What REALLY Happens During a Bank Valuation? | FUNdamental Fridays

0:00The best thing that you can do to help yourself is one, give us access. Yes. I need next weekend to clean my house before I'm going to let you in. We can look past all that. Yeah. It's not a big issue for us. Yeah. Your presentation is everything when you're marketing a property. But, you know, like if it's, we've all got kids. Yeah. You know, the stinky boys bedroom. Um, you know, that sort of thing. It's sort of like, well, it doesn't matter. Good evening. Welcome back. It's a Friday fun one. That's right. We get to have a lot of fun and talking about a particular topic that's eating our minds at the moment. I am joined here by Neil Alice from Preston Road Patterson. Mate, welcome. We've got a Friday fun one. And guess what we're talking about today. You're going to help us understand how a bank uses you to get a valuation. And whether we're happy with it or not. Because most of us as consumers, we want the best valuation possible for our own. But it doesn't necessarily work like that. Does it? Well, that comes as a surprise to me. All right.

1:00So what rules do you have to follow when you're getting a bank valuation done for their purposes? No, not for the individual's purposes. It's very different from a market appraisal from a real estate agent. So when we, when we start doing a valuation for finance purposes, we've got to look at the standing instruction of the client. Now, there's a big difference between where it goes from a real estate point of view where the marketing campaign in some markets might be out to six, 12 months. Yep. When we're doing a mortgage valuation, they want to know what a property is going to realize within 30 to 60 days. Important. Very important. Yep. Because if you're in a market where it's slow, what are you going to do? You've got to look at where it's not where the one buyer might be, but it's where sort of 70 to 80% of the market transact in that circumstance. Yeah. So yeah. Well, I think it's an important thing, right? Because ultimately the banks basically lending money are against the security and that's your security. So they have to, to your point, realize that in a short period of time, then ultimately

2:01that's going to happen. Now, is there anything, anything that we can do to assist the value in assessing the property? Look, the really interesting part about this is quite often people provide us with information that we've already got. Yep. It's nice to talk them through it. Yep. So, because there's actually a wear of a transaction that's occurred in the street, wouldn't hurt for them to notify us and say, listen, that probably across the road sold over there for me and VUX. Yep. And we might say, well, that's what it was advertised for, but we know it's sold for nine. There's not one lender that we work for that asks us to go out and value things low because it's for finance purposes. Yeah. I'll be completely clear with that. Yep. We're asked to do a market valuation based on the comparable sales evidence that have occurred at that time. So the best thing that you can do to help yourselves is one, and this is not necessarily because we can look past, people got to live in the houses that we come out to value. Yes. But if speed is of the essence for you and you want the loan tidied up as quickly as possible, give us access.

3:01Yes. Okay. You got no idea how often that. So you get there, I'm going to be 15, 20 minutes from here and you can't get into the house or the car. Well, I look, I need the weekend in the might be Monday. I need next weekend to clean my house before I'm going to let you in. We can look past all that. Yep. A big issue for us. Yep. Sure. Presentation is everything when you're marketing a property and we do see that as well. Yep. But you know, like if it's, we've all got kids. Yep. You know, the stinky boys bedroom. You know, that sort of thing and sort of like, well, it doesn't matter. And what are they going to expect when you come into the house? I mean, obviously, I'm doing one right now. In fact, and so there's a value of probably coming to our property as we're recording. Well, you should be there. James there. The reality is you also take a little device in there because you're also doing other types of things. So tell us, tell us the sort of process that you're going through when you're walking through a high. Well, with the Preston Road Paterson experience. Yes. When we walk through your house, our guys will turn up with the computer.

4:04They need to take photos. One of the big things if you could, you know, but a lot of people have photo of their kids on the fridges and we have to take photos of kitchens and things like that. We try and avoid people in all our photos, but it's become a very sensitive topic. We're there quite often. Our value is take photos. They don't even see those things. But you know, when it goes to audit and review, we've got to take them out. Yeah. But it's a bank requirement that we actually take those photos. Yes. So we measure up the house. We inspect it from top to bottom when I say top to bottom. We go right through the house. We're not climbing through the roof. No, no. Looking under floors. Out the back yard. So if you've got a vicious dog tied up. Or put it in the garage or the car so that the guys don't get violated and trust me, it's happened over the years. I'm sure it has. I'm sure it has. And what about when you're dealing potentially with tenants who also don't necessarily want you in their space? They feel like it's their private space and it should be, but there's obviously preparation

5:04that you need to do as part of that. Look, my business partner and I spend a lot of time trying to educate mortgage brokers on this because there's a big disconnect. And I think with tenants, you've got to engage the property manager from the get go. Not just rely on someone to send them an email. You've got to ring and say, these guys are going to be in touch. And I need it done as soon as possible because if we're ever struggling to get into a property and you can actually judge this by when we're doing in a city units, the big problem that we have is our turnaround times the slower in the city because tenants don't want to let us in. And it's a simple thing, but it gets left. And if you don't ring your property manager, chances are they'll get to it tomorrow or the day after, not casting dispersions on the real estate industry, but that's what happens just not seen as important because no one's informed them that this process is going on. OK, so there's an organisation on coordination process that you need to focus in on.

6:07I'm going through the steps now and I know what these things look like. I've seen hundreds, if not thousands of them over the journey. I'm going to see, obviously, the measurements of the improvements on the land. I'm going to see the size of the land. I'm going to see the comparable because you're going to judge me as superior, a comparable or inferior. Wow. As part of that particular. And potentially some banks also want a risk rating in a series of questions that you need to rate them in terms of that risk. So take us through a little bit of that in terms of broadly. I don't need you to run through each one, but just give us a sense of what those risk ratings are doing there and why they're helping the bank in terms of their understanding. Well, I guess the bank want to read as little as possible about these things. They just want to read for no one. One page. Yep. So the risk ratings, I guess, are a signal that they may need to look further into a report. If we get a high risk rating, typical things are backs onto a railway line, front and main road, these power lines within a hundred metres of the property, those sorts of things.

7:11Landslips and all of that type of stuff. Yeah, bush fire. Yeah. All those types of things. So, you know, it's not stuff that we go looking for, noted stuff that we're actually required to actually go and investigate and put in the report. It's not a stigma about your property. It just is what it is. And some people take exception to that because you're in a market where all the other houses are affected by that. So it doesn't really affect your value. It's just something to signal to the bank that they might need to read the report a bit harder. Now, my final question, as we wrap this up, is if I've done things like smart-wire the home or I've got certain sort of features that are built in that add value, underfloor heating, you know, those types of things, is that something that you should also be just sort of can be seeing you with at the start in terms of the quality of the fixtures and fittings. Yeah. And look absolutely. And depending on where it is, it's going to have varying degrees of added value. Yeah. And, you know, some markets will expect those types of things in there.

8:12Yep. Property. Other markets have no appetite for it. Yep. So, in other words, if you're in a really entry-level market and you've got a hydronic heating and you've done all of these, you know, amazing $1,000 C bus system that you know, I guess, you just don't know it. Unfortunately, it's not necessarily going to lift the value, even though the capital cost has gone in there as well. Yeah. Some sage advice here from Neil, mate. Thank you very much for joining us on Friday Fun Months. Until next time, always remember people. Knowledge is empowering, but only if you act on it. Bye for now. Bye. Good job. That was good.