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Why did the bank underestimate your realestate?

[RealEstate]     26 Feb 2020
No matter what kind of realestate you buy in australia, even if you need a loan, the lender will need to make an assessment of the realestate you bought and decide how much money you need to lend based on the results. This is what we call a bank valuation. Most of the time this valuation is below the contract price of the property you bought, so the buyer will have a big psychological difference: ...

No matter what kind of realestate you buy in australia, even if you need a loan, the lender will need to make an assessment of the realestate you bought and decide how much money you need to lend based on the results.

This is what we call a bank valuation. Most of the time this valuation is below the contract price of the property you bought, so the buyer will have a big psychological difference: Why did the bank underestimate me? Did I buy the house expensive


To better answer this question: The following three questions need to be analyzed:

Does the valuation reflect property market prices?

What are the criteria for valuation?

Who is the valuation report for?


Does the valuation reflect property market prices? 

1 Difference between "market price" and "valuation"

Why did the bank underestimate your realestate?

First of all, for "prices," we have a conceptual difference:

  • Market price, refers to a commodity in the open market trading price. In other words, the buyer is willing to sell, and the seller is willing to sell the true price.
  • A valuation is only an assessment or prediction of the market price of a property by a valuer. Predictions are certainly not absolutely accurate.

Even if the valuer is professional, it cannot fully determine the market price of the property to be sold.

If it`s so accurate, it must be crossing.

So market price and valuation cannot be confused conceptually. Market price is objective, while valuation is subjective.


2. Property valuation is difficult to objective

Why did the bank underestimate your realestate?

Valuation is a very professional and difficult task. This is particularly evident in real estate. Because every property is unique in this world.

No property is exactly the same as the other, and even if similar, there will be geographical location, floor, location, noise and so on. This gives the valuer a puzzle that each property is valued without absolute reference.

Here`s the point! Anyone who is influenced by their own perception and subjective will, and different valuers have the same emphasis on the value of different properties, makes it an interesting thing: each valuation of the same property may vary.

So, when a property is valued below expected or contract prices, don`t go too far as panic, because the valuation doesn`t fully objectively reflect the true market price.


What are the criteria for valuation? 

Why did the bank underestimate your realestate?

An important part of the valuation report is the recent price comparison.

Typically, valuers will value similar types of housing in the same area for the past six months.

In markets with less trading volume, this information is highly lagged in today`s market, and this is one of the main factors contributing to undervaluation.

Why did the bank underestimate your realestate?

The same area of the quality of the project and the matching itself is very big gap, then the decoration standards are high, good supporting facilities, landscape house is very unfair.

Because these things will not be reflected in the valuation report, only in the real sale of house, the next buyer can really feel, and these things are the real selling point of house.

Here`s a simple example, in the same district of the house,2 rooms 2 Wei 1 parking space of the house, the indoor area is 70 square meters. A house transaction price of 600,000, the room with ordinary carpet,2.5 meters high, the kitchen operating table stone thickness of 15 mm, the room with split air conditioning, the entire project only with a 10-meter long pool and a 30-square-meter gym.

And the buyer`s house contract price is 700,000, the room uses solid wood flooring, the floor height 2.7 meters, the kitchen operation table stone thickness 30 mm, and equipped with embedded sink, dishwasher and microwave oven, the room uses the central air conditioning, the project matches 25 meters long heated swimming pool,120 square meters specialized gym, banquet hall, spa, cinema. These details, in the valuation report, are only taken with the word "super "! It means that the contract price of 70 million house is better than that of 600 thousand house. How much more expensive is the decoration material than the 600,000 house? Where are the supporting facilities? Appraisers don`t really have the ability to give precise numbers, and they know only that because they are not builders or developers.

Therefore, this recent price comparison will be a lot of times let people really helpless, really dumb eat Coptis, have bitter cannot say.


Who is the valuation report for? 

Why did the bank underestimate your realestate?

The valuation report is an absolute reference for banks to lend property! This valuation report is prepared by the valuer for the bank! The bank gives the valuer a corresponding valuation fee, which means that the valuer "belongs to" the employee of the bank!

As we all know, the biggest risk for banks is that borrowers cannot continue to afford loans.

In this worst-case scenario, banks are forced to sell property to repay their loans.

In terms of the original cost of borrowing, future market changes, the sale of real estate intermediary fees, lawer fees and all fees will become the bank`s "loan risk ".

How can banks minimize the risk of borrowing?

That is valuation.

To put it bluntly, house estimates that even if the worst happens, banks can resell the property at a higher market price to cover the full cost.


digression 

What about a low valuation for cash-strapped investors?

For cash-strapped investors, if the valuation is low, contact your loan advisor immediately for a solution.

Why did the bank underestimate your realestate?

This shows that a lender has a better advantage than a bank`s loan manager: independence.

Because only independent, loan advisers can stand in the customer`s perspective to choose the bank.

Senior loan advisers will be familiar with the valuation trends and policies of each bank, as well as the different attitudes of banks at various times towards "loan insurance ".

in some cases, we can also re-find the valuer to redo the price evaluation.

All right, let`s talk about it today, hoping that the buyer will be able to deal with the valuation right, because you`re buying the value of the house, not a single valuation report.

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