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Tuesday Feb 05, 2013

Bank valuations 'depressing Pretoria property market'

Willing home buyers and sellers in Pretoria's Moot area are reporting that big banks are undervaluing properties for sale, which slows down transactions in this popular neighbourhood.

Agent Willie du Plessis, who recently bought the RealNet Moot East franchise to add to his RealNet Moot West operation, says the practice inconveniences genuine property sellers, and is starting to harm estate agents' reputations.

"The practice has been reported in other parts of the country and is now also prevalent in our local market. Banks are valuing properties on which consumers have applied for bonds at much less than market value - which is the price that qualified buyers are willing to pay.

"In some instances, bank valuations are as much as 20 percent lower than (the amount) buyers have offered, and in extreme cases even lower than the municipal value, which as everybody knows is usually much less than the market value.

"Sellers who are marketing properties they bought recently are understandably especially shocked at bank valuations.

"We had a recent case where the owner bought a property for R720 000 in 2011, for which he obtained a bond through a bank. Now the bank value is given as just R650 000. It's no wonder that the owner is upset and is questioning the integrity of the bank and estate agents.

"It took quite a bi t of explaining, with the aid of official growth figures in property and comparative market analyses, to illustrate to the irate home owner that he was not the victim of a conspiracy and that bank valuations do not necessarily reflect market value, but rather the amount that the bank is willing to lend on the property.

"Market value is, quite simply, the price that buyers are willing to pay, and banks interfere with this free market mechanism when they undervalue properties for credit purposes."

Du Plessis adds, though, that quite a number of buyers are now circumventing the problem by applying for personal loans at banks not active in the property market, to make up the shortfall between the listed price of a property and the amount that the four big banks are willing to lend.

Weekend Argus (Sunday Edition)

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