BANK VALUATIONS!!!!!!!!!!!!!!!!!!!!!!!!!!!

Much has been made of the differences over the way that valuations are done in Spain by comparison with other parts of the world. What is certainly apparent in the current climate is that banks are now starting to pay a great deal more attention to the purchase price of the property when assessing valuation figures. There appears to be less dependance on the cost per square metre to build formula. While that will still be a reference point lenders are being brought to heel by the Bank of Spain to be more conservative in their valuation assessments and a bank official told me yesterday (in light of a badly valued property) they have been instructed to down value by 3%. The only problem is nobody is quite sure what the 3% is in relation to -  last years value? purchase price? catastral value? or most recent price comparison? - for the latter this could be linked to a declared price which may not in fact have been the price paid!!!!!!!

ALL SOUNDS TERRIBLY CONFUSING DOESNT IT????? Believe me it does to me too!!

Yesterdays published valuation figure was 395,000€ which spookily enough is roughly 3% below the purchase price of the property - hmmmmm?? A similar townhouse on the same urbanisation physically transacted in June 2007 at 415,000€ and in fact is smaller than the property valued yesterday - the house in yesterdays report is also a corner unit and better aspect. The valuation company (not the same one for yesterdays situation) last June valued the previous house at 460,000€ and they are one of the most conservative valuation companies in Spain. Additionally the house is in prime location, 150 metres from the beach and there is not another property of equivalent size etc within 10 minutes at anything less than 100,000€ more. The area is also likely to improve as there are well publicised improvements to amenities and infrastructure ongoing that should enhance value and saleability.

I wish someone would find a crystal ball or at least define a firm method of calculation so that this becomes more predictable - hold on this is Spain and somewhere in there logic is required - two words that sometimes shouldnt be used in the same sentence. Then again perhaps it is logical for the BOS to instruct valuers to use prudence when evaluating the figures - guess it will make a lot of Real Estate agents predictions fall even further short of the capital growth expectations they were extolling some time ago.

 

This message was last edited by Smiley on 4/25/2008.

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Hi Smiley,

I know exactly what you mean.........

Yesterday i spoke to the ban k regarding a mortgage application we have through them.

Generally in days gone bty you could speak to someone to see how things were progressing and give the client upsdates.

I was told yesterday that in this particular Bank the decision making has been taken away from the individual at branch level and passed to a computer at head office.

Basically mortgage applications are processed by a system of green lights and red lights by a non emotional employee.

If "computer says no" then thats it,in saying that when the smelly stuff hits the twirly thing for giving mortgages too easily in the future all they will have to do instead of sacking anybody is push the computer out of the nearest window.

Not trhat a computer is going to give anything too easily.................

The banks seemed to have resorted to age old banking practices,if you need something you cant have it,if you dont then choose any product you want sir....

 

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Not quite as bad as that old chap - but certainly every belt is tightening. Not sure whether the computer is better or worse than the committee decision making process - as in the buck stops with everyone as they cant sack everyone - there was a guy over from the UK Head Office of a well known lender last week who had parachuted in as a result of their change of policy - someone actually willing to take responsibility and make a decision - would that he were here all the time.

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Slightly off topic but... My wife works in the mortgage arrears department at Barclays, their call centre is in Leeds. Representatives of Barclays Spain have been visiting this week, very interested in the UK processes for collecting mortgage arrears instead of heading towards repossession and also in adopting the computer system. Not sure if this means that some lenders are now looking in the "long haul" with regards the crunch, but is probably a good sign?

Mark

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Seems to me from these comments that the Spanish banks are moving towards our UK procedures and practice which will be good for the future

Even with current UK problems the mortgage market in UK is efficient, well run and valuations are realistic and if this applies in Spain then it can only bring confidence to the Spanish property market for non Spanish buyers

The old ' Spanish ways' were good in the past but like ' black money ' are on the way out fast and for the best

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Guess we can only hope that Barclays Hispania train the staff to do the job correctly and that they then do as trained. They have a great many personnel in Madrid Head Office but i have to say one wonders what many of them do all day????

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My Wife went out to Mumbai for 6 weeks to help train the personnel out there, but the language barrier was and still is a problem. Needless to say, she has her name on the list as a volunteer for Spain, where the language barrier will still be a problem .

Mark

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And they are probably studying the Uk system for when they try to collect debts from UK owners of Spanish property after repossession!

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I can just see it now Rixxy. If a client defaults on a mortgage in Spain and in the UK, which branch of Barclays gets to repossess first......they will have to bring in Harry Hill.............."FIGHT!!!"

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More like bloody Harry Potter

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And they are probably studying the Uk system for when they try to collect debts from UK owners of Spanish property after repossession!

I don't think that is right Rixxy. The department my Wife works in is before the legal department. She is the one that negotiates with people, sensible repayment plans to prevent the property being taken into possession. Maybe they have realised that getting some payment is better than nothing for a period and renegotiating the terms at a later date, especially with the glut of properties nationwide at the moment.

Mark

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I was being rather facetious there, sorry Marksfish

I do know a new compnmay was asked to set up in SPain and now in the UK to follow through people behind in their payments and ultimately through to repo stage.

I cannot see the banks just letting the debts go and wiping the slate clean - not in their nature!

I know of many people in this plight but the banks are refusing payment schemes so far!

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The problems of those in mortgage arrears regardless of in which country are not based upon the actual monthly affordability in 95% of the cases but the fact that they cannot pay back the arrears and the monthly payment and the interest added on by the lender, the last thing lenders currently want are repossessions as ultimately they will lose monies on these.

As a result there are now a large number of "distressed sales" where one can buy a property valued for example at £200,000 (mortgage valuation not estate agents) for £165,000 fully tenanted by the same person who otherwise would have been repossesed at in excess of a 6% yield.

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This sounds a bit like UK sale and rent back which is being investigated in UK by the OFT

I have no knowledge of this in Spain!

Anyway, the majority of UK buyers of property in Spain are not wanting to sell nor need to sell so a ' valuation dip in value' means nothing and long term they will have a nice investment

Even if you have to sell you have probably bought at circa 1.46 € to the £ so you can take a nice drop in price and still in £ be OK!!

Same applies in UK ...except for the exchange rate

At any time in a property market cycle there are ' urgent sales' and no doubt in Spain like UK some Spanish will have extended themselves too far

But if say for example you buy a 2 bed top maisonette at Polaris World Alhama for 119.800 € [ [ £94330 at a very low exchange rate] and the build time is 2 years [ 2010] and you keep it for 10 years [ 2020]

By then we will probably be in the € Zone[ !] and all the facilities at Condado de Alhama will be built and the owners can play the Golf Trail of 9 courses

Corvera Airport will be open

It has to be a good long term buy!

MInd you not everyone wants to be on a PW Resort but the same applies if you buy right.....2008 even with a low exchange rate may still be a good buy long term!

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