How much to offer above RV/GV?

[snuggleball]

First, do RV and GV refer to the same thing? What about the term "valuation", is it the same as RV/GV? Does the QV valuation report give an idea of how much the house is suppose to sell for, or the current RV/GV?

We noticed that, it seems most houses in the market are asking for (BBO/BEO) around $100k above the RV/GV. I was told by property agents that a realistic selling price is 20% above RV/GV. Is that about right? Especially for those of you who has bought a house in NZ already?

I understand it's different in different parts of the country. Just like to have a feel of whether to believe the words of these agents, or are they just saying that to make us make a higher-then-necessary offer.


I'm asking these questions because, back where we came from, houses are sold "at" or "below" valuation. Even if "above", it is only about 5k more. Pardon me, but I do find it hard to stomach that we have to look at 100k above valuation here

On the other hand, we don't want to waste precious $$$$ on the conveyance lawyers making unrealistic offers that will never be accepted. Is it possible to make a "verbal offer" to guage the seller's response first, before making a formal lawyer's offer?

[Avalon]

Welcome to the worderfully confusing and unintelligable world that is NZ real estate!

GV (governments valuation) IS the same as RV (Rateable value). Basically - its the value on which the council rates are set. I belive QV actually are the main people that rate the properties for the councils.

As for BBO etc and what to pay - honestly - I think the very best thing to do is to pay a valuer to go and value the property for you. If you do that - make sure its not someone the agent recommends. A lot of them get kickbacks of companies they send you to. Back home, we all often know what property is worth, but here we can be in a sticky situation because we often dont know of underlying problems in the areas we are looking in.

I would also recommend reading a book called "Dont Sign Anything" by Neil Jenman, which goes through some of the more unethical things agents can do. I found that although its quite depressing to read what goes on - being informed helps you understand exactly what you are being told (and sold) and can help you smell a rat when needed.

Also, ask around. If you are working - ask people at work what they think. Or your landlord if you have one.

Often sellers will NOT accept verbal offers. Its just not they way they are used to doing things. I stopped looking at anything that did not have a fixed price - I just had better things to do than play "Guess what the seller really wants". Thats why, when we found this place - it had a price tag, and then I got a valuation (50K less than the price).

HTH

[backtonz]

RV/GV/CV are all the same and most councils have QV to do it as Avalon said.
In most parts, the valuation is done once in 3 years. IF the valuation was done long ago, the seller may ask QV (for payment) to value at current market, specially if the market has gone up since then. These would be the ones where QV is mentioned instead of the council's valuation in the ads

If the council valuation was done within the last year (as in North Shore for ex) many properties (specially new ones) will be sold well below GV.

However, the GV comes in 2 parts (land and building). A 1950s house may show a GV of 500K (but land of 450K and building of 50K). However, the owner may have since upgraded the interiors and 50K is no longer a realistic value for the building. In such cases - above GV may also be reasonable.

You don't need to bid through the lawyer. You do have to bid in writing but the agents have a standards form to bid through. Make sure that you don't leave the bid open ended.

P.S. We bought and sold in NZ - happy to help if we can

[jess]

We started comparing rateable values with what we knew a property sold for, and found a very wide range. I'm told the council here doesn't come look at the interior - just goes by the age and area and stats on paper. This means, as back2nz said, two similar 1950's houses - one in bad shape and one that has been completely redone inside - will have about the same valuation. But of course when they go to sell them they will get very different offers. And if the house is architecturally designed with unique features it can be popular with lots of bids that drive up the price. I had no luck judging by RV. We had to rent so we could take a while to go to open houses and auctions and see what sold for what before we put an offer on anything.

No one seems to go for a verbal offer. They are hoping to put you in the position of bidding blind against another buyer so they can get you to sign that form that says you know there are other bidders and you've been told to put your absolute best offer forward on your first bid.

[snuggleball]

Thank you for the responses!

I'll be sure to get the book!

I think the very best thing to do is to pay a valuer to go and value the property for you.

From the sounds of it, seems that paying for a valuer will get a different result from GV/RV/CV/QV? Why is that so? Because a valuer will take into account the interior furnishings, etc, that those GVs wouldn't, and because the valuer can give a closer idea of the market response?

Will paying for a QV report be sufficient, or would we get a more accurate idea of the price to pay by hiring a valuer?

If the council valuation was done within the last year (as in North Shore for ex) many properties (specially new ones) will be sold well below GV.

This is interesting... why would the new properties sell below GV?

Btw, is it true that GV done 3 years back tend to be lower than current GV? since I was told that housing prices are always growing?

However, the GV comes in 2 parts (land and building). A 1950s house may show a GV of 500K (but land of 450K and building of 50K). However, the owner may have since upgraded the interiors and 50K is no longer a realistic value for the building. In such cases - above GV may also be reasonable.

So it is true that, conversely, ie, 50k land 450k building, should not attract much above GV?

You don't need to bid through the lawyer. You do have to bid in writing but the agents have a standards form to bid through. Make sure that you don't leave the bid open ended.

Cool~ I was always under the impression the only way to make an offer is through a lawyer. Or is that the recommended way? Are there any shortfalls in offering through the agents' standard forms?

What do you mean by leaving the bid open ended?

Jess, thank you for sharing your experiences! That's what I thought... but it's been hard to find out the asking price and the sold price, not a lot of agents advertise them. I suppose, the best way to find out is by attending the auctions?

[jess]

Hey snuggle - yes you can tell the exact price for houses that sell at auction, and an agent who's calling you about looking at houses will often give you a general idea of how much a house you looked at sold for, since it's a done deal.

About the standard real estate contract... I have a sample copy. PM me with an email address if you'd like me to send it to you. I also have a list of some useful clauses that are often included. (An agent sent me both of these). The form itself stays exactly the same, but it matters what's been filled in (like settlement date, chattels, etc.) and what clauses you attach when you make an offer. From what I can tell most people draft the offer first with the agent and then get a lawyer. BUT - Just remember you can't add important conditional clauses - like the right to get a builder's report, LIM, title check, valuation etc. - after the fact. Whatever safeguards you want need to be in print when you make the offer. If you have any questions at all about the form or what clauses to include it would be wise to get a lawyer beforehand.

[Avalon]

From the sounds of it, seems that paying for a valuer will get a different result from GV/RV/CV/QV? Why is that so? Because a valuer will take into account the interior furnishings, etc, that those GVs wouldn't, and because the valuer can give a closer idea of the market response?

Will paying for a QV report be sufficient, or would we get a more accurate idea of the price to pay by hiring a valuer??

Yep - if you get a vaulation on a property done, it should take into account that land, building, chattels and condition. The way I understand the difference is that you need to remember that the GV etc valuation is for RATES. Its NOT a market value, ie what the house is worth on the open market. To my mind - putting the GV of a house on the sales details is pretty meaningless. Especailly as Backtonz said - if the valuation was 3 years ago - what on earth has that got to do with current house prices.

Our house is a good illustration. We paid $595k for our house. Our Valuer gave a value of $606k. The GV was about $95K Why? - because the last time the rates were done - the house wasnt here - so the rates were calculated on the value of the bare land (which made this years rates nice and cheap ) QV have done a "2004" vaulation (last year ) and valued it at $430k (Ie the value of the house and land in 2004), and thast what we will pay rates on next year (ouch). But its still now where near the ACTUAL value of the house and land.

Cool~ I was always under the impression the only way to make an offer is through a lawyer. Or is that the recommended way? Are there any shortfalls in offering through the agents' standard forms??

I always work through lawyers. This is just something I firmly believe in - that it isnt worth teh risk of not getting a lawyer to check EVERYTHING before you sign it. I know that for me it gives a sense of security and safelty - and knowing that I cant be browbeaten by an obnoxious agent into signing a bit of paper. And I did have one try it on You certainly can DIY - and the forms from the agent should be the same forms the lawyers use, but you do need to make sure you have covered all your bases.

An important example is the term "Subject to finance". Its commonly put it as a condition of sale, and means that you wont "go unconditional" (the UK exchange of contracts) until you have the mortgage in place. However - written like that - it means the seller can actually force you to take out an unsuitable mortgage if you havent found the right one. If the wording is "Subject to finance suitable to us", then they cant. By using a good lawyer, you avaoid such pitfalls. Though it doesnt always come cheap. Cheaper than getting ripped off mind!

I suppose, the best way to find out is by attending the auctions?

Great idea. If you even think you may buy at auction - I suggest you go check a few out and see what happens. Its fascinating (though I loathe them). Look out for situations where the Auctioneer places bids for the seller.

[snuggleball]

Wow, that is certainly a wealth of information! Thank you for sharing your experience, Avalon! So far we haven't attended any auctions, because we didn't think we will want to buy from auctions... we are just not comfortable with going unconditional. But we have since learnt that we can do all our homework beforehand, ie, getting building inspection, LIM report, etc, before the auction day. So at least now that is an option, though a relunctant one We simply do not have a lot of cash running around paying for all these inspections each time the auction goes unsuccessful At least for a non-auction/non-tender house, we can state down the conditions, and only go ahead to pay for the inspections when the offer is accepted.

Same for the lawyer fees... does it mean that we have to pay ~$800+ each time we make an offer on a house? It can be quite hefty if our offers were unsuccessful, say, for 5 houses in a row.

Sometimes it makes us wonder if it's a better idea to just build our own. We have a pretty clear idea what we want in a house, and we can't find that ideal house here

[Avalon]

Same for the lawyer fees... does it mean that we have to pay ~$800+ each time we make an offer on a house? It can be quite hefty if our offers were unsuccessful, say, for 5 houses in a row.

Theres a way to deal with too. In the UK, I had a solicitor who pretty much did everything. But here in NZ - lawyers seem to specailise, so in this case you would go to a conveyancing lawyer.

Now - theres absolutely nothing to stop you asking to speak to several conveyances to check them out. They dont charge for this, and youc an actually pick up a wealth (literally) of information about the prosess without spening a penny (or cent). It means that you also get a feel for the people you will have working for you, and find one you can get on with.

Costs for conveyancing vary. Our was expensive because we bought the house with my parents, so there was extra work involved, and we aslo had powers of attorney drawn up.

Checking my bill: we paid:

For drawing up the offer = $250
Conveyancing = $650
Other parerwork for house = $ $320

There were a few other bits and bobs, but as you can see - the offer wasnt all that much.

Also please bear in mind that our lawyer isnt the cheapest in town. By a long shot. If you went to a conveyancing company - it woudl probably cost you less.In total - our bill (inc GST) was just under $1500. Most people pay about 850-1000 for the lot.

[backtonz]

This is interesting... why would the new properties sell below GV?

Because, in property, the land appreciates while the building depriciates. A new building is like a new car, depriciates the day it is taken out of the showroom (or its equivalent). If I want to pay 400k for new construction with fancy kitchen and bath - I want it to my taste, not the builders.

So it is true that, conversely, ie, 50k land 450k building, should not attract much above GV?

I wouldn't buy it at any price. Its better to buy a shed in a good neighbourhood and get it done to your taste rather than to buy a fancy building in a dump. This point goes beyond monetary considerations and extend to safety and comfort of your family.

What do you mean by leaving the bid open ended?

Have a finite time period within which the seller needs to reply. This leaves you free to bid for other properties after that period and prevents the seller from "shopping around" based on the security of your written bid.

There is a gold mine of info on this thread thanks to Avalon and others. Good Luck..