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Property Valuation System a joke?

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  1. #1

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    Jan 2016
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    Property valution

    Hi,

    I am interested in buying a house, and I have asked mReferral for valuation.
    it was 3.1M, while asking price was 3.48M (I did not tell mReferral the asking price).

    I told the real estate agent that asking price is too high based on this. Agent got back to me with reference number from BOC, that BOC values it at 3.5M. I checked with HSBC as well and they also value it at 3.5M (but BOC and HSBC asked asking price)

    I asked mReferral why their valuation is low, and their response was “because they did not take into account the asking price”.

    I am a bit confused. Shouldn’t the valuation be independent from asking price? What is the point of asking for valuation if they reiterate my asking price?

    Thanks for reading


  2. #2

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    There have always been variances between the mortgage valuations quoted by various banks. It's been a while since I was in the market, but for a while BOCHK consistently provided higher valuations the HSBC, SCB or DBS. I don't know if that's still the case?

    While I agree with jrkob that houses are less liquid than apartments with fewer comparatives which makes providing a valuation more difficult (most valuations for residential properties in HK are based on sales data for comparable properties), I struggle with the idea that the asking price has any relevance to the valuation – if that logic was correct then valuations can be lifted simply by vendors inflating their asking prices? Am I missing something? If not, next time I need to reportage, I will instruct an agent to list it for a few million more than it's worth so I can get a bigger mortgage?


  3. #3

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    Original Post Deleted
    That's diligence!

    The other website I look at is Centanet which has a database of sale and lease transactions which I find reasonably useful.

  4. #4

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    I think the banks use their own formulas to work out the valuation. Usually this is for mortgages and which they lend a percentage of.

    I guess if they want more business (home buyers getting a loan or mortgage from them and paying interest), then it makes sense to give a higher valuation and better interest rate.

    I found BOC was better than HSBC and Hang Seng for both these important factors.


  5. #5

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    Many of them outsource the valuation tables to companies like DTZ and don't bother with their own calculations. Look for the fine print near / bottom of page on the property valuation pages of the banks. The disclaimers usually have licensing info.

    traineeinvestor likes this.

  6. #6

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    Property Valuation System a joke?

    Hi,

    I am looking into buying a property and "property valuation" quoted by banks seems really like a joke to me.

    I am asking three institutions: HSBC, BOC, and mReferral.

    When I asked those three institutions on the same unit, they quoted: 3.2M, 3.0M, and 3.5M.
    I asked mReferral why their valuation is so different, and they said it's because I "did not provide asking price".

    According to the agent, when agent asked BOC for valuation and got 3.3M. I said when I asked BOC for valuation it was 3.0M.

    Agent said it is because they (agents) "have a lot of business relation with [banks] and therefore can get more desireable valuation easily".

    So in conclusion, property valuation can be affected by:
    1. whether or not I provide asking price
    2. who asks for valuation (buyer or property agents)

    This just doesn't make any sense to me. Sounds like property valuation is a joke to me...

    Is this really the way property valuations work??

    Last edited by simpsjk; 15-01-2020 at 12:23 PM.

  7. #7

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    There has been another thread recently about this.

    Dare I ask - what sort of property is this? The valuations seem to vary a LOT for village houses / low density / old properties (walkups etc). Larger estates have the benefit of some sort of recent transactional volume.

    Couple of things

    - look at recent transactions on Centaline etc, ask the broker for recent transactions.
    - look at the rental value (non inclusive of rates / management etc) of the property and multiply by 600 to 650 to get a very very vert very rough estimate of what it is worth.

    (And yes, property valuations are sketchy in HK!)


  8. #8

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    Hi Shri,

    it is a old stand-alone building (52 years old).
    the agent is actually Centaline guy, and I did check historical transaction prices. Asking price seems to be overvalued slightly (seem 3.2M is about right).

    Of course I wouldn’t buy at 3.3M, but just wanted to have a look of what professionals (banks) considers a “fair value”.

    but it appears that valuation system is really a joke and not at all professional...

    Paxbritannia likes this.

  9. #9

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    Quote Originally Posted by simpsjk:
    Hi Shri,

    it is a old stand-alone building (52 years old).
    the agent is actually Centaline guy, and I did check historical transaction prices. Asking price seems to be overvalued slightly (seem 3.2M is about right).

    Of course I wouldn’t buy at 3.3M, but just wanted to have a look of what professionals (banks) considers a “fair value”.

    but it appears that valuation system is really a joke and not at all professional...
    With respect, I disagree both that the valuations are a joke and that they are unprofessional.

    The valuations provided by the banks are loosely based on recent sales in the same or comparable properties. However, they are not able to take into account very recent changes in prices - almost by definition this approach results in bank valuations which lag the market when the market is changing (in either direction). Also, variations such as interior fit out (new v old) and significant differences in outlook caused by, for example, a flat one floor higher being worth a lot more because it looks over the top of an adjacent building instead of into the neighbours bathroom, are not reflected in these valuations.

    Since it makes zero sense to base valuations of residential property of yields (as is often done for commercial properties), there really isn't a better system unless you want to pay a professional to come round, do an inspection and issue a formal valuation report. The bank's don't need this because ...

    ... the valuations are done by (or for) the banks for the purposes of mortgage lending. They are not done for the purpose of telling prospective buyers what a property may be worth. For the bank's purpose, so long as the valuation is close enough to market, there will be enough equity in the property to protect the bank's position.
    jrkob, jgl, cookie09 and 2 others like this.

  10. #10

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    Since it makes zero sense to base valuations of residential property of yields (as is often done for commercial properties)
    @traineeinvestor - dare I ask why it does not make sense? There is a correlation of sorts (anecdotally observed and not really researched) with the rental value of a flat and a sale price - around 2%ish at the moment in HK.

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