Why do people perceive valuer’s as being very conservative? In short, if a valuer is valuing a property and the report is for mortgage security purposes, and the Bank ends taking a loss as a result of the borrower not performing his loan obligations, it appears the Bank’s first port of call is a forensic search of the original valuation report.
Valuers are required to hold professional indemnity insurance, and some banks see this as a way to “insure their loan”. So when things don’t work out for them, they send a letter to the valuer advising of the situation and a request seeking the valuer covers the loss the Bank has suffered.
No valuer wants to have their “day in court” to be defamed and discredited by an opposing barrister in front of a judge. Hence, a valuer will only place a figure which, after all his/her research, is realistically achievable in the market on the Date of Valuation.
No longer can a valuer place any great reliance on the “uplift” in value a property may have as a result of a zoning change for example. A valuer can only place his opinion on how much he would pay as a prudent purchaser today, given the information available to him. No-one can know all the information about a property. But given all the searches and conversations he/she has had with various people about the property, and based on other sales of similar properties in the nearby location (if available), he can only advise how much he would pay as a “reasonable” person.
It is this opinion of the valuer is ultimately challenged. I am certain that when a couple are looking to purchase a property, each are seeking different attributes, and the value they place on these. Invariably, it will be the woman who makes the ultimate decision to purchase the property and she may be placing a much greater emphasis on the kitchen and bathrooms, whereas, the husband may be seeking a great media room and back deck for the barbeque. In this case, each will have a different opinion on value, albeit that it maybe within a tight range, there is still a difference of opinion. Then bring in a valuer who has no vested interest in the property and they have their own opinions (which may be a big backyard for a pool for example).