Property Valuations…These two words often send a shiver down the spine of any active real estate agent.

With the colder weather starting to kick into gear, if you’re like me, you’ll find it’s just that little bit harder to get out of bed in the mornings…but the good news is that there’s still plenty of willing buyers out there in the marketplace despite a misconception that Winter is a slow time in the real estate industry.

Now for today’s topic – Property Valuations…These two words often send a shiver down the spine of any active real estate agent.

As you may be aware, a bank sometimes will engage a professional valuer to measure the property, inspect it and determine what they believe to be the current market value of the home.

They will compare recent sales but will also take into consideration other factors such as replacement cost, or these days, they’ll often look for reasons why the property may be of ‘increased risk’ to the bank, factors such as easements, power lines, potential flooding issues, etc.

Should there be an existing contract on the property, a valuer will hopefully determine that the buyer has paid a fair and reasonable price and provide a report that would inform the bank that they have limited risk should the buyer default and the property was re-possessed and needed to be sold quickly.

Any buyer can contact a professional valuer and with an appropriate fee and permission from the home’s owner, engage the valuer to conduct a valuation on a property.

This report would usually provide numerous recent sales of comparable properties and information on land value, construction type, sizes, photographs and any other relevant information that would help determine the current market value of the property.

Occasionally, a buyer will contact us (the real estate agents engaged to sell the property) and request to obtain a valuation prior to an offer being placed on the property.

This is often a devious negotiating tactic as the buyer will directly correlate their offer with the property valuation they have obtained.

Why devious you may ask? Here’s a number reasons…

Firstly, I have had a number of valuers tell me that the buyer did everything they could to point out the faults of the home to the valuer prior to the valuation being conducted in an effort to try to bring the figure down as low as they possibly can.

Secondly, valuers who conduct a valuation in this circumstance are really in a ‘no-win’ situation.

If something goes horribly wrong with the property, a valuer’s report can be retrieved years after they first prepared their report and they (or at least their insurance company) can be held liable for their past work.

Valuers need to be very careful they don’t value a property too low and they certainly need to be careful they don’t value a property too high.

So without a contract, they have very little to go by – and usually act somewhat conservatively if they don’t have a contract to follow.

As a property owner, the ramifications of a low valuation can be disastrous!

I have seen numerous instances where a buyer obtained a valuation, talked the valuer down and walked away because the seller wouldn’t sell it at the valuer’s figure.

Only weeks later, the property did sell for a much higher figure and as the new buyer’s offer was subject to a successful finance application, the bank engaged a professional valuer to value the home – and at times, the same valuer can be engaged that had only been there weeks earlier for a figure that was well below the new contract price.

Not surprisingly, the valuation figure comes in the same as it did weeks earlier and this resulted in the finance application being declined for the new buyer…or at the very least, the bank will only lend on the valuation figure meaning the buyer will have to come up with the shortfall which they usually won’t do.

If the valuer brought the price in at the new contract figure, it would almost have been an admission of error a few beforehand so again, the valuers are placed in a ‘no-win’ situation.

The analogy I would compare this to is a sporting referee making a decision and having a player ask him to change his mind which is obviously never going happen (with the exception of those painfully adjudicated recent video refereeing decisions…let’s hope we don’t see too many shockers tonight…or if we do, let’s hope they go the way of the Maroons ).

Unfortunately, an agent who feels hard done by cannot convince the banks to employ a video referee who would provide us with an ambiguous ‘Benefit of the doubt’ call so until this happens, my advice is to simply decline any buyer requests for a valuation unless they first have a contract in place for a valuer to consider.

This might seem exceedingly harsh but I cannot stress how important it is for an agent to protect the price of your property at all costs.

A couple of years ago, I even had a valuer tell me that he had an agent who deliberately pointed out the shortcomings of a home when escorting the valuer through that was engaged by a buyer – just to try to get the owner to “Become a lot more serious about his price” – this from the very person who the owner was employing to achieve the highest possible price and paying a commission upon a successful result!

This same valuer told me that the figure the agent was trying to persuade him to value the home was clearly well short of what the property was worth at the time – Absolutely disgraceful!

So the moral of today’s story is to engage an agent who has the experience to deflect clandestine attempts to lower your price expectations and final selling price…and make sure your agent has systems and strategies in place to do their best to protect the contract price.

As always, Happy Listing and Happy Selling…and Go The Mighty Maroons tonight!