When the real estate market was in full swing they were best of friends. A new client would approach the bank for a loan, the bank would ring the valuers. They would barely leave the office to come up with a number, they didn’t need to see the place, it was only going to go up in value anyway. They may have been 20% out but it really didn’t matter no one ever thought that the market was going to go down.
Those were the “dream days”. I actually know valuers who changed careers during that time because they didn’t like where the industry was heading. I was told by quite a few of them that their expertise was being ignored and their clients were applying undue pressure to make sure that the valuation matched the loan products offered even when they didn’t meet reality. One day it was all going to blow up in someone’s face and they didn’t want to be there when it happened.
Well it seems that the “when” is now. As the market turns the friends are falling out. It is time to point fingers about who is to blame for the mounting losses.
The nation’s banks, financiers and mortgage insurers are pursuing property valuers for negligence claiming their inflated values triggered more than $100 million in losses in both residential and commercial property since the start of the global financial crisis.
In one example, BankWest has sued CB Richard Ellis and two of its valuers, claiming $2.1 million in damages over a commercial property in Kogarah, New South Wales; in a second case, residential mortgage backed securities provider Resimac is suing Megaw and Hogg National Valuers claiming a $258,000 loss due to a negligent valuation. The BankWest suit claims CB Richard Ellis valued the Kogarah property at $4.1 million in July 2007. It was sold in April 2010 for $1.05 million. The Resimac suit claims that Megaw and Hogg valued the Brisbane home at $850,000 in April 2007, but the lender claims it was only worth $575,000 at the time.
DLA Phillips Fox partner Lindsay Joyce, whose firm is defending CB Richard Ellis in the BankWest case, says a defence to this action will be filed this week.
Another win for self-regulation!
I can only assume that these losses have been caused by loan defaults. Without some further government intervention ( and maybe even with ) the credit and demographic environment is going to continue to put downwards pressure on the housing market. If these cases find in favour of the banks I would assume that this is just the beginning of this type of action. For the sake of the valuers I hope that the Gold Coast doesn’t start defaulting in large numbers because some of the price to sale ratios in that area are plain scary.