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A leading specialist lender has urged brokers to grow more adept at offering valuation advice to customers, with over-valuations being the prime cause of loans souring.
Bluestone Group’s national manager sales and distribution, Royden D’Vaz, told The Adviser that poor valuations, which resulted in deals falling over, were a headache for brokers and lenders alike; particularly for a specialist lender like Bluestone whose rates were determined by LVRs.
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Mr D’Vaz, who joined Bluestone in July after seven years at NAB, said many lenders offered brokers a valuation service “but for some reason brokers aren’t utilising that service to help their customers”.
“Brokers go through all that work and the lender goes through all the work [to get the loan approved] and then they find the valuation comes in and it’s not where they wanted and it all falls over,” he said.
“It’s human nature, the seller is so emotionally involved in it, it’s their home, they’ll naturally overstate the value of their property. And it can go the other way too; customers can underestimate the value because they had no idea it [their property] had increased in value as much as it had.
“The customer’s biggest mistake is thinking whatever they put their home on the market for they’ll get. A house is only worth what someone is willing to pay for it. Sure, you can advertise it for $800,000 but if it sells for $600,000, that’s what it’s worth.”
Mr D’Vaz urged brokers to better familiarise themselves with property sales and prices in their area and said there were a number of websites – real estate specific or RP Data – that brokers could exploit.
“A lot of these sites have this sort of information available and I think it’s up to the broker – particularly if the sale is going to be much lower – to be able to provide that sort of information. These sites have a lot of good data a broker can use, they show what properties are on for sale, what the contract rates are, and each property will show what it previously sold for. They [the broker] don’t have to have an intimate knowledge, just some knowledge of what the values are worth and that saves everybody time in the long run.”
Mr D’Vaz says it’s not about brokers “giving advice”, more, it’s about recommending the sites to their customers.
He also dismisses the idea that, due to the amount of investor lending at present, many customers are buying in areas brokers may be unfamiliar with.
“I’d say that was a low percentage, I think most brokers, 80 – 90 per cent of brokers, would write loans in the areas they knew well," he said.
“Brokers simply need to have a better understanding of the values in the areas they are working in. The more informed they are, the better the industry will be. A broker should have an idea of what is overstated and what isn’t."
[Related: 'Valuations have been creeping up for mortgage books']
