Valuer insists on purchase price

[payjisan]

Looking to purchase a property and the valuer has asked me for the price we have it under contract for. I politely said that we would prefer to wait and see what his assessment of the fair market price is first so we can compare it ourselves. He has now said he will need a copy of the sale and purchase agreement before he can do the valuation and has asked for the sales agent's number.

Am I being paranoid about not telling him the price or giving him the agent's number yet?

We have used this guy once before and he gave a good fair valuation then. The price of this house is about double the last one though and in a different area so maybe he is not so confident.

I would like to build a good relationship here but feel that he is being a bit pushy... Have not dealt with the valuation process very often though so would appreciate any comments.

thanks

[cube]

Why does he need the S&P or the agent's number - if he needs to clarify some details about the property, ask him what those details are and find out for yourself.

In my experience, a valuation done with knowledge of the contract price is heavily influenced by it (as witnessed by a new valuation by the same valuer later increasing more than the market would indicate, but being more in line with expectations).

cube

[Dean@Massiveaction]

I would report the valuer to his employer and never use him again. Biggest load of nonsense I have ever heard

[Heg]

I would report the valuer to his employer and never use him again. Biggest load of nonsense I have ever heard

Ditto. Never heard such crap. none of his business what you paid.

[payjisan]

Wow, thanks for the quick comments everyone, I think I know what I have to do now.

[Glen]

He obviously doesn't know st!!

[SuperDad]

Nice censored emoticon Glen.

[Monid]

With respect the valuation formula used in New Zealand is heavily dependent on the last sale price if it is close in time. Given that the valuer is attempting to determine market value, knowing what it is being sold for is a relevant data point, even if as Cube says this will heavily influence the value. It should since what you bought it for was market value! Now of course you can argue that you bought it for an unfair price (fair being determined by market value) if you want and the valuer can and should take that into consideration but this:

I would report the valuer to his employer and never use him again. Biggest load of nonsense I have ever heard

Is wrong, the valuer is doing their job and doing it well, seeking all relevant information.
Cheers
David

[deliveryman]

.....circular logic?

.....cos if the price it sold for is the market price then why would anyone ever use a valuer.....

.....unless as you say, an investor bought it at an "unfair" (not my choice of words) price and wants to see what it is really worth.....

.....and then isn't it's market price based on the quality/quantity of building being valued and its comparison to those around it, and their prices .....

.....or is it only as valuable as a single valuer values it within their margin of error..........

[Monid]

Nope it isn't circular. The job of a valuer is to determine how much the property would sell for today in a arms length market transaction where neither party was under any pressure to buy or sell.

Surely you agree that what price a S&A agreement has been signed at is relevant information for that, even if there is reason to believe that the actual market value is higher (Because the vendor was desperate or wanted to sell fast or the property was poorly marketed or something). It is not the only consideration but it is an important one.

Just as a btw I wasn't using fair as a moral term but simply in it's economic sense: That is a fair price is determined by a arms length market transaction where neither party was under any pressure to buy or sell.

If you believe that the valuation should be higher than the purchase price then economically speaking the agreed price was unfair. Morally speaking is that problematic? No of course not, that depends on how you went about achieving that price.

Cheers
David

[deliveryman]

.....so perhaps, then,

.....it's "fair" to keep the valuer at arms length too.....

[Seismo]

The job of a valuer is to determine how much the property would sell for today in a arms length market transaction where neither party was under any pressure to buy or sell.

This has a good ring to it. I seem to recall some other factors that may fit into a definition of fair market value...reasonable exposure to the market, 'normal' financing arrangement for the buyer...while the 'unfair' value may be of interest in the valuation process, if the property was obtained at that lower value in a way that broke one of these assumptions (ie maybe the seller was desparate to sell), then does that really make it fair market value? Hmmm.

[Monid]

This has a good ring to it. I seem to recall some other factors that may fit into a definition of fair market value...reasonable exposure to the market, 'normal' financing arrangement for the buyer...while the 'unfair' value may be of interest in the valuation process, if the property was obtained at that lower value in a way that broke one of these assumptions (ie maybe the seller was desparate to sell), then does that really make it fair market value? Hmmm.

Exactly! When investors buy these conditions will often apply (Especially if they are from the 20% below market value camp). And of course these factors are relevant and ought to affect the valuation as should comparable sales, but the actual sale price is still a relevant piece of information for determining the bottom value if nothing else (On the assumption that some of these factors do apply and so the sale price is lower than it would be in a fair market transaction)

Cheers
David

[Monid]

perhaps.....it's "fair" to keep the valuer at arms length too.....

Nope, because the relationship you have with your valuer is not an arms length relationship it is a fiduciary relationship like the one you have with your lawyer or accountant. (That is why they are professionals) In other words it is a relationship of mutual trust rather than market. As such withholding relevant information betrays that mutual trust.

Cheers
David

[Monid]

Sorry everyone for my somewhat rabid defence of valuers. It is just from working with many of them in terms of training them in professional ethics, most are really genuinely committed to doing the best for their client as possible by delivering an accurate valuation. Indeed quite a few of the disciplinary proceedings I have read through often the complaint is that they have been too biased towards their client (In particular in regards to setting market values in compulsory government land purchases, where they regularly value properties higher than the expected market value). As such I think it is a bit rough when we investors start to complain about them for doing their job well!

Their job is to determine fair market value, not give you a valuation that confirms what you think or shows you have made more money!

Okay that is enough of that rant

Cheers
David