House Valuation from Bank

[KOPITE]

Hi Guys

Just wanted to know why a bank can under evaluate a house. say you the buyer and the seller agree on a price. the bank comes in and evaluate the house less then the value the 2 parties agreed. is that legal what the bank is doing. what does the bank got to do in valuating houses and not using property agents as consultants to the work for them. i am also in the possession of a piece of paper which gives me what the houses were sold in the last 3 years and what their prices were. why would the bank even go lower then those amounts which gives them an indication of what the average selling price is in the area.

i do think that the banks have too much power in the dealings. anybody willing to give their input.

 

[Sinbad]

The bank is taking the property as security against the loan. If the value is less than the loan, the bank is at risk, so yes they are entirely within their rights to value the house.

 

[guest2013-1]

A house is worth as much as the buyer is willing to pay for it. The bank's responsibility comes in when lending the amount to the buyer, nothing more, nothing less.

The house is the "I promise to pay you back for the loan". If the loan is considerably higher than what their risk assessor thinks the house is worth (remember, if the person doesn't pay, it defaults and the bank then has to sell the house again to recoup the amount lost), they will deny it.

The value at which they sell these repossessed houses are normally way lower than what you'd normally pay

There is no reason why the buyer won't buy the house from you at the price you agreed on unless the bank is unwilling to issue them with the loan they asked for (which NORMALLY only rides on how much they can afford to pay back and not the house value, which means the buyer most probably can't afford the repayment and asked the bank for special consideration)

The value of your property is usually determined by government/what other houses sold for in the area/location of schools and shops etc. (government being mostly for tax purposes)

 

[guest2013-1]

Also, unless you have direct contact with the bank that undervalued the house, it's probably a ploy by the buyer to lower the price

 

[drs]

When my wife and I bought our house, we went through a bond originator, who got quotes from the big four banks. Three of them valued the house around what we were offering for it, but Beep Bank valued it at about two thirds of what we'd offered (as a result, they also offered a much worse interest rate).

When we chatted to the estate agent about what she thought was going on, she reckoned that Beep Bank just didn't want to do business with us, but that it looks bad for them to say "no". Apparently it looks better for them to be able to say "we offered loans to 99% of applicants".

I can't vouch for how true that is, but we were quite happy enough to take our business to one of the other banks -- I'd suggest you do the same.

 

[KOPITE]

The value of your property is usually determined by government/what other houses sold for in the area/location of schools and shops etc. (government being mostly for tax purposes)

well they did not look at the piece of paper to make their job easier. i hate the bloody banks. guess the buyer just needs to cough up the rest of the cash as they already got 100% bond.

 

[deweyzeph]

You're all welcome to pay for your houses with cold hard cash if you're not happy with borrowing money from the bank.

 

[akescpt]

if the deal goes south the bank wont be able to break even when they auction or sell the repo.

 

[rrh]

Hi Guys
what does the bank got to do in valuating houses and not using property agents as consultants to the work for them
i do think that the banks have too much power in the dealings. anybody willing to give their input.

The banks use certified valuators to perform the valuation of the house: using an estate agent (who in all likelihood has a vested interest) would be like using your local mechanic for heart surgery.

That said, the sales prices of houses in the neighbourhood do form part of the equation. However, one must compare like with like e.g. a new kitchen, a slightly better location/garden etc.

Finally, it's the bank's investors money that is being lent to someone who is in essence a stranger. How would you feel under similar circumstances ?

 

[KOPITE]

yes they lending you the money, but they getting alot of money on the interest over the period of 20 or 30 years. you get raped left, right and centre by everyone along the way when selling the house. not much left over once they finished. you feel like you have been penetrated during the process.

 

[supersunbird]

Hi Guys

Just wanted to know why a bank can under evaluate a house. say you the buyer and the seller agree on a price. the bank comes in and evaluate the house less then the value the 2 parties agreed. is that legal what the bank is doing. what does the bank got to do in valuating houses and not using property agents as consultants to the work for them. i am also in the possession of a piece of paper which gives me what the houses were sold in the last 3 years and what their prices were. why would the bank even go lower then those amounts which gives them an indication of what the average selling price is in the area.

i do think that the banks have too much power in the dealings. anybody willing to give their input.

They have the money you (or your buyer) want to borrow, thus they have to power. Get a cash buyer and the banks will not be in the process at all. Blame the buyer then for not having cash.

And they take the risk (refering to your last post), thats why they get interest, if people didn't pay interest then they would not be INTERESTed (get it?) in borrowing out money since there would be no point to it for them (lots of work and risk for no return).