SFO targets dodgy valuations

SFO director Adam Feeley says there is a small number of property valuers who are undermining confidence in the profession. Photo / Dean Purcell

Property valuations up to five times an appropriate level have been discovered in a series of probes by the Serious Fraud Office into valuations sought by vendor-owners.

While the problem is not believed to be widespread and no criminal charges have yet been laid, the SFO said it was making referrals to the Valuers Registration Board for some transactions, and that "further matters are under SFO consideration".

"There is a small number of valuers who are undermining confidence in a profession, which is an important adjunct to investment decisions, and we are determined to work closely with the valuation profession to ensure rogue valuers are not tolerated," said SFO director Adam Feeley.

"In recent weeks we have concluded investigations involving property valuations where we have been disappointed to see investors making bad investment decisions based on information which can only, at best, be described as optimistic values. It is imperative that investors are made aware of the underlying assumptions on which the valuations are based."

In most cases, the valuations had been commissioned by the owner of the property, or property-related company, who had an obvious financial incentive to inflate valuations beyond what was commercially realistic.

In some cases, the valuations were at the margin of what could be regarded as professionally justifiable, while in a few extreme cases, properties had been valued 500% over their market value.

"Where there is a clear intention to deceive an investor with false information, the SFO will lay criminal charges against all parties to that offence, including any valuer who is knowingly a party to the deceit," Mr Feeley said, "however in many instances the valuations fall short of what is required to meet a criminal standard of proof for fraud."