LETTERS TO THE EDITOR: Valuation experiences

With some of our most talked about stories of last week revolving around experiences with valuations, it was no surprise that Property Observer's editorial inbox was seeing responses from both sides of the fence.

If you weren't around last week, fill yourself in with these articles:
- Off-the-plan values come back 15% below purchase price
- Calls for an overhaul to the valuation industry
- Patrick Bright asks 'Why do some valuers get it so wrong?'
- Valuers speak out: What's happening from their perspective 

Here are a couple of the highlights.

From: Gavin Hegney, Founding Director, LMW Hegney

We do over 50,000 valuations per year in Perth, and have valued half of the city over the last 23 years.

Valuers are asked for the most recent relevant and settled sales available as evidence to the valuation. The only problem is that by definition this makes any property only worth as much as the last sale, which is just not the case in a moving market, whether it be up or down.

In a boom market we are often too low, and conversely, in a falling market too high.

Low fees and high volumes place a lot of pressure on the valuer today, along with ever increasing litigation and liability, and like any profession there are both good and not so good operators.

The talked about cases are often the minority, not majority.

Of course we all have an emotional attachment to our homes and hence I have found nine out of 10 have an overinflated view of their value. I put myself in that group too.

The worst thing we can do is to be over geared to an overinflated view of our property. That helps nobody and if it goes wrong will end up in pain. I have seen this too many times.

Sometimes new projects have over inflated prices that people get caught up in paying. This too usually ends up in pain unless the market drastically increases in value soon after the purchase.

Often a good valuer will spot these issues, and alert the person and lenders to the issue so appropriate risk and pricing can occur. The developer is usually not that happy though.

So I view a good valuer as someone who is there to assist you to build wealth and financial security safely.

People with excessive problems just haven't found a good valuer, yet.



From: Nathan Wagner, Managing Director, Me & Nathan

I am an avid reader and the articles on valuations have caught my interest.

With respect to full disclosure, I run an ethical property marketing company that provides outstanding packages with great inclusions for well below market price, I do not put high comms on the projects, my negotiating and volume pricing has me make a suitable income and ensures my win/win focus never changes and other than one instance I have never had a valuation issue, anyway, I thought I’d send this to you to give you some actual facts.

In December 2012 I sold a house and land package to a client in Doreen.

The package was $387,800 (Land was $170,000 including a rebate I negotiated for the client of $30,000, the construction was $217,800).

Block size 400 square located in Delfin’s Laurimar Estate in Doreen.

The house was a 24.3 turnkey with an extremely impressive inclusions list such as stone bench tops, feature wall, 9ft ceilings, 2,340 x 1,020 stained entrance door and evap cooling.

When I put this package together the market had similar (some smaller, all with much less inclusions) packages recently sold and for sale ranging from $399,000 to $430,000.

The valuation came back with a horrifying low ball of $360,000. The strange part here is on the valuation the valuer approved the price of the build and the price of the land but decided to drop it by nearly $30,000 as he simply thought bigger blocks were better, and whilst I agree bigger blocks are attractive, they are not always feasible or necessary and the land developer has the control over this.

In disputing the valuation I was told by the mortgage broker that the valuer is well known for being jaded and that he is very out spoken about how bad the market is. The valuer used comparable sales of three-bedroom houses with studies and during the dispute advised the studies could easily be [counted] as a fourth bedroom. Below is information obtained from the mortgage broker.

“I have had several long phone conversations with the valuer on this; he said the biggest bearing here is land size in comparables used. I asked him why the comparables are three bedroom and not four bedrooms and again he pointed this back to land size. He stated in his opinion most three bedrooms will also have a study and second living area too, so land and total construction size become the reason for the valuation pricing again in his opinion.”

Obviously the valuer had no clue and was jaded, the three bedroom houses he was comparing to were roughly 20sq, they barely had enough room for three bedrooms and two living areas. Even after I provided comparable sales reflecting four bedrooms on 400sq in the same estate he still refused to budge and simply used the worst possible houses in different sub par estates with poor finishes.

Add to all this that I have sold several properties in the area for over $410,000 including a couple I bought myself however as these projects were house and land they did not appear on any comparable sales reports.

This email is not about me, but I have a principal in my business which means I only sell what I would personally buy, and that’s exactly what I did, I bought a 400sq block one street over and built the same house, last month I decided to refinance it and the valuation came it at $450,000. Doreen and in particular Laurimar has had continual growth even during the last few years, but I don’t believe it has gone up by some 25%

Fortunately the client gave little weight to the valuation, he did his own homework and realised it was a bargain, equally fortunate is that the client had enough cash to cover the difference.

That’s a horrifying $90,000 difference that could have easily scared a client off not just me but off investing for ever.

I completely respect valuations are required and I feel proud of what I do when I hear about other companies that heavily load properties getting adverse valuations but the above example is as true as it is ludicrous and my main concern here is that it could have easily jaded my client which possibly means when we wind the clock forward twenty years he ends up retiring broke simply due to one idiot’s reckless and unaccountable actions

If you would like to comment on the debate, contact: jduke@propertyobserver.com.au