Last month I wrote about equity, and some people have since asked, “How can I figure out my equity position, if I don’t know what the value of my home is?”
That’s a really good question; value is something that seems to change depending on who you’re asking. Ask the home owner, and the value is optimistic, ask the bank valuer and we get a more realistic figure, or sometimes pessimistic figure to suit a firesale. A real estate agent may give you a value somewhere between the two, and the sale price they actually achieve is essentially the current value on the market.
From my point of view, there is not much I can do with an owner’s estimate aside from some very general/broad estimates on LMI, equity and rates. Even a real estate appraisal is not going to assist when we apply for the loan because the bank will use it's own modelled estimate, kerbside valuation or full short form valuation. The best thing you can do is be prepared with comparable sales within your area, in the last six months, for similiar properties. Please note, a 'listing' is not a sale price, and often presents an inflated value, banks and valuers do not adpot listing prices as guide on real value ever, full stop, only valid sales that have settled can be used.
It gets more interesting though, bank valuations can differ also depending on what panel valuer was used, and there are many in each area, independently working for the banks., depending on what firm they use and what research they have undertaken. Sometimes we speak to valuers about recent comparable sales data that they may not be aware of that they can use to give us a better valuation. The interesting point I want to make though, is that I have clients that come to me not just for a good rate – but for a better valuation! For one client I have, we undertook two valuations before we decided on the lender, because the valuation at lender number two, was higher, and meant the difference between approval and decline. As always, it’s important to be one hundred percent transparent with clients and give them the information and options so they are fully informed of the process.