Valuation problem

Pom down under · Feb 13, 2007 11:21 pm

Hi everyone

My project has been going along nicely with finance approval, plans and building contracts signed and on time.

I have now been told by the bank that the valuation of the property is $52,000 less than the total value of the house and land.

This is on a new sub-division within an established suburb and the valuer has made comparisons with older established properties that have been sold recently. There are many new sub-divisions in the same situation e.g in the suburb I am currently living the new properties are selling at around $60-100k more than established.

The bank is only willing to lend against the valuation, even though we have been approved for much more than we want to borrow.

Without the full amount we are stuffed as the new loan is secured against our existing house until we move and sell and are unable to raise more.

Has anyone come up against this problem and any suggestions on how to solve it.

I understand from a couple of real estate agents that the valuers very often are not very reliable, especially as they are being paid by the bank.

Any help or suggestions would be appreciated.

Regards
PDU

aspiringpropertymogul · Feb 13, 2007 11:33 pm

The best advice that i can give you is to get a mortgage broker: they cost you nothing and they get a standard rate from all banks so should be unbiased. they can let you know wich bank suits your situation. from my experience, banks always undervalue properties, sometimes up to 30k less than a real estate agent because they are looking at the worse case scenario: you dont make any payments and they have to do a quick sell. which part of australia are you in?

Pom down under · Feb 14, 2007 12:14 am

Thanks for your reply.
I'm in SA
I don't want to change bank unless absolutely necessary as they have given a special rate with the land and house with no fees or penalties when I pay out the loan early, which I will when I sell my present home.
Regards
PDU

Lotte · Feb 15, 2007 10:25 am

I'm sorry to hear about the situation you're in currently.

You must understand that Real estate agents will always have a go at valuers because at the end of the day, they lose a lot of commission due to valuers being 'stingy'.

I used to work for valuers and I can tell you right now that they have an extremely difficult job on their hands.

To give you an example, you're saying that properties in the established area of where you want to go, cost $60k - $100k less. That's a very, very big difference if you ask me. Valuers need to base their 'opinion' on a Comparative Market Analysis which must comprise properties in the nearby area (ie. to make them comparative). If I were a valuer, I'd be hard pressed trying to value a new house in an established area at that much more than an older house.

Personally, I am of the belief that new pockets in old suburbs don't work.... but that's just my opinion. In my suburb, an old pocket in inner Brisbane, if a new subdivision popped up, iI think it would decrease the value of surrounding houses substantially.

Your best bet, if you're gun keen on staying in tha area, might be to fork out for mortgage insurance....

Cheers,
Lotte

Pom down under · Feb 15, 2007 9:34 pm

Thanks Lotte

Mortgage insurance won't help me with thi.

I have already signed the building contract with the banks telling me everything has been approved and no reference to valuation.

I am now left with two options fork out of my pocket $52,000 or loose a minimum of $8,000 in builders costs and return to square one.

My question is why is a valuation on a new house so different to the building costs.
Its not like a second hand car and subject to many variables.

Incidentally my building costs are $848 per square metre with everything included, double garage, water tank, concreting all round with hardstanding for caravan, 6x5 pergola, security system, Spa, a/c, solar water, storm water etc.etc

PDU

rellie · Mar 24, 2007 5:13 pm

Just wondering how you went with your valuation ?

We are in a situation at the moment whereby we have sold our house, the purchasers valuers is coming out on Monday to Value the property. He is the same valuer we had out 6 months ago for refinace purposes and he severly undervalued the house then. If he values it at the same amount this time then it will be valued at 15% less then the purchase price which could prove a problem with the purchasers finance...........

It is my belief that if you are not happy with the first valuation you can ask for a second valuer to value the property, if you still aren't happy then you can lodge a formal dispute.......

Pom down under · Mar 24, 2007 6:28 pm

Hi rellie

We asked the bank for another valuation as we had heard that the valuers they had used had a reputation for undervaluing and to make matters worse normally value in the affluent eastern suburbs not in the north where we are.

We politely reminded the bank that our business account was at risk as two others were offering me finance just to get my business account. It sometimes helps if there is something else to bargain with.

However, in the meantime, while this is going on we get letters from the lending manager of the mortgage centre informing us that "our loan has been approved" (Full stop, no conditions, subject to valuation or anything)

The second valuation, different valuer, came in $15000 under after considering all that was included. the bank graciously waived the second valuation fee and stamp duty on the mortgage.

Hope yours goes OK.

Regards
PDU

rellie · Mar 24, 2007 6:34 pm

So pleased to hear it all worked out ok for you PDU.

It just annoys me know end that there is so much inconsistency in valuations when so much hinges on them :roll:

Adrian B · Mar 26, 2007 11:10 pm

Nice work!! Interesting to see what happens when you threaten their livelihood whilst they threate yours!!.

Well done.

Adrian B

double07 · Apr 03, 2007 10:24 am

Good to hear it got sorted out.

I had the same problem early last year with a credit union. They valued the property at 50k less than what we needed to get finance. Our consultant was very apologetic and suggested we go and see a broker. We did so and the broker suggested we go with one of the big banks as they are a bit more lax with their valuations and lending criteria (seeing as they have so much of the market already, they have to be very competitive). Anyway, the commonwealth/colonial were having a special at the time with no application fee, discounted rate and no fees etc. So we applied with them. The bank came back with a valuation ~60k above ($359k as apposed to $300k) what the credit union did. We're not really happy with the service at the commonwealth, so we'll be re-financing as soon as we've got enough equity to not pay LMI again, but they've served their purpose

newhomebuilder · Apr 03, 2007 11:06 am

Just to make a note on what Mandy has said, their are real estate agents that are also qualified valuers- I know my estate agent is a qualified valuer

Mandy · Apr 04, 2007 11:17 pm

You are right. There are SOME Real Estate agents that are qualified valuers BUT most aren't. That's great that your Real Estate agent is a qualified valuer, there should be more of them.

Mandy