Low valuation problem for construction loan

Hi Guys,
We are getting a loan from CBA directly for Land as well as Construction loan. Land is not yet titled. Within this period we applied for construction loan so that everything comes under 1 application. 1st land valuation was done and it was worked out well. Then we got a builder and got the contracts ready from them and then applied for construction loan. Now because the land is not titled the bank advised us that they can do everything in 1 loan which fair enough.
The bank came back with under valuation stating that there are no similar properties in the area and they had 1 property was bigger in size as well as the land size was bigger then us. We dont have any inclusions just normal things which builders include like benchtop, driveway, downlights. The builder is relatively smaller then other big builders like henley , porter davis etc. Compared to them we got a good deal from that which was about 20k less then other builders. I am sure that if anyone builds in that area it is always going to be more expensive than what we are building for $$

What are my options and what can be done in regards to the under valuation? .

We are building in Tarneit VIC.

Please advise.

Hi Psyherin,

This is often a problem with new estates, sadly.

Ask to see the valuation or at least know the breakdown of land and house (so you can work out where the problem is) and the cross check value on the construction.

If the land component is low, see if you can get lists of land prices right now & give them to the bank of that justifies your land price (ie: same block is more or equal to your block, even better if there are settled sales). If it's the build you look at the cross check value and if it's commented to be ok or too high. Failing that hit the local agents for comparable re-sales of same size block with similar houses as close to the area as you can. Give these to the bank. Be very realistic. Failing that get a broker to try another lender. Best of luck!

Sadly i dont think there is a lot you can do.
Ours came in 50k undervalued by the bank, same reasoning, nothing else to compare it to.

Thank you Bec for your insight on this. We are going directly with the bank so I will call the bank and check with them. The land side is alright the problem is on the construction side. I am pretty sure that the construction of the house is not a huge amount as it around $230k for 27sq house.
I will speak to the bank and advised them about the same as few of my mates have build the house near that area and they never had any problem. I will also approach the lender and will tell them about my situtation.

I wish you luck. So the job you have is to ring agents in the local area and ask them for sales history of same size block, same number of beds, baths, garages etc. settled sales. Take these to the lender if they are equal or more than you're spending on yours. Don't assume the land is ok either, just because it valued up previously - check, different valuer may give a different result.

Hey psyherin, had a similar issue with CBA, OH said for them to go right ahead and build the house for us it CBA could do it for the value. Strangely we got approval, obviously good clients of the bank but sometimes a straight up conversation may help. Best of luck!

Thank you so much for info. To give you an update, I have client who is also a valuer for other big banks and after speaking to him. He gave me quite a good insight about the valuation and what steps can be taken. The client's view was that in new estates the under valuation is not a surprising thing and it does happen quite a bit.
Anyways he has given me good amount of information for that area and I can challenge the bank for the valuation.

Also 1 thing I dont understand about the bank why would they touch the credit file before the valuation and go ahead and put mark in the credit file.
I spoke to 1 of the broker today and they have been very helpful in this situation and have advised that they will get some other banks to do the valuation 1st then we proceed with the loan application with other banks. They will also let me know if other banks can better the deal compared to CBA.

Hopefully things work out but I am for sure going to speak to bank tomorrow about the information I got from the client

Go direct to the bank and they like to have you put the application in to see if you will pass their credit scoring and policy before they order an valuation. Why? The valuation costs them money so they don't want to do it first and then find out you aren't a suitable client by checking your credit report afterwards.

If you don't want a hit on your credit file, find a decent broker who can order upfront valuations with lenders. This means they can order a valuation, get a gauge of what the valuation is, and if it meets expectations, they can then put the application in. If the valuation comes back short, then you haven't had a hit on your file.

Cheers,

Tom