Now I’ll through the example out, we secured a property for a client literally this morning. That property was an off-market purchase. I think we ended up securing $315 000. Based on comparative data we can see that the market would probably pay $340, 000 for that property without anything being done to it. Theoretically my client can go and get $25, 000 from the bank and all of a sudden reinvest that in the market but not the case. And we don’t necessarily always say that that is going to be the case. So, hoping from a lending perspective Scott, you might be able to give our viewers understanding about how they can access equity and when they should be looking on getting re-values on property.
Scott Le Quesne: It’s a question that we do get asked a lot. A buyer’s agent got me a great deal, I’ve bought it well under market value, I’d like to buy it and immediately access that equity by getting it revalued and tapping into the immediate equity that I’ve got there. I guess true value and bank value are two different things. A bank valuer will look at contract of sale generally and then unless it’s extraordinarily cheap they will value at a contract price because that’s what you agreed to pay for. So effectively you’ve set the market price by agreeing to pay for that and for the vender agreeing to sell it to you for that.
So, I guess the bank valuation will always be based on the contract of sale, 99% of the time. If you are looking at revaluing the property we suggest you wait sort of 12 months to get it revalued. Because if you do it inside of six months, the bank will use that sale as a direct comparison because they have certain parameters that they need to use when they looking at valuations. One is sale of a similar type of property within six months. So, if it’s sold within six months it’s a direct comparison of itself.
So, we generally say wait 12 months until it’s well out of the system for being used as a comparison. The one thing that you can do, if you going to do a renovation so if you going to get in quickly do a renovation of your property, get it revalued to try and access equity. One tip that I’ve got is to keep records of what you’ve spent, so invoices, any trades that you’ve used, before and after photos to actually provide additional information to the valuer. We have the ability to provide documents to a valuer when we ordering a valuation. So, provide that to your broker, to your lender to say this needs to go the valuer so we can get a true reflection on the current value this is what’s been spent this is the current value. So, you can certainly do that.
Paul Glossop: Yes, good point. I think that the before and after effects of these selling what you’ve done to that value, is key. Don’t leave it in their hands because you need to explain if you’ve added value, you need to explain where you’ve added value it’s not necessarily say you’ve put a coat of paint on the wall to say look if you bought it for ‘x’ and you perceive it to be worth ‘y’, you need to tell them why.
Scott Le Quesne: Even simple things like dressing the property. If you’ve done the renovation and you don’t have your tenants in there yet, you can dress the property. And it makes a huge difference. We’ve seen examples of it makes a very big difference when a valuer walks through. Having it dressed to being a vacant property as well.
Paul Glossop: Yes, absolutely. I think it’s quite a common one and something that’s quite close to myself and my team as buyer’s agents. We all day, every day we look at property and we look at comparable sales of properties to see if the property we’ve secured is the right price or we should be getting a cheaper price. It doesn’t necessarily mean to say that that is going to therefore mean that we’ve got that property $30, 000 under market value because ultimately as you said we setting the price when we buy it at that price.
However, we want to know what comparable’s are selling for. So true value versus market value as you said two different things, but we want to always make sure that you trying to buy that property at the right price and hopefully below that comparative sale market, and if you do want to add value from a renovation, keep records and want to try and reassess equity beyond what you’ve spent on it make sure you trying to say “Well here is what I’ve spent, here’s what I’ve done, here’s what it compares to out there in the market” and you might well be able to extract a portion equity by doing that.
Scott Le Quesne: And just an understanding the actual value and mortgaging value are two different things.
Paul Glossop: Yes, most certainly. Good insights and always if you do want to get in contact with Scott or anyone from his team, feel free to give him a call as per the details at the bottom of the screen. And from our side from a buyer’s agency perspective our contact details are at the bottom and we always happy to set out some time and have a chat. We’ll catch up with you soon. Cheers!