Building A New House
Sep 10, 2017 7:57 pm
Who had it and how often does it happen?
It looks like playing a Russian roulette when building in a new area. You have a tender appointment, a contract appointment, pay 5% of the house built cost and then... Your bank says that your house price is too high and you have to cover the shortfall from your own pocket. And it's not a couple of thousands, and you have to find the money pretty quickly, like yesterday . Surprise surprise! If you don't have money to cover the shortfall you are in a deep.. waterlands, call it so.
You lost your deposit, your land is standing still with you paying mortgage on it. What to do? Sell the land, pay back the bank for the land and spend another million years saving for a larger deposit (due to property prices growth) until your pension comes.
The house is not super special but filled with good inclusions and extras (nothing crazy), it's under 1million (575 m2 land and a 42 sq.m. double story build combined), the block is large but it's not Toorak. It's Officer, even that it's on the northern side and wrapped by the "iconic" Timbertop estate.
There are no similar houses that were sold in Timbertop to compare it with. How would bank evaluate?
Where to go and whom to ask for a piece of advise to avoid an unpleasant surprise?
Re: Bank evaluation shortfall. New build in Officer, VIC2
Sep 10, 2017 8:43 pm
I've known of some that have brought titled land and have had the banks value the land lower than what they've paid. But how can a bank value a new build lower than what the builder has quoted as cost?
I've brought untitled land, and follow up sales have the land selling 30-60k more. So I'm hoping that will eliminate any issues with bank valuations of the land. But if they have issues with builder quotes, then not sure how I'll address that one.
Re: Bank evaluation shortfall. New build in Officer, VIC3
Sep 10, 2017 8:53 pm
Our land has gone up in price quiet a bit, again - according to the land sales office. Banks are warning that they will be very conservative when evaluating land and the total price of the property when built.
Re: Bank evaluation shortfall. New build in Officer, VIC4
Sep 10, 2017 8:56 pm
We had the same thing. Land was purchased in a new area with little sales history. They had to compare sales in a suburb that was 10kms further away from the city. The land was valued ok at $220k but the build was valued at $260K instead of $288K. We included a prestart allowance of 10K which hurt us as well as a big siteworks allowance. We were fortunate to have the extra funds aside, but it raised our LMI which sucks
It seems the banks are being very conservative with the valuations. I called my builder who told me that their pricing was standard and there was no room to move.
Hilbert HGWA Build
Re: Bank evaluation shortfall. New build in Officer, VIC5
Sep 10, 2017 9:16 pm
I read that when doing evaluations banks deduct any allowances from land sales or builders. i.e. they use an actual price you pay, not the full price that you have further deductions from.
Anyone building on their block of land in a developed areas with higher property prices are much more better off than pioneer-settlers in new areas. Construction prices are the same for everybody (with a difference in site costs). But the same house built in, say, Carnegie and in Officer/Pakenham will be evaluated differently. Great for Carnegie, not as good for O/P.
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