Rising home prices lead to bank valuation challenges

There is, says Wayne Albutt, the Rawson Property Group’s Regional Sales Manager in the Western Cape, a very real possibility that bond awards will drop in the next few months.

This, he said, is due to residential property prices rising quite dramatically in the last few months, which in turn is making it difficult for banks to find full value in the properties they are asked to finance. The latest Absa report indicates that middle sector housing has been rising at over 9% year-on-year.

“In these conditions,” said Albutt, “on-the-ball estate agents need to push for high deposits and to prepare themselves for on-going negotiations with banks to justify and validate the prices they are achieving and subsequent increased values.”

If the estate agent has been well trained in comparative market analyses (always an important part of any Rawson Property Group training programme), he or she can, said Albutt, often prove to the bank that the sale price achieved is correct and this is sometimes difficult for the bank’s assessors who have to deal with larger geographic areas to understand the value of any one specific area when they may not have been as closely involved as a leading or resident agent.

Quoting just one example, Albutt said, where recently a property was sold for R4,75 million, the buyer, although having access to a healthy deposit wanted a 100% mortgage, nearly lost out on the purchase due to the bank only finding an initial value of R4,4 million. The astute agent contested the bank’s initial assessment and provided more recent comparatives of sales and values achieved in the area where after the bank granted the 100% bond.

“This type of liaison, professional action and agent behaviour is,” said Albutt, “going to be especially necessary in the coming months, but the good news is that we have found banks to be ready to listen and to make sound decisions when presented with well researched facts.”

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