Valuation for construction

Arakkal · Jan 26, 2021 1:08 am

Hi everyone we are building a double storey home 32sq we have been undervalued by the valuer by 15k from contract price..What has anyone done in this situation? honestly we can’t come up with the shortfall...we haven’t really upgraded anything...we are building through a custom builder and pretty much have a turnkey package? What do you guys think we can do at this stage?

StructuralBIMGuy · Jan 26, 2021 10:30 am

Hey Arakkal Welcome to the forum
1. Find another Builder and get another quote
2. Do your own design, own copyright and get 3 other builders to quote
3.If necessary make the house smaller
4.Take out some of the final trades, DIY or complete later when funds become available
I digress (lighter side)
5. Ditch the gig economy and get a full time well paying job
6.Hold off till prices drop, they tell us we are in a covid recession, everyone is feeling the stress
7.Get the block rezoned, split and sell off half
8.Knock off the upper storey, add it on when you can afford it
9. Close the door and walk away, aim for a cheaper apartment
Cheers
Chris

becjarrettdalton · Feb 05, 2021 12:25 am

Hello - was the valuation short on the land component or the build component? If its the build Chris' first point has some merit - but you could also go back to the builder and ask them to sharpen their pencil a little.... otherwise removing extras and doing them later is another idea as long as it doesn't affect the overall valuation.

You may also find another valuer comes back with a different valuation - ask your broker to do another one, would mean changing banks

If it's the land - can you rustle up evidence to support the land price? Sales listings showing sales at a higher price / smaller lot?

Good luck!

gallopgrove · Feb 22, 2021 11:50 am

Just wondering what type of evidence would you suggest in support of the land valuation? We are currently in the prelimenary process of arranging a construction loan for our KDR and it's currently pending valuation.

its a 658m2 block, only reference I've used is the Valuer General of NSW.
The suburb sales demand have been for a lot of KDR due to the size of the blocks and it's proximity to more highly desirable suburbs.

Sale listings are mostly between $750-$850k for mid 1960's 2-3 bedroom houses sitting on 650m2 - 700m2 blocks

thanks for your feedback!

becjarrettdalton · Feb 22, 2021 12:01 pm

gallopgrove

Just wondering what type of evidence would you suggest in support of the land valuation? We are currently in the prelimenary process of arranging a construction loan for our KDR and it's currently pending valuation.

its a 658m2 block, only reference I've used is the Valuer General of NSW.
The suburb sales demand have been for a lot of KDR due to the size of the blocks and it's proximity to more highly desirable suburbs.

Sale listings are mostly between $750-$850k for mid 1960's 2-3 bedroom houses sitting on 650m2 - 700m2 blocks

thanks for your feedback!

The valuer generals report won't help a bit, that isn't anything like the sales value - thank goodness!! when did you buy the land? If recent, it will probably be the land + construction cost cross checked against the comparable sales in area, if it is not recent then they will simply compare it to the other like properties - similar land size, attributes etc and adjust for age / finish.

gallopgrove · Feb 22, 2021 12:39 pm

becjarrettdalton

The valuer generals report won't help a bit, that isn't anything like the sales value - thank goodness!! when did you buy the land? If recent, it will probably be the land + construction cost cross checked against the comparable sales in area, if it is not recent then they will simply compare it to the other like properties - similar land size, attributes etc and adjust for age / finish.

ok thanks I wasn't really sure what the point of the Valuer General is, I guess it's just used by the council for land rates purposes.

Anyways apologies if I was a bit vague in explaining our situation.

We currently have an investment property purchased 10 years ago which we would like to knock down rebuild and make it potentially our forever house.
The property is mortgaged with BANK A but we'd like to refinance the KDR and existing mortgage to BANK B.

For us to achieve this I think it hinges on how much the value of the land is and not so much the building sitting on it because it will be replaced by our planned build. Am I correct?

becjarrettdalton · Feb 22, 2021 1:18 pm

In essence - yes, but in fact they will look for "like" houses to compare to it...

plc · Mar 02, 2021 11:12 am

gallopgrove

ok thanks I wasn't really sure what the point of the Valuer General is, I guess it's just used by the council for land rates purposes.

Anyways apologies if I was a bit vague in explaining our situation.

We currently have an investment property purchased 10 years ago which we would like to knock down rebuild and make it potentially our forever house.
The property is mortgaged with BANK A but we'd like to refinance the KDR and existing mortgage to BANK B.

For us to achieve this I think it hinges on how much the value of the land is and not so much the building sitting on it because it will be replaced by our planned build. Am I correct?

Yes. Any new valuation going forward will be determined by current land value plus the new construction. Then it will be compared with current existing residences in the area to make sure its comparable.

Since you have owned the land for over 10 years, you would think that the land value shouldn't be an issue as you would assume it would have increased a fair bit in that time frame.

To get an idea, what you can do is to get a full valuation done on the existing property. With it you will get a valuation comprising individual land value and improvements (existing dwelling). It will at least give you an idea on what the existing land value may be with before you dip you toe in the water and proceed further.

Cheers,

Tom