Is the bank's valuation the same as market value?

whatcanido29

Hi Guys,

I am in a tricky situation and need some help asap! Many many thanks in advance to whoever helps me out here!!

I am selling a house that me and my sister co-own. Originally the idea was to have three valuations done, and agree the sale on the average. My sister contacted me and told me she´d a price from an agent to whch I agreed. She went about getting her loan, and when it came time to sign the sale documents I asked for the other valuations. And she told me she didnt do any more valuations.

I rang the agent who did the valuation and he told me that he´d put it on the maret for 20% higher. I asked for the valuation her bank did and it was the price my sister told me, but 20% lower. A you can imagne this is causing a lot of stupid aggro. You said this, I said that malarky!

I just dont trust the valuation from the banks. I have read online that they always value the house lower, as they are interested in covering their backs as opposed to maximising profits. Ie they just want their money back asap in case of mortgage repayment problems.

Does anyone have experience with this? Does the bank value houses at a lower price than market value?

My solicitor said they usually value it a little more, and so did my local bank, although it´s a bank in Spain, as I live here. So its different from Ireland.

And all the research I have done online says that the banks valuation is lower than the market value. I don´t know what to believe. I am getting another valuation done next week, but would appreciate if this little confusion was cleared up!

Thanks a million!

J

MouseTail

Is the property in Ireland, if so, I would pay little credence to the Bank in Spain. The original agreement was fair, 3 valuations, and choose the average.

Hotzenplotz

We went sale agreed twice in the last few months, both times the bank valued it at the sale agreed price ( both properties were sale agreed at about 5% above asking price)

whatcanido29

Thanks MouseTail,

Yea, the property is in Ireland.

Well, my sister has said that she is not raising the offer. What is of most interest to me is knowing the actual value of the house.

Thanks again!

J

whatcanido29

Hey Hotzenplotz,

just to make this clear, you agreed on a price privately (this is what sale agrred means i guess) and the bank valued the property at 5% more than the sale agreed price?

Did you get it valued by an estate agent? And was there a difference between the agents valuation and the banks?

Thanks,

J

MouseTail

Is your sister buying you out?

Hotzenplotz

Sorry, I should have been clearer.... In both properties we were bidding to buy. The houses were valued by an estate agent and advertised at that price.

In both properties there were several bidders which caused the bidding to go above the asking price. When the final price was agreed (sale agreed price) the banks made their valuation. Their valuation takes several factors into account, including if the property requires work and the value of other recent property sales in the area. In both cases the bank valuation matched the sale agreed price.

whatcanido29

Hi Hotzenplotz,

so the bank nkew the sale agreed price before valuing the property?

If so this slightly skews my take on things. Because if the loan is asked for upon the house being at a certain price then the banks will want minimum the price from which the loan is based on, wouldnt they?

Do banks base their valuation on the sale price or the actual valuation? This is where things get very grey I guess!

For eg if a house is worth 150,000 but the sale is agreed on 130,000 then would the bank base their value using the 130,00o as a marker or the 150,000 as a marker?

Yes, MouseTail, my sister is buying me out!

Cheers again!

J

Hotzenplotz

Yes, in my experience the bank is made aware of the sale agreed price. They then decide if they are willing to finance the mortgage at that price. The only time I have heard of banks disagreeing with the sale price is if there was significant structural work needed to make the property habitable.

However I am not massively experienced in property sales, this is just reflecting my dealings so far.

P. Breathnach

In general, the value of a house is taken to be the price it can achieve if sold in an open market. For that reason, banks usually accept what an open-market purchaser is paying is the true value - although they might sometimes think a purchaser is overpaying, and substitute a lower valuation.

Your problem, OP, is that you have not got an open-market valuation. If there have been comparable properties sold in the past few months, then the prices they achieved might give you a reasonable basis to value your property. Otherwise, the best you can do is get a best-guess from somebody who knows the local market. Your original plan to get three valuations was a reasonable approach. If you can get back to that, and also make sure that the EAs understand that you want a genuine estimate of what the property might achieve in the open market, that would be the best thing for you.

Bear in mind that a valuation for in intra-family transfer might be on the low side.

whatcanido29

Thanks P. Breathnach! Thats what I was expecting to hear. I also dont think its an open market valuation.

ALso once again thanks Hotzenplotz!

J

Little Miss Cutie

The bank valuation is done by an estate agent. My understanding is the value cant be higher than the sale agreed price.

When we bought in July last year, the valuer said he thought we bought for a great price and he was restricted to valuing it at the sale agreed price.....

whatcanido29

Hi Littlemisscutie,

Thanks for your input!

J