The assessment of the value of an underlying security for a loan is a very important part of the lending process.
The better the assessment of the value- the better the
lending outcome for the borrower.
The requirement for a more rigorous approach to valuations, has
recently come into focus .Some of the reasons being:
· Reduction/absence of value inflation to create
equity in property
· Intense competition driving lenders to accept
higher LVR ratios
· Competitive pressures on paying appropriate fees
for complete valuations
· Low-interest rates encouraging borrowers to
over-borrow
· The last GFC
A valuation is required to be undertaken in almost all
circumstances but particularly when:
· LVR
exceeds 80% (LMI cover typically required)
· Refinancing
· multiple
securities have been provided
· agreement
for Sale & Purchase specifies "without the intervention of an agent”
· certain loan products have specialised
conditions ( eg Lo/No doc or fast doc)
When the LVR is less than 80%, some lenders may use the
purchase price to determine the value of the property or do a "kerbside”
valuation, where the value is determined either through the lender’s valuers’
research or without the need to do an inside inspection.
If no Contract of Sale/Purchase Contract is available, a
full valuation is likely to be required when:
· LVR is likely to be greater than 70%
· The property is non-standard residential
· The property has not previously been occupied as
a residence
· The property has important features which cannot
be reviewed from the road.
Need a property or vehicle loan?
Contact us @ propertyloans@realrenta.com
Marlene Liontis
Friday, 28 February 2020
