Investors and brokers alike are sure to be pleased with new valuation guidelines currently being discussed within the industry.
In recent times there have been many complaints by both investors and brokers that valuers were being more inconsistent than ever in issuing valuations on properties.
Stories abound of different valuations coming in on the same property from different valuers, with variations ranging from tens of thousands of dollars, to $130K in one recently reported case.
A new set of standing instructions for valuers to operate under has been developed by leading industry data provider RP Data.
Under the current system, each bank has its own set of ‘standing instructions’ for valuing residential properties, which often leads to wide inconsistencies in valuations between valuers, depending on which bank employed them. This then leads to amended valuations and considerable delays causing great frustration to investors and their mortgage brokers.
Apparently the Commonwealth Bank is a major instigator of these new guidelines and is bringing together other lenders, Lenders Mortgage Insurers, the Australian Property Institute and major valuers to establish this new industry benchmark.
Exactly where these new guidelines will lead for the industry and for clients we will only see in the fullness of time. While some commentators are saying it’s an attempt by the banks to fix in place more conservative valuation standards others see it as ushering in a new era of consistency which they believe can only be good for the industry.
For my part, I welcome this move as there is nothing more frustrating than having two identical properties, side by side in the same unit development being valued at two completely different amounts, by two completely different valuers. Or worse still, different valuations by the same valuer, but employed by two different lenders. It is these examples which clearly show how unworkable the current regime is.
It is just a waste of time to have mortage brokers having to query valuations with lenders or valuers, forcing valuers to have to rework or defend their valuations or the broker going to another lender to go through the whole process all again.
Generally I’m optimistic these proposed new guidelines will be good for everyone and we can look forward to far more consistent valuations coming through in the future. Because ultimately nothing could be more important to the real estate market as a whole than having a system that works out the value of properties on a fair, consistent and true basis.
Working out what a property’s really worth, will be well worth it!