by Brian White
I’ve been involved in the property industry for 25 years (as a mortgage broker, real estate agent and investor). In recent times,flawed valuations have become a significant source of complaint, with manyagents advising that valuers are routinely undervaluing property and causing contracts to fall over. Buyers also accuse builders and developers of overpricing property, resulting in low valuations and contracts being terminated. While these scenarios do occur,the hidden culprit is often the type of valuations that lenders demand which can disadvantage both buyers and sellers.
Read on to discover the secret tactics used by some lenders to manipulate property values, protect their backsides and boost profits…all at your expense.
As you are probably aware, if you buy a property which requires financing, the lender will usually insist on having a valuation done. This is a sensible precaution to take when hundreds of thousands of dollars may be at stake. The lender needs to feel confident that should you default on the loan, a forced sale will yield sufficient funds to pay out the loan balance, plus accrued interest, agent’s commission, lender’s legal fees and advertising costs.
While no one objects to lenders fairly protecting their interests, some of the methods used to value residential property are intentionally secretive and deceptive.Most people innocently assume that when a valuation is conducted for mortgage security purposes, it is done on the basis of Market Value.
So what exactly does Market Value mean?
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