hil Rice from EZFinance discusses how working closely with a finance broker can help eliminate any surprises when the bank comes to value a property for sale.
Doing the right thing by the vendor does not always work out the way you want it to. You do your homework and list the property at the higher end of the market because the property is exceptional and the vendors expectations are that their property is the best on the street so they expect a good price. The property is on the market for six weeks and you get the asking price and everyone is happy. The purchaser submits their finance application and the bank sends out their valuer to attain a market opinion/valuation of the property.
Two days later, the bank advises the purchaser that the valuation came in substantially lower than the contract price? Have you heard of this happening before? What do you do?
1. Cancel the contract?
2. Negotiate with the vendor to drop their asking price to meet the valuers opinion?
3. Negotiate with the purchaser to increase their loan or add some cash into the transaction?
4. Ask the purchaser to apply to another bank to get a different valuation?
Any of the four scenarios above are hard to palate and negotiate with the associated parties. Valuations are an opinion based on the valuers research and knowledge of the subject property and surrounding area. If the subject property is the best property on an “average” street, chances are that the other properties may pull down the valuation, especially if one or two similar properties sold recently at lower prices.
Whilst the ultimate goal is to have a satisfied vendor and purchaser (and a sale), unexpected issues sometimes do arise during the sale process. To help alleviate this potential problem, speak with (or ask the purchaser to speak with) an experienced finance broker during the early stages of the transaction if you feel the property falls into the similar category as above. A good finance broker will have access to a variety of banks or non banks, their staff and their valuation systems. They may be able to evaluate which bank (and their valuer) would be most suitable to the complete transaction –in advance of completing an application, saving all parties possible heartache.
Many real estate agents have experienced (perhaps on more than one occasion) the despair of bank valuations coming in lower than the contract price, (causing the contract to be cancelled) however, if you are savvy and you are connected to an experienced finance broker, a solution to this and many similar situations may only be a phone call away.