It’s rare to borrow money these days without your bank needing to know the current market value of the properties they are holding, or will hold, as security. There are a number of things you can do to get the most from the valuation and increase your lending capacity.
Why does the bank need a valuation?
Market values are continually changing. To ensure they are not lending more than the value of the property they are holding as security, your financier will require a current valuation before approving a new loan or loan increase.
Are you engaging an independent valuer prior to the bank valuation?
Sometimes borrowers engage an independent valuer to gauge the value of their property (and their likely borrowing capacity) before they go to their lender. If doing this, be sure to engage a valuer who is recognised by the lending institution you planto use. This way, your valuation can be "reassigned" to the bank at a reduced fee, rather than having to pay full price for a new one.
Financial institutions will only accept valuations from valuation firms which are on their Residential Valuation Panel. Check that the valuer you wish to use is on the panel of your preferred institution.
A valuation report is current for three months. A new valuation may be required by your lender if all action is not settledwithin this period.
Why can’t the valuer tell me the figure (even though I’ve paid the bank for the valuation)?
Valuers are legally bound by privacy laws to provide the information requested directly to the instructing party, which is the lender. Each financial institution has a different policy on providing the valuation figure to the borrower.
Why can’t I get a copy of the bank valuation?
As the valuation has been conducted for the bank for mortgage security purposes it is industry standard that copies of valuation reports are not released to the borrower.
What can I do if I’m not happy with the bank’s valuation?
Every lending institution and every valuation firm will have a different policy on this issue. It is rare that the bank willrequest another valuation. Your best avenue is to try to find sales evidence in the area in the same price range that supports your case. At JDMA, our valuers will always take into consideration any additional sales evidence provided by the client. We are happy to review reports where clients have queried the figure and where additional sales evidence can be provided.
Private Valuation VS Bank Valuation
It is often commented that a bank valuation is conservative. However, this should not be the case. When a valuer is engaged by a lending institution they are under instructions to provide the "market value" of the property. The market value is "the value of the subject property at its highest and best use on a specific date as negotiated between a fully informed and willing buyer and seller who are both keen to trade but neither so eager as to overlook reasonable business principles". Whether the valuation is being conducted for the bank or for the owner of a property who has engaged us directly, the value of the property is the same. It is the role of the lending institution to manage their risk and to implement a prudent loan-to-valuation ratio (LVR). It is the role of the valuer to provide an independent and fair assessment of the market value of the property.
Prepared by Johnathon Millar of JDMA Property Consulting and Valuations - www.jdma.com.au