about the befit of getting valuations on your properties, whether you’re a buyer or a seller.house price tag market property cost save home growth data statistics trend

Interestingly, the difference between the valuation you might get done and the one that the bank gets done may be different according to Jonathan Millar. Jonathan, what do you mean by that?

Jonathan:  With regards to that, each valuation completed for a bank has about eight risk factors that they will include in that report.

That’s obviously just to help the bank make a lending decision with a particular client.

Sometimes there is a misconception that if a valuer is completing it on behalf of a bank that he’s going to be conservative, because that might then help them with the risk side of things.

But to be honest, the valuer shouldn’t be conservative; he should just value it as he sees it in the marketplace, and then the bank makes its own decisions on lending in line with all these risk comments and factors that are in each valuation report.

Kevin:  So is it a myth  that the valuation the bank does is actually more conservative than any other valuation?

Jonathan:  I can’t speak for all valuers, but certainly the valuation report shouldn’t be conservative; it should be at its fairest market value.

The valuer determines that after looking at sales of similar properties in the location, then he works through why the property is worth a certain amount of money.

He certainly shouldn’t be conservative, because obviously the client then potentially loses out on a percentage of equity in their property.

But yes, I’ve certainly heard that many times before, that sometimes people believe that the valuer is conservative.

It may be the valuer didn’t get close to what they thought it was worth. That can occur sometimes. 

But whether someone is engaging a valuer to complete a private valuation or whether it’s for the bank, the two figures should be exactly the same.

Kevin:  I’ve heard that when a valuer does a valuation, they’ll ring around real estate agents in the area to get a feel for what’s been selling, what’s been listed, and so on.

Jonathan:  What assists the valuer in that situation is that you have to try to use the most recent sales evidence, and while there are few systems out there that provide the valuer with sales of properties that have occurred in that same locality, some sales may not yet be on the database.

If they can see a sold sign on a property up the street most times the selling agents are very helpful and advise on what the property has sold for so that would give you the most recent amount of information.

Kevin:  If I were getting a bank valuation done, how would you feel as a valuer if I wanted to be there during the valuation, and even influence that by giving you some of the recent sales to try to support my view of what the value might be?

Jonathan:  I think that as much as information as possible can be provided to the valuer.

The client should feel that the valuer has every piece of information to value that property as well as he can.

It’s especially important if you’re an owner and you know of something that sold very close by similar to your property, and you believe you know what it sold for – sometimes people can be wrong – that’s really good information to give the valuer, because if that doesn’t pop up on some databases, which can take three months and sometimes longer to capture that sales information, then the valuer certainly should be trying to keep his finger on the pulse.

Some of that information from the owners of properties can be really good.

Kevin:  Valuers are human and all humans can make mistakes. If I were to get a valuation done by a valuer and I wasn’t happy with it, is there anything stopping me from getting another one done?

Jonathan:  Certainly, it’s not a perfect science, and two valuers can be slightly different in their assessment of value on a property.

If you had a valuation, and you feel like the valuer didn’t do a thorough job or you had some sort of issue with what the assessment is, some banks’ lending policy won’t allow more than one valuation, however, nothing stops you from getting a private valuation and then taking that to the bank.

We certainly see a lot of people before buying a property getting their own valuation so that they can assess all the positive and negative features as determined from the professional valuer, just to make sure they make the best decision possible.

Kevin:  What is the cost of a valuation?

Jonathan:  It ranges a  bit – the fee would be $440 including GST for properties valued up to $1million and above that, it might be up to $770.

Kevin:  Great advice, Jonathan. Thank you so much for joining us.


Listen to the full show at RealEstateTalk.com.au and while you’re there subscribe and receive our weekly podcast (or the transcripts) where I interview Australia’s leading property experts. 


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'Understanding Bank Valuations' have 2 comments

    Avatar for Kevin Turner

    September 13, 2015 Cia

    I went for a top up this year and got three bank valuations. Two of those were actually performed by the same valuer working for two of the banks independent of each other. Why did he value my property for $30k more For one bank than for the other?


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