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The Australian Property Institute (API) in conjunction with the major lending institutions, lender mortgage insurers and valuation firms has conducted a significant review of the Residential Valuation and Security Assessment Pro Forma Supporting Memorandum.

The Supporting Memorandum provides the basis upon which Members of the API will provide valuations of single residential property for first mortgage purposes using the PropertyPRO ‘Residential Valuation and Security Assessment Pro forma Report for Mortgage Purposes'.

The Supporting Memorandum sets out the limitations and qualifications inherent in valuations, and in particular the Risk Analysis provided in the report.

The revised document includes the following enhancements:

  • Defining a “single residential” property including the types of property that may / may not be completed utilizing the report format.
  • Supervision guidelines for API members including the need for an appropriate counter signatory to the reports.  This includes the need for all valuations undertaken by a Residential Property Valuer (RPV) to be counter signed by a Certified Practising Valuer (CPV) as well as all valuations over $1M requiring a counter signatory unless the valuation was undertaken by a CPV who is a director, principal or partner of the firm.
  • Update of Risk Ratings – the ratings have been revised in two significant ways:-
  • Market Risk Rating “Reduced Value next 2-3 years” has been replaced by “Recent Market Direction”
  • The Risk Ratings, both property and market, now includes specific guidance for the valuer in providing an alert to the lender-client / LMI re any issue that is readily apparent and known to the valuer at the date of valuation and that may impact on the current market value or marketability of the subject property, limited to the Valuer’s area of professional expertise.   It is expected that the guidance will result in greater consistency in the application of risk ratings. Any rating of ‘3’ or above will require comment from the valuer.
  • Sales Evidence & the Market – the Supporting Memorandum includes further guidance in considering sales evidence as well as the specific need to comment on whether a “selling period > 6 months” is expected, and whether “a full copy of the contract of sale has been sighted”.
  • Notes & Qualifications - all future reports will include a GST clause which effectively treats the transaction as one to which GST is not applicable.  The lender will need to satisfy themselves of the GST position of the borrower prior to extending funds.

The effective date of the revised Supporting Memorandum is 1 March 2012, although earlier adoption is permitted. Please click here to view the Supporting Memorandum.

An example of the actual Report may also be viewed by by clicking here or alternatively, Listening Post Pty Ltd which supplies and supports PropertyPRO under an agreement with the API may be contacted on (02) 9879 4468 or sales@propertyPRO.net.au to view the product.