construction valuation

Has anyone had a situation where the lender has approved your loan but come back after they do the valuation and said it is not worth what your paying?

This just happened to us. We are building with Henley and the lenders valuation was $30000 less than what we are being charged by Henley. So what this means is if we want to proceed our broker says we will have to find the money on top of our deposit. We were borrowing 80% to avoid LMI but the only way for us to do it now would be to borrow 90% pay the LMI.

Doing the 90% option means we will be borrowing less than what we were at 80% believe it or not. So repayments will be slightly less than expected but kind of hard to find the additional cash.

Has anyone had any experience with this sort of situation and if so do you know of any options?

Is it worth going back to Henley for a please explain and asking for a price reduction?

Thanks.

Yes it can be common. You can try asking Henley for a reduction - they can only say yes or no.

Basically what the valuer is saying that you may be overextending - either by building that house in that area or alternatively you are including items that are not increasing the value of the build.

Some people have paid for a second valuation, others have gone to a different lender, others have borrowed extra as a personal loan and others have had to rethink their house / inclusions choice.

This happens all the time. Valuers can be quite conservative with valuing house and land prior to construction. Unfortunately they usually require 3 comparable sales in the area (being re-sales of the completed house). Most estates don't have this for a while, so the valuers don't consider what is being built in the estate, they just value the property lower. happens most often in areas that may have a reputation for reposessions (eg north west sydney) or in areas where a new subdivision has occured at the back of an established, lower demographic suburb. Or if your house is bigger than the average being built in that estate.

An applicant has one chance to argue their case to the valuer. Talk to local real estate agents to see if they have any properties for sale or recent sales you can provide to the valuer. Alternatively, get an independent valuation yourself to see if the numbers stack up. I note that these valuations won't generally be considered by a bank as they appoint their own valuers, but it may give you a second opinion.

Thanks for the replies.
I am building in Mernda villages Vic, house is average 3 bedroom. Not too sure what house prices are there at the moment. I will do some research on this.

Thanks again for the responses.