Browse Forums Home Finance 1 Aug 18, 2009 5:30 pm Hi Everyone This is our personal story for all those STILL waiting on your lenders to approve loans or those who have received valuations significantly BELOW contract price. The reason we heard is that the Top 4 (there maybe others) banks are in collusion about trying to address what they see as a 'false' housing bubble. A bubble caused by First Home First Home Owners Boost and low finance rates. We have heard that the banks have instructed their valuation companies to deliberately undervalue properties to try and address this 'false' housing bubble. Of course, they'll deny it, they've done it before. Our situation is that we are trying to get an unconditional extension of a loan to build a home. We have not overcapitalised ourselves. They wanted us to request more but we don't want to service a large amount. So we settled on the land (located at The Ponds, NSW) at the end of July. Our land was valued $10K less because the bank deducted the Woolworths Gift Card of $5K and Landscape/Build Rebate of $5K which they considered would have inflated the purchase price. Even though we pointed out that the above incentives are not guaranteed, they did not budge. We covered the shortfall and pressed on. Of course, we look forward to paying one of our monthly mortgage with our Woolworths Card. Apparently Landcom undertook to deliver these cards within 5 business days after settlement. It is now Day 22 and we are still waiting even though our solicitor called them last week and I called yesterday. We have to wait until the 'person' returns from leave next week. (another story) Anyway, the valuation on the build came in after waiting 4 weeks. It was $60K short! Our unique problem is that the houses they compared it to would not fit on the corner lot we purchased because the house we have to build is customised to comply with Design guidelines for DA and the RTA given that we have 2 x ill-placed road tree bays limiting where we can put a driveway and they can't be moved (We spoke with the Council about this, the answer, no). So we wrote and demanded that our RAMS rep get another valuation or we will go to another lender. We had started to speak to Aussie then. RAMS then reapplied to another valuation company. In the meantime, we had seen another house which offered alot more value to us and complemented the shape of our land better. We gave the estimated costs for this alternate house to RAMS to value. The valuation on the second came in at $70K less than contract price. I have since spoken and lodged a dispute with the Financial Ombudsman (9 week response time but at least it is lodged) and will post my complaint letter to RAMS about their overall service. At risk is our eligibility to receive the full value of the First Home Owners Boost. We have now spoken with a mortgage broker who was referred to us as being successful in obtaining an unconditional loan for a client for the exact same house we want to build in the exact same suburb but his contract value was alot higher than us and his valuation came in exactly according to contract. We hope that the fact that our land is larger by 200sq and we are talking about the same house being built, that we can sort out this valuation problem...in time! As for exit fees, it is approx 1% of our loan. While large, this is a small price to pay to leave the poor service we have received from RAMS and WESTPAC. In return, I will continue to tweet my disgust with RAMS, WESTPAC, LMR Residential (one of the valuation companies working for RAMS) and this collusion they have to deliberately undervalue properties to combat what they see as a false housing bubble brought about by low finance and the First Home Owners Boost. I'm sure there are happier stories than this but I thought I would share what we are going through as I know we are not alone in this. Good luck to everyone else. Cheers cheers Berny ----------------------------------------------------- http://serenityattheponds.blogspot.com/ Re: Collusion among the Banks to provide low valuations 2Aug 19, 2009 8:52 am I work in the professional finance industry and have not seen, or heard of this. The valuations that are coming in Melbourne seem to be fine in the outer suburbs anyway. I have seen some people who overcapitalise on their build and there the ones who do get into trouble with valuations. As for teh big four trying to stop the housing bubble, Thats a big call Re: Collusion among the Banks to provide low valuations 3Aug 19, 2009 9:18 am I worked in lending for one of the "Big 4". Our valuations were all done by external, independent valuers, who would not welcome or in any way allow any interference from the Banks in the provision of property valuations. Their reputation as valuers would be on the line if this ever went on - like Elastic, I have no experience of this happening. Sorry you are having difficulties, hope it all works out for you. MagicJ I finally have my own reno thread: viewtopic.php?f=1&t=28335 The reason a dog has so many friends is that he wags his tail instead of his tongue! Re: Collusion among the Banks to provide low valuations 4Aug 19, 2009 11:09 am elastic I work in the professional finance industry and have not seen, or heard of this. The valuations that are coming in Melbourne seem to be fine in the outer suburbs anyway. I have seen some people who overcapitalise on their build and there the ones who do get into trouble with valuations. As for teh big four trying to stop the housing bubble, Thats a big call Over capitalisation has been driven by the banks allowing people to overdraw on perceived equity by the banks. Mind you, I agree people need to take responsibility but this does not exhonerate lenders who do not adhere to open, fair and equitable lending practices and offer ready made levels of debt. We are currently trying to climb our way out of a global financial mess due to various lending practices. Australia dodged the bullet but Australian financial history is testament to the quality and 'consumer focused' practices of the big four. After all, it was the bank you can bank on that led the way to financial ruin of many Australian families in the early 90's. I too work in the financial industry and valuers, brokers, and the like all know which side their bread is buttered on. I am not saying they are dishonest just covered in the fine print. Glad to hear Melbourne is well valued cheers Berny ----------------------------------------------------- http://serenityattheponds.blogspot.com/ Re: Collusion among the Banks to provide low valuations 5Aug 19, 2009 11:18 am MagicJ I worked in lending for one of the "Big 4". Our valuations were all done by external, independent valuers, who would not welcome or in any way allow any interference from the Banks in the provision of property valuations. Their reputation as valuers would be on the line if this ever went on - like Elastic, I have no experience of this happening. Sorry you are having difficulties, hope it all works out for you. Thanks, I'm sure we'll make something work. Unfortunately in our situation the valuers with RAMS are aligned with RAMS. We spoke with one of them directly (after they mistakenly called us to ask if it was an established home or vacant land they were valuing and I asked who and why they were calling) to provide information that we felt should help. They were reluctant to talk to us and stated that their client was RAMS and they reported and were accountable to them. When we asked our RAMS rep if an independent valuer could provide them with a report, they said they had their own and it was their policy not to look at outside parties. This morning I received an email from RAMS detailing how they came about with their valuation. They have asked us that they could ask the valuers to review it if we provided comparable sales evidence. I will do my best and see if this makes a difference. cheers Berny ----------------------------------------------------- http://serenityattheponds.blogspot.com/ Re: Collusion among the Banks to provide low valuations 6Aug 19, 2009 11:20 am Berny, Thats a fair reply. But I was referring to you personally overcapitalizing. Are you building a house that will be more expensive than all other houses in the area. Also you cannot blame banks for ruining peoplesfinances. People have to stand up and take responsibility for themselves, there are countless instances where more caution by Australians would have stopped them being ruined, Im thinking pyramids, Storm, Westpoint just to name a few. All were sold on greed. Re: Collusion among the Banks to provide low valuations 7Aug 19, 2009 11:39 am berny Unfortunately in our situation the valuers with RAMS are aligned with RAMS. We spoke with one of them directly (after they mistakenly called us to ask if it was an established home or vacant land they were valuing and I asked who and why they were calling) to provide information that we felt should help. They were reluctant to talk to us and stated that their client was RAMS and they reported and were accountable to them. Our valuers were independent valuers, but they would still consider the Bank as their "client" as the Bank requests the valuation and pays for it. The valuer would not release any info to a third party, even if that third party was the loan applicant. If the loan applicant pays all relevant fees to cover the cost of the valuation, which the Bank initially wears, the Bank will of course provide a copy of the valuation to the loan applicant. But in my experience, the valuer rarely speaks directly with the loan applicant. MagicJ I finally have my own reno thread: viewtopic.php?f=1&t=28335 The reason a dog has so many friends is that he wags his tail instead of his tongue! Re: Collusion among the Banks to provide low valuations 8Aug 19, 2009 4:18 pm elastic Berny, Thats a fair reply. But I was referring to you personally overcapitalizing. Are you building a house that will be more expensive than all other houses in the area. Also you cannot blame banks for ruining peoplesfinances. People have to stand up and take responsibility for themselves, there are countless instances where more caution by Australians would have stopped them being ruined, Im thinking pyramids, Storm, Westpoint just to name a few. All were sold on greed. Yes, this is how the banks view this. The bank doesn't care about the house people want to live in, they only care about their ROE. Any bank will move to protect itself at the expense of the consumer. There needs to be a fair balance and better risk management for all parties. In direct response to your question, I have the right to build whatever house I like if it is DA and in my case Design Panel approved and I can service the loan. No, we are not overcapitalising ourselves. We deliberately went for a lower amount than what they wanted us to take because we understand exactly what we need to service the loan even when the rates increase again. This valuation was decided by the bank instructing their valuers to look only at comparable sales within the last 6 months in the surrounding areas. They gave me a short listing of the properties they used to assess their valuation. All 5 x houses as is would not receive DA approval to be built on the land we bought. It has to be customised and this is why the tenders I provided to them are slightly higher. I realise that construction loans in newly developed areas are apparently tricky to value but we should not be held hostage because of their unrealistic policies. I have since given them a direct example of a house we intend to build that was bought recently in the same area but was valued by St George at full contract price ($90K more than what we are after) on land LESS than 200sqm than my own. Whether they consider this and my offer of providing an independent valuation report is a different story. I await their answer. In the Financial Review this week, the government is setting up a review panel to look into unfair contracts. The Big 4 and Brambles are resisting the enquiry as it will cost them money - Go Figure! cheers Berny ----------------------------------------------------- http://serenityattheponds.blogspot.com/ Re: Collusion among the Banks to provide low valuations 9Aug 19, 2009 4:48 pm MagicJ berny Unfortunately in our situation the valuers with RAMS are aligned with RAMS. We spoke with one of them directly (after they mistakenly called us to ask if it was an established home or vacant land they were valuing and I asked who and why they were calling) to provide information that we felt should help. They were reluctant to talk to us and stated that their client was RAMS and they reported and were accountable to them. Our valuers were independent valuers, but they would still consider the Bank as their "client" as the Bank requests the valuation and pays for it. The valuer would not release any info to a third party, even if that third party was the loan applicant. If the loan applicant pays all relevant fees to cover the cost of the valuation, which the Bank initially wears, the Bank will of course provide a copy of the valuation to the loan applicant. But in my experience, the valuer rarely speaks directly with the loan applicant. Doesn't this sound unethical? The Bank requests the valuation and pays for it. Right, so because they intially paid and requested it, they are in a position where they can dictate how it should be valued and what they accept! The valuer, as you wrote has the relationship with the bank. Their client is the bank. But when we settle, the bank passes on this valuation fee to us! Are you saying that in return, we simply bend over and thank the Bank for a report they have already colluded with the valuation company to produce? Where are the checks and balances on this process? Is this the place for Independent Valuers? The problem is that if the lender does not recognise them, our options are limited. I have taken note however, to request these reports. First for the land they recently undervalued and for the build we are currently disputing. It better be a detailed report since we are paying $200 per valuation. cheers Berny ----------------------------------------------------- http://serenityattheponds.blogspot.com/ Re: Collusion among the Banks to provide low valuations 10Aug 19, 2009 5:02 pm MagicJ I worked in lending for one of the "Big 4". Our valuations were all done by external, independent valuers, who would not welcome or in any way allow any interference from the Banks in the provision of property valuations. Their reputation as valuers would be on the line if this ever went on - like Elastic, I have no experience of this happening. I work for valuers and as you said MajicJ, they do not welcome in any way any interference from the bank in relation to the value of a property. The bank is the client but they cannot dictate to the valuer what the property is to be valued at. I also have had no experience of this. Re: Collusion among the Banks to provide low valuations 11Aug 19, 2009 8:26 pm Why is it unethical? The Bank IS the client, from the point of view that it is their responsibility to their shareholders not to make bad loans to people. They are not doing the valuation for you, they are doing it for themselves, to ensure that their security position is solid enough to warrant lending you money. Then, if for whatever reason you cease repaying the loan, they are safe in the knowledge that they can sell your assets to get their money back. That is why the Bank dictates what they will accept. And yes, you have to pay for it, that is the cost of doing business - this is made clear to you as the customer before the loan assessment process begins and you do receive a copy for your own reference. The Bank would never accept a valuation obtained by a customer for this purpose - how do they know your best mate hasn't knocked up a ******* one for you? After all, the Bank is the one taking the risk by lending you their money, they need to protect themselves - why else would they bother taking security for a loan in the first place, if they are not sure what it is worth? Instead they go to industry-recognised, reputable, INDEPENDENT valuers to ensure the process is fair to everyone. I am only talking about the Bank I worked for here, I know nothing about RAMS, but I can't see that they would operate much differently. MagicJ I finally have my own reno thread: viewtopic.php?f=1&t=28335 The reason a dog has so many friends is that he wags his tail instead of his tongue! Re: Collusion among the Banks to provide low valuations 12Aug 19, 2009 9:25 pm Wow! since when did it become their money? "Their money" actually belongs to those who invest in the bank either via share holdings and/or through banking products. I agree that the bank dictates what they will accept including information from 3rd parties. I have family who work for valuers and banks often reject valuations if it breaches acceptable risk criteria. In the course of business one normally gets three quotes to ensure transparency in dealings. I have yet to see a bank get more than one valuation in order to ensure fair market value. Often valuers can vary in their valuation by as much as 30%. I believe the system is geared towards the banks in their contracts when they strip out consumer rights. I read the same article mentioned above in the Financial Review last Monday, the Fed wants to legislate against unfair contracts but the Big Four have complained against this as they will lose money - this is their mentality! Who wants open fair and transparent dealings in business? I think this persons point is that they feel they have the right to build the kind of house they want to live in. I do not agree that a bank through looking after it's own interests should be able to negate this through down marketing a persons home due to abject greed. Any business transaction should be equitable. As long as they can service the loan this should be enough. Interesting you make the point about peoples changing circumstances where people end up on hard times, as long as the bank is ok and people can take second place to corporate. Whichever bank you work for, community and market responsibility are obvious buzz words - said but not practiced. But then again, that is nothing new with banks. Maybe if you spent sometime on the other side of the counter you may have a better view of the inequities banks impose on people. Re: Collusion among the Banks to provide low valuations 13Aug 19, 2009 9:49 pm MagicJ Why is it unethical? The Bank IS the client, from the point of view that it is their responsibility to their shareholders not to make bad loans to people. They are not doing the valuation for you, they are doing it for themselves, to ensure that their security position is solid enough to warrant lending you money. Then, if for whatever reason you cease repaying the loan, they are safe in the knowledge that they can sell your assets to get their money back. That is why the Bank dictates what they will accept. And yes, you have to pay for it, that is the cost of doing business - this is made clear to you as the customer before the loan assessment process begins and you do receive a copy for your own reference. The Bank would never accept a valuation obtained by a customer for this purpose - how do they know your best mate hasn't knocked up a ******* one for you? After all, the Bank is the one taking the risk by lending you their money, they need to protect themselves - why else would they bother taking security for a loan in the first place, if they are not sure what it is worth? Instead they go to industry-recognised, reputable, INDEPENDENT valuers to ensure the process is fair to everyone. I am only talking about the Bank I worked for here, I know nothing about RAMS, but I can't see that they would operate much differently. Are you saying that only valuers paid initially by the banks operate objectively and professionally while independent valuers paid by the 'actual' end customer to provide transparency are...*******? Why then are there usually large discrepancies in valuations for the same property or tenders when people look at changing lenders? Why would my lender say I should provide them with comparable sales figures for the last 6 months only? Why give such an unrealistic small window? I'm all for competition, profits and free markets but I'm also for fair market values based on realistic and level playing fields. cheers Berny ----------------------------------------------------- http://serenityattheponds.blogspot.com/ Re: Collusion among the Banks to provide low valuations 14Aug 19, 2009 9:55 pm Ozman, I believe I clearly stated in my post that it's the Bank's responsibility to its shareholders not to make bad loans to people ie I'm perfectly aware that the money they lend belongs to their shareholders. As for obtaining 3 quotes to ensure "transperency", these are not free quotes we are talking about, valuations are expensive. There has already been complaint on this thread regarding customers being required to pay for ONE valuation, how do you think they would feel about paying for THREE? Or are you expecting the Banks to meet this cost for you? You seem to be of the opinion that the Bank should make unsecured loans to people - ie as long as they can service the loan that should be enough. I'm sure you realise that with unsecured loans, the risk to the Bank increases, therefore correspondingly the interest rate on the loan would be sky high - such as with credit cards, which are effectively unsecured loans. And when people's circumstances change and they can't or won't repay the loan, and the Bank has no fall back security position, do you suggest the Bank should smile and say, "Don't worry about it"? Community and market responsibility are one thing, but the bottom line is that a Bank is a business, not a charity, as I'm sure most Bank shareholders would agree. My DH was involved in the Recoveries section of a Bank for a long time, and believe me, that Banks prefer to help people back on track rather than selling them up. Selling them up is an expensive and time-consuming process, not good business sense, and Bank's bend over backwards to avoid the hassle. I HAVE spent time on both side of the counter, we have loans too, just like anyone else - I'm no blind Bank advocate, a lot of their policies annoy me too. But I'm not keen on uninformed bank-bashing. My only point in this thread , like the other respondees, was to say that in my Bank, there was no "collusion" with valuers. Perhaps YOU should spend some time on both sides of the counter, you would have a fuller understanding of the way things are done in reality. MagicJ I finally have my own reno thread: viewtopic.php?f=1&t=28335 The reason a dog has so many friends is that he wags his tail instead of his tongue! Re: Collusion among the Banks to provide low valuations 15Aug 19, 2009 10:02 pm berny Are you saying that only valuers paid initially by the banks operate objectively and professionally while independent valuers paid by the 'actual' end customer to provide transparency are...*******? No, not at all. I'm sure most customers, like yourself, are honest and only want the best outcome for all involved. However, not everyone is like that - some customer-obtained valuations might be *******. I'm saying that the Bank has to rely on the valuation for their decision making process. It is their prerogative to choose a valuer that they believe is reliable and objective. If you don't like the valuer they choose, go to another financial institution or come up with your funds somewhere else. That is YOUR prerogative. Good luck with it all. MagicJ I finally have my own reno thread: viewtopic.php?f=1&t=28335 The reason a dog has so many friends is that he wags his tail instead of his tongue! Re: Collusion among the Banks to provide low valuations 16Aug 20, 2009 9:39 am In direct response to your question, I have the right to build whatever house I like if it is DA and in my case Design Panel approved and I can service the loan. No, we are not overcapitalising ourselves. We deliberately went for a lower amount than what they wanted us to take because we understand exactly what we need to service the loan even when the rates increase again. Yes I agree you have the right to build what ever you like. However if you need funds to do it you are at the banks mercy. You may be able to prove servicabilty however banks alos must be happy that if it went to sell the property they do not went a loss. I also think we are in great shape in Australia compared to the rest of the worlds banking and housing system. Re: Collusion among the Banks to provide low valuations 17Aug 21, 2009 4:38 am The Banks choose their panel of valuers by a tender system, to ensure that the pricing of valuations remains reasonable for their clients. And, for the "Big 4" it is a very large panel of valuers, each with their own geographic expertise, right across Australia. So to suggest collusion you are implying that upon appointing the valuer, the Bank's Head Office instructs them how to perform their valuations. However, if this were so, the valuer has no way of knowing each specific loan applicant's servicing position or security position to arrive at the Bank's "required valuation". Therefore you are also implying that every lender who is assessing a loan application "instructs" the relevant valuer what figure they are expecting. Part of my job was to order valuations for my lending team. I filled out a very basic form and faxed it off to the valuer, stating the address we wanted valued, when we needed it by and who to contact to arrange access. I usually never even spoke to the valuer until after the valuation was done, unless we were chasing one urgently. I had neither the time nor the inclination to contact the valuer to bang his/her ear about the valuation and even if I did, I can assure you I would have been told in no uncertain terms to buzz off. Valuers are always busy - they don't have the time to chat to every lender in Australia about how to do their job, it just doesn't happen. As for the six month window for comparative sales which has been mentioned, the Bank needs to know what your property is valued at NOW to determine your security position, not what you could have sold it for 12 months ago. That is the whole concept of market value. The real estate market is always uncertain, it changes constantly, especially since the economic downturn - outdated information is of no use whatsoever. Valuers provide an expert opinion on the market value of your property. Of course this may vary from valuer to valuer, some are most likely more conservative than others. Nobody can know for sure what the market value of your property is until you sell it. Until then, financial institutions have to rely on the educated opinion of an industry expert. Elastic raises a good point about over-capitalisation. Just because you buy a property for X dollars and build a house on it worth Y dollars, it doesn't always follow that X plus Y equals market value. You absolutely have the right to build whatever house you want on your land, but that doesn't mean you will be able to sell it for the same money you have outlaid to build it. Having said all that (whew), I am in no way saying that Berny doesn't have a case, or that he/she has overcapitalised. Perhaps your special circumstances are such that the valuation needs a review by your lender. In which case, you are going about things in exactly the right way by finding sales evidence to back up your argument. Banks have to have blanket policies regarding their lending criteria to ensure that their approach to lending is uniform across all their lending centres. However, there are always senior lending staff who have the delegation to make exceptions to policy where warranted. Perhaps you will be one of those exceptions. I really hope it works out for you. Everyone deserves to build their dream home. MagicJ I finally have my own reno thread: viewtopic.php?f=1&t=28335 The reason a dog has so many friends is that he wags his tail instead of his tongue! Re: Collusion among the Banks to provide low valuations 18Aug 21, 2009 7:16 am My mother is a valuer and I can tell you that the banks don't get a say in the valuation process. From what I see when with my mum it is usually the banks calling her to try and push the valuation up so they can lend more money, which doesn't work as Valuers are at risk of losing their license and being sued personally if they give a false valuation. Re: Collusion among the Banks to provide low valuations 19Aug 21, 2009 12:13 pm Quote: Yes I agree you have the right to build what ever you like. However if you need funds to do it you are at the banks mercy. You may be able to prove servicabilty however banks alos must be happy that if it went to sell the property they do not went a loss Because we pay interest, we should have the right to question and dispute any findings. Why is there always a collective response by the banks when interest rates increase? They follow each other. If one goes against general trends, it's not long before the others join them. All I'm saying is there should be stronger say, protection and rights for the consumer. Of course you can always leave your lender. Just pay the exit fees, forfeit any other costs and time wasted and close the door on your way out. It's business. In my case? Whether there is collusion? The jury is still out as to what is going on. cheers Berny ----------------------------------------------------- http://serenityattheponds.blogspot.com/ Re: Collusion among the Banks to provide low valuations 20Aug 21, 2009 12:19 pm gemmaandlilly My mother is a valuer and I can tell you that the banks don't get a say in the valuation process. From what I see when with my mum it is usually the banks calling her to try and push the valuation up so they can lend more money.... - Now that I CAN believe. Gotta reach those lending targets ! MagicJ I finally have my own reno thread: viewtopic.php?f=1&t=28335 The reason a dog has so many friends is that he wags his tail instead of his tongue! 4 6201 If you can calculate the reasonable charged head from let's say 100mm below the gutter to the top of where the vertical riser's horizontal discharge pipe will be, that… 11 17540 Those span tables can be pushed a little for a low deck if you dont mind a little flex. Last deck I did, I pushed it a little and it was still rock solid - no noticeable… 6 13781 |