- This topic has 12 replies, 3 voices, and was last updated 8 years, 7 months ago by
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Hello,
just received the report from the appraiser that the bank is using as a basis for what mortgage they will approve. Really not impressed with their methods. Among a lot of other things, instead of using transactional data they appear to have using square meters and asking prices from real estate websites, which really isn’t a very exact method. I feel that a high school student would have done a better job and used web “data” with more caution than this appraiser. Doesn’t Spanish appraisers have access to transactional data?
And Mark – thanks for a fantastic newsletter! You are doing a great job.
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Hi Sofia,
No, the Registry information is not public. Even if it was, there has been so much money passing under the table in the past it would be meaningless. Much more accurate now, but still doubtful. So Asking Prices are the best source of information for valuers. They have to judge the comparison and estimate the amount of discount sellers are accepting genrally. When the market was bad that was as high as 20%, but now asking prices are being raised and in the best locations with few properties, it’s ‘pay it or miss it’ for the buyer.
Tasadores (Spanish bank valuers) are obliged to value according to the dictates of the Bank of Spain, which can relate more to a wish to ‘guide’ the economy rather than accurately reflect the market. In addition, seeking comparisons, some tasadores are known to use previous valuations. Great for consistency, but if the original value is inaccurate, subsequent values depending upon it will be too. Also, their fees are low, the tasadores that is and not their bank employers, so they have to scurry round many properties to make a living. There is little time to ensure that all is correct.
The banks may also use ‘guiding’ the tasadores in their values to encourage purchase of their own properties and discourage sales of competitors on the market. Its not a fair game and the tasadores are pawns in it. -
Thanks for your reply. I think you are on the spot, especially about the appraisers work situation. In this report, I think someone has really tried to cut corners.
Turns out that of the only six comparison houses, three don’t exist, three have no street address and “sin nombre”. The square meters of these houses are all over the place. For example, in this urbanization where we live, all three bedrooms are just under 100 square meters. Yet, in this report there is a two bedroom of 135 square meters.
I found it odd, so I decided to drive by and have a look at this 135 square meter house, and guess what… It didn’t exist. The street number vas 56 and this street ends with 44. I assumed it was a typo, but when it turns out the only other two houses with addresses were also in the lemon fields one starts to wonder… You would expect at least one indentifiable house in this survey.
From this “data” they calculate square meter prices with two decimals, which determines the size of the loan and the interest rate.
Since this survey is not just a formality, it’s final and cannot be redone, plus the fact that we paid for it, I expect a serious job.
I really don’t care if all of the above is common practice in Spain. As a consumer I find this completely unacceptable and will not give up before I get a serious appraisal.
I am currently working on a feedback letter to the bank and any help and input from anyone in the know would be greatly appreciated.
PS. Our first choice would be to buy a bank repo from this bank, we would be very happy to, because they offer 100% financing at a better interest rate. Problem is that there are none in this area.
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“When the market was bad that was as high as 20%, but now asking prices are being raised and in the best locations with few properties, it’s ‘pay it or miss it’ for the buyer.”
Exactly. In the report they have randomly deducted 10% or in some cases 15% of the asking price on the comparison houses, whereas we know, because we live here and have been looking for houses here for two years, most sellers will not come down one euro.
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Sofia, I don’t know about the ‘lemon field’ properties, but that doesn’t read well!! Certainly worth going back to the bank. Would be good to go back to the tasador too. I don’t think it is, and hope that it’s not, ‘common practice’. You’ve got a ‘bad ‘un’.
Nothing complicated in the feedback letter. Just say what you’ve found, it looks like fraud by both the bank and the valuer; that if they don’t investigate it promptly and thoroughly, you’ll be complaining to the Bank Ombudsman, the Bank of Spain, the appropriate professional Colegio of the valuer, (Arquitecto or Arquitecto Técnico), the Junta de Andalucia consumer office and anyone else you can think of.
Beware bank properties with 100% mortgages. Always check that the price is good compared with those around. Remember that if you needed to resell within a month or even a couple of years, you would be offering without the mortgage and so would have to compete on price. Especially difficult if the banks are selling others nearby with 100% mortgages.
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Hmmm, good point… Might rethink my strategy. My letter is much lengthier, because my original concern was the small sample size and seemingly random selection of properties (even if they had existed).
There are several houses of the exact same type for sale in this area and I feel that those would make up a much better comparison. We are only interested in south and west facing properties and the appraiser claims in the report that orientation doesn’t affect the value. This is not true, in our area the asking prices for north and east facing houses of the same three bedroom type are typically up to 20K less – and they still don’t sell.
Then it’s the actual house. This particular model is more popular than the others, so I really feel that they should be comparing “our” house to the same type of houses with the same orientation available on the market.
Just to give some more background: this house, when west or south facing, in this area, typically is advertised between 179.000 – 199.999, and most will not sell for less, they will rather wait a year or two. The valor castral of this property is around 154. The sellers have agreed to 155,000 and after carefully researching the market for two years, while living in the area, we felt that the price was fair. It’s not a bargain, but it’s not expensive. It’s pretty much on par. Our bank manager agrees it’s a reasonable price and the mortgage was approved by the bank for this amount based on their opinion this was a good buy.
So we went ahead with the valuation a) because it is mandatory for the mortgage and b) because the bank and us thought that with a favorable valuation we would get an even better interest rate (the interest rate we get is already good). So it was quite a shock when the number came back as 140,928 €, which means the bank can only approve a mortgage of this number. It’s only a 14,000 € difference, but the theoretically higher interest rate is something we will be paying for in the long run, because of this sh*t report.
Now, the problem is that this is the first time in my life that I see a Spanish appraisal report and I don’t know what is reasonable to ‘ask’ for. How many properties are usually used to calculate square meters prices, and are the properties normally identified, and are they comparable or any random property? If you have a very large sample, you can do average or mean prices using any kind of properties, but with so few surveyed houses, could we ask (demand) that they only compare with houses of the same type?
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I suggest that you stick to the one complaint – that the comparables are fictitious. This is by far the most serious ‘error’. I agree with all your points, but point out that the valuer will not have had the time to go into the very local market in as much detail as you. However, its bosh that orientation does not affect value. Check that the valuer’s valuation is before or after the banks costs i.e. has he/she deducted agency fees, etc. before giving the value. 10% off would account for that.
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I sympathise with your situation. I have had several bank valuations over the years in Spain – for various reasons – being sporadically active in the market and I can tell you that they have all been the most unprofessional, lazy, inaccurate and misleading multi-page documents you could encounter. Never based on like for like properties, areas or condition, – just random previous sales pulled out of a hat. I’ve never got anywhere by complaining or by producing counter arguments as the banks say their hands are tied by the Bank of Spain and they are not allowed to question the valuations. Though even so, I have always remonstrated with the bank managers, to the point of shouting and swearing, in the hope that if more people do this it may change their attitudes and get them to do something about this disgraceful farce. -Sadly the Spanish seem reluctant to cause unpleasantness when they are wronged, and accept being charged for it.
If the property is truly the best you can find and you can bully the bank into letting them give you some business, maybe a personal loan, -or credit card? might bridge the gap, if you could see your way to higher payments for a while to keep the long term mortgage interest rate down.
I would also say try to get a reduction in the purchase price, but I honestly hope they refuse as it’s terribly unfair on them.
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Oh lord! It is really not good news that this is common practice.
The only positive thing compared to your experience may be that our bank manager is on our side. But not much he can do. He has asked us to provide feedback which he will forward to the appraiser.
Just read in a Spanish forum that they can use as few as six properties to compare:
“Método de comparación: es el método más utilizado y consiste en valorar el bien objeto de la tasación mediante su comparación con otros bienes de similares características cuyo valor sea conocido. La normativa exige como mínimo 6 “inmuebles testigo” que serán ponderados por coeficientes para asemejarlos al bien objeto de valoración. Con ello obtendremos un valor unitario del m2 de inmueble que multiplicado por los m2 del inmueble objeto de valoración supondrá el valor de mercado del mismo.”
This is the absolut minimum according to the law. No excuse for doing a shitty job though…
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One thing that can be helpful is to provide the valuer with comparisons that you have obtained from your detailed researches. Yes, it’s doing the job for them, but keep your eye on the result that you want, being an accurate valuation of ‘your’ property, and not trying to change the system. You’ve spent days, weeks and even months researching and are more expert than the valuer who has to flit from one area to another according to instruction. He/she should be keeping an eye on the bigger regional picture of values so that he/she can judge one area against another. However, that’s no excuse for using as comparisons properties from widely different markets and locations. Remember too, that the valuer has to protect him/her self against being sued for over-valuing should the market drop. The banks want them to be cautious and not bullish. It is generally accepted in UK Courts that a valuation can be +/- 5% at variance from the true value – whatever that is? The internationally accepted valuation definition is – The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.
In addition, go after them tooth and claw if they are inventing addresses and comparisons. There is no excuse whatsoever for that.
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I don’t mind at all doing their job, if the result is that I get a fair valuation. Since I moved to Spain I feel that I am constantly doing the job of our lawyer, accountant, the tax office, but in the end the outcome is usually what want it to be. It takes time, but it is time well spent. Like David Vick says, it seems like the Spanish don’t really stand up for themselves, even when they are seriously wronged.
Anyway, I prepared a letter which I sent to my bank manager. He thinks it’s good to go, and wants to translate it to Spanish and send to them. This morning I woke and felt that your advice was better, just focus on the fraud part so that doesn’t get lost, so I asked him to wait a little bit… Now I am not sure. SurveySpain – can I send you my draft as a private message? You seem to know what you are talking about.
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