How can you stop off-the-mark valuations from upsetting your clients and damaging your relationships?
The tension between brokers and valuers has been a topic of considerable debate in the mortgage industry, but what does this conflict mean for your client relationships? And how can you deal with unrealistic expectations?
The key to avoiding those difficult valuation conversations, says Home Loan Experts director Otto Dargan, is to be open and clear with your clients from the outset as to what they can expect.
“What we do is we talk to the customers from the beginning and we tell them that bank valuations are usually conservative, and when the results come back they’re either pleasantly surprised or they’re not.”
Home Loans Experts’ webpage features detailed information on property valuations, how they work and common mistakes borrowers make in assessing their own home value.
Rael Bricker, director of House & Home Loans, says information is frequently included in their client communication which explains valuations and what clients can expect in the current market and why.
“The valuers are using data that’s maybe six months old, and we’re in a rising market, so we’re starting to see a difference in perception. They’re using old data and there’s always a lag of about two or three months, so it’s about educating clients and managing their expectations with regards to that.”
During client interviews brokers at House & Home Loans discuss what the clients perceive the home’s value to be and what their justifications for this value are.
Having these discussions can also better prepare clients for on-site valuations, says Bricker.
“If they look at this valuation and say ‘Well I just did a whole lot of renovations’ then they need to be able to sell the valuers on that fact when they come to value the house, so it’s training the clients on what adds to valuations and what doesn’t and how they can leverage that.”
Both Dargan and Bricker agree that using tools such as RP Data help to get a realistic starting point for discussing property values.
When working in a declining market, valuation disparity can be even more difficult to deal with, say the brokers.
“We lend Australia-wide and Sydney is a rising market, but I would say over the last couple of years in places such as Brisbane and the Gold Coast the vast majority of valuations have been inaccurate," says Dargan.
If expectations are set from the beginning, however, and the statistics and reasoning are presented clearly, most clients will accept the valuations without much trouble.
If clients still decide they want to challenge valuations, says Dargan, bringing the conversation back to the facts of the process is the best option.
“The ones who don’t agree or start challenging the evaluation we just give them the stats. The success rate is something around 3 per cent with challenging evaluations, so there is really no point we will generally go to another lender instead. Then if the other lender gives a lower valuation too we need to help them accept the reasoning for that."
Have you struggled with inaccurate valuations? How do you deal with them?
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