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Banks' valuations often do not reflect true market value
Much coverage in the property media has recently been given to the difficulties experienced by would-be home buyers in obtaining bonds. However, the problem is that the banks' valuations often reflect the way in which their client is rated by their criteria rather than the true market value of the property, says Gregory Senftleben, Rawson Properties residential franchisee for the Umhlanga precinct north of Durban.
"We have just recently had a case in which we had an offer on a beachfront home at R2,1 million, but the bank valued it at R1,8 million. When we asked the bank about this, it became clear that their valuation was based on inaccurate information and that no on site valuation had been done.
Independent valuer
"After providing them with correct information and insisting that an on site valuation be carried out, they finally raised their value to R1,9 million. This helped but did not eliminate the problem because there was still a substantial discrepancy between our valuation and that of the bank - which, understandably, caused the buyer to lose confidence in the property and consider withdrawing his offer.
"We were able to convince him of the accuracy of our valuation by bringing in an independent valuer - whose figure was similar to ours - and then forwarding this written valuation to the client and the bank. This incident is by no means the only one he has had to deal with and although bringing in another valuer is an effective tactic, it has to be said that it is also an expensive one," Senftleben says.
Banks are over-cautious
"This incident highlights the true nature of the problem, namely that banks are in many cases over-cautious in the implementation of their lending criteria for bond applicants and are not willing to accept that the market has adjusted itself. Banks need to realise that buyers today inform themselves very adequately concerning property prices and, when an offer is made, it is seldom done in ignorance but only after careful comparison of the properties available in the marketplace. Offers are truly market-related in every sense.
"Even though the banks' attitude towards bonds has eased up slightly throughout 2012, with all the necessary checks and balances in place, the market does not need further outside regulation by means of over-stringent and possibly inaccurate property valuations. There has to be a 'meeting of minds' somewhere along the line and the banks must accept that existing clients, both sellers and buyers, have the right to allow the market to determine the true value of their property," Senftleben concludes.
