Widespread concerns about “conservative” and “inconsistent” property valuations have led a number of lenders to introduce a single set of standing instructions for valuers.
The new standing instructions, developed by RP Data, make it simpler for valuers who no longer have to deal with different standing instructions from different banks.
The standing instructions outline a bank’s expectations regarding PropertyPRO (shortform), Restricted Valuation (Drive by) and Progress Inspection reports.
The Commonwealth Bank took the lead to gain agreement with other lenders, lenders' mortgage insurance (LMI) providers, the Australian Property Institute and major valuation firms, to establish this industry benchmark.
Previously, most banks had their own set of residential valuation standing instructions, which caused valuer confusion, unnecessary amended valuations and delays.
The new standing instructions provide guidelines that will assist in reducing the amount of amended reports and delays.
They also allow retail banks to measure valuation quality against the valuation minimum standards.
The new standardised set of instructions couldn’t come at a better time, with many brokers complaining about the “inconsistencies” in valuations from valuer to valuer and lender to lender.
Last year, Gold Coast-based real estate agency principal Lucy Cole, of Lucy Cole Prestige Properties, claimed conservative valuations were undermining property sales in her territory.
Mortgage brokers are also lamenting the impact of inconsistent valuations. In response to an article in Real Estate Business' sister title, The Adviser, mortgage broker 'A Rubel' said recent valuations that he had done show valuers are not consistent.
“Last month, I have had a full valuation done from one bank for $700,000. The next week the same property was valued by a different bank for $570,000. I just could not understand how a valuation could differ by $130,000 within a matter of a week,” he said.
Similarly, mortgage broker 'Vicki' had the same problem, telling The Adviser online that she had four different valuations for the same property.
“I had four valuations done on the same property within three weeks and they came back at $425,000, $385,000, $364,000 and $420,000,” she said. “And valuers wonder why they are getting a bad rap.”
In a related story, Fairfax Media has reported that an inquiry has been called into how NSW's Office of the Valuer-General calculates land valuations, following claims its methods fail to accurately determine market values.