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Post by Carol on Feb 4, 2007 16:16:42 GMT 1
I bellieve it. My comment was about the valuation. In my experience the bank's valuers value property down by as much as 50%. The reason they do this is becuase its what the banks want them to do to protect their investment i.e. if the person defaults and the bank takes the property, they will have no problem covering their losses if the property is worth twice the vakue of the loan. Mostly the valuers are just estate agents who get paid by the bank to do the valuations. Its in the interest of the agencies to do what the bank says because its a nice steady source of income to see them through the times when they are not making many (or any) sales.
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Post by darcy on Feb 5, 2007 11:29:48 GMT 1
Carol is right about the bank's valuators. Banks need to secure the loan, so they need to downplay the valuation or increase the deposit. Also, banks do not offer mortgage insurance, and that is also an important factor.
My only question is what data valuators use to get the valuation? After all, they might be right - all prices could be easily inflated by 50%. Why not?
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Post by Carol on Feb 5, 2007 13:11:01 GMT 1
how do you value any asset: equity or a bond or oil painting or a house? Its the same thing whatever the object, the true value is the price people would be willing to pay for it (NB people not one person). For equities and bonds that is easy enough to establish since there are usually lots of buyers and in some places its easy enough to value property because there are lots of similar properties changing hands regularly. However on the coast in Croatia this just doesn't apply. there is a lot of property for sale and a fair number of buyers around but all the propertis are so different. You can't even automatically infer that a property is overpriced just because it has been for sale for a long time. Here accurate valuation is almost impossible but forming an opinion about the range is not once you get to know the area well. However I know the banks are undervaluing when the valuation they make is something that I could sell the property for in a few days (if not hours) sight unseen if it were to come onto the market at that price (which is what is happening).
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Post by rijekafan on Feb 6, 2007 12:34:14 GMT 1
My valuer does bring in conservative valuations but this is expected. I have the same experience in Australia. What else can they do? However the Croat valuer is always within 20% of what I would deem the value to be. This is the problem with real estate alot of the value is notional. The only way I can truly judge the value of the property is to calculate the net rental yield. Even this has its problems as it does not factor in blue sky and people that want a lifestyle rather than a good rate of return. As I rule I would say the net rental method works very well in cities but as soon as one gets to coastal resorts it all becomes quite tricky.
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Post by nikh on Feb 6, 2007 14:55:50 GMT 1
as an investor i disagree the banks are actually valuing at close to the real rate,but Carol is also right. the problem here is one of greed and also purchasers accepting the price as they compare to their properties at home. Purchasers are also unrealistic about the costs of maintaining the property and potential rentals, what is applicable in other makets does not necesssarily apply to this one. Its early days but things are changing. Some regions are luckier than others. As long as purchasers continue to pay the prices how can you blame the Croatians for doing this / Also alot of purchasers fall in love with a property and buy with their heart and not their brains, this is fine if it is your holiday home or a lifestyle change as the value is the value based on what is worth to you and not a capital return,
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