Property valuation company recognises broker concerns over variances in valuations, saying there is still “room for improvement” in the industry.
spoke with Brendan Smith, the chief operating officer of WBP Property Group after reporting yesterday
that the FBAA has called on APRA to regulate how mortgage valuations are calculated.
While there are general standing instructions which cover all mortgage security valuations, Smith says valuations are still an opinion, so variances are unavoidable.
“The value is an opinion at the end of the day –
as long as [valuers] do go through the correct process –
and opinions can vary. I totally acknowledge they vary too much and as an industry, yes that is definitely something that we need to work on,” he said.
“I think we are better than what we used to be, although there is still a lot of room for improvement. There is no doubt about that.”
As a general industry rule, Smith says the accepted variance threshold is about 10%, although it is difficult to determine a 'hard and fast' rule.
“It really depends on the property. If you are talking about a house which is a new estate, the variance will probably be less than if you are talking about a unique property.
“Hundreds of thousands of dollars if you’re talking about a property under a million dollars is, in my mind, too much. However, if you’re talking millions of dollars, then in percentage terms it is probably not too bad. I think it all comes back to how complex the property is with regards to the variance and when it is reasonable.”
If a broker does disagree with a property valuation, Smith said they should be able to ask for a review and know that the property valuation company will take it seriously.
“If we send a valuation off and [a broker] disagrees, then from my point of view that is fine – if they’ve got sales evidence or an actual reason why they think that the valuation is wrong.
“In a particular suburb there could be 100 sales that have happened over a particular month and as a valuer, you can’t put 100 sales in your valuation report. Plus, all those sales aren’t uniform so you’re not going to get an exact line of correlation so there may be one sale that the valuer hasn’t used that is relevant. If the broker or the applicant knows that and sends that through, then the valuer should look at those and give a proper response. As long as there is substance then I think a valuation firm really should review it. At the end of the day they are our customers and we should be doing that.”
Although Smith agrees there could be room for improvement in the property valuation industry, he doesn’t believe more regulation is necessarily the answer.
“Woking towards improvement is not so much about regulating. I think it all comes down to rigour. Valuation firms should be working closely together – you can actually learn off other valuers. If there is another valuer in a particular area, even if it is from another firm, we always encourage our valuers to talk to people. They might know something you don’t know and if we work together then I think that end product for the brokers or lenders will be far better.”
contacted Valex, who declined to comment.