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A broker has lodged a petition in Parliament calling for property valuations to be better regulated, given inconsistencies in valuations.
Western Australia-based broker Paula Parola has lodged a petition with the House of Representatives and is currently seeking signatures of support to regulate property valuations and improve accountability.
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Created by Western Australia-based finance broker and director of Alorap Creations, Paula Parola (who also recently lodged a petition on clawbacks), the petition argues that change is needed as “common sense is not being used by valuers” and is harming home buyers.
According to the banker-turned-broker, even experienced valuers are allegedly basing decisions on “irrelevant or outdated sales evidence”, with valuations varying wildly in size. According to the broker, valuations can vary from $25,000 to $1 million from market.
She added that valuers are also generally unwilling to make changes when challenged on inconsistent property valuations.
Brokers should be able to challenge valuations with supporting sales evidence, she suggested, noting the detrimental impact unexpected property valuations (particularly those under-shooting market pricing) has on home buyers.
The petition is, therefore, calling on the government to make valuers accountable for work performed and to refund fees if valuations are not aligned with estimates, use outdated information, or valuers cannot substantiate the cost or variance.
The petition is open for signatures until 11:59pm on Wednesday (19 February).
‘Money grab’ valuation fees
Speaking exclusively to The Adviser about why she launched the petition, Parola said valuers can “charge any random price for a valuation” but will often refuse to make adjustments to values despite “minimal sales evidence”.
Parola told The Adviser that she had experienced valuers giving below-market valuations and then stating they were “having a bad day” when challenged, and other examples where a valuer had overestimated the cost for window treatments and flooring by $25,00, which she said would have “killed the deal for the client”.
She also flagged that valuers had no insurance qualifications yet were putting large “insurance values” on the valuation, driving up insurance prices and putting financial pressure on home buyers.
Parola told The Adviser that fees charged for valuations were also costing borrowers, with some valuers charging a valuation fee on top of the actual valuer’s costs, which she labelled a “money grab”.
She said: “As part of best interest duty to our clients, brokers need to have current information to assist their clients, and these valuations can improve or worsen a client’s position.
“[We] just want a reasonable valuation where the valuer talks to real estate agents to check the market, with recent (i.e. within three months) sales evidence, and – when listing an insurance price – having this aligned to the building’s value of the valuation plus 10 per cent (or a realistic percentage).”
The Adviser has asked the body representing residential valuers, the API, for comment but has not received a response by the time of publication.
Brokers have previously flagged issues with valuations, including lower-than-expected valuations pushing borrowers into higher loan-to-value ratios and delays caused by “unnecessary” full valuations.
What do the rules look like?
Property valuations in Australia are governed by a combination of national standards, state-based legislation and professional guidelines.
At a national level, the Australian Property Institute (API) and the Royal Institution of Chartered Surveyors (RICS) Standards govern professional valuation practices.
The API sets professional practice standards, including for mortgage lending valuations.
The RICS valuation standards apply to valuers accredited by RICS Australia.
The prudential regulator, the Australian Prudential Regulation Authority (APRA), also sets standards aimed at ensuring bank valuations comply with risk assessment policies. While many lenders often use automated valuation models (AVMs), certified valuers are required for higher-risk properties.
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