We’re all about doing rigorous due diligence at Southern Cross Partners. This includes up-to-date property valuations – which we require to be as recent as possible - using the most accurate and up-to-date property information.
There are several valuation methods we use depending on the circumstances of each individual loan. Valuation decisions are based on the property type, loan to value ratio (LVR), location, and the purpose of the loan.
Valuations tell us what a property is worth and helps us decide how much we’re willing to lend. With ever-shifting market conditions, being a conservative lender comes in handy.
Here, we break down the different property valuation methods we use at SCP. Whenever we’re faced with two different valuation methods, we always use the method that gives us the lowest value.
Registered Value (RV)
An RV is the market value of a property as determined by a registered valuer. Registered valuers place a specific value on a property based on size of the land, condition of the property, and the state of the local market.
We have a panel of trusted valuation companies we prefer our customers use. These companies tend to be large, well-known firms that have more rigorous checks and measures in place, rather than solo enterprises.
There are some circumstances where we may accept a valuation from a valuer that is not on our panel, for example where a valuation is needed for a standard property with a very low LVR.
Comparative Market Analysis (CMA) A CMA estimates the value of a property by comparing similar recently sold properties in the same area. We use leading property data, information, analytics and services provider, CoreLogic, to determine our CMAs.
CoreLogic pools comparative sales data of properties within a specified geographical area, for example within a 2km radius, of a similar land and building size as well as room configurations.
An average value range is then produced with the lowest of the range then used as our CMA in most cases: if the CMA produced a value range of $850,000 to $900,000, we would use $850,000 as the estimated value.
Sale and Purchase Agreement (SPA)
SPAs are a legally binding contract between a vendor and a buyer for the sale of property. It states the exact purchase price of the asset being sold.
We may use the SPA to determine the value of the property provided the contract has been transacted through a licensed Real Estates Agents Authority (REAA) provider and was conducted at arms-length with unrelated parties and has a willing seller and willing buyer.
The contract must be less than six months old, and, in most cases, we would back up that value with either our own CMA report or a real estate agent's appraisal.
Real estate appraisal
A real estate appraisal draws from similar information as a CMA, but they are conducted by licensed real estate agents. We opt to use a real estate appraisal over a CMA where we feel we need more insights into the demand for property in the immediate area and in some cases the condition of a property, which requires a site visit.
A real estate agent is in tune with the market demands of property in their area and whilst not a comprehensive report like a registered valuation, they can still provide supporting data to ascertain the market value of the property. Again, we would use the lowest of any valuation range provided.
How are the values used?
An accurate valuation is extremely important as it tells us whether the security is worth lending against.
It also helps us to ascertain the LVR, or in other words the amount we’re willing to lend relative to the value of the property.
Why do we deduct GST?
As a conservative lender we must ensure we lend the right amount, on the right properties and to the right people. Loans in which the borrower is making profit – such as for business purposes or for a development - are usually subject to GST and as such we ensure that we make allowances for that should the need arise.
SCP’s been in business for the over 27 years and we’re proudly New Zealand owned and operated. We’ve seen the market ebbs and flows throughout this time and we’re well-equipped to weather any storms through conservative lending, beginning with accurate property valuations.
How to find a property’s valuation, and valuation method, on the portal
Log into the investor portal and navigate to the Investment Opportunities section. Click the listing you’d like to explore and click the details button.
A pop out box will appear showing you further specific details about the loan including property details.
On the bottom left-hand side of the screen, you’ll find the property’s valuation, valuation date and method.
Southern Cross Partners is licensed to provide peer to peer lender lending services under the Financial Markets Conduct Act 2013. This article is general in nature only and has not taken into account any particular person’s objectives or circumstances. We recommend you speak with a financial adviser before making any investment decisions
