Browse Forums Home Finance 1 Oct 06, 2009 10:41 am We have just signed our contracts with the builder (yayyyy) and am off to do pre-start tomorrow. From what I have calculated with upgrades, we will be spending an extra 20-30k. We have the money to pay for this ourselves, but will the bank need to see the variations before valuing the property and will they take those variations into consideration when valuing it??? Also the extras after handover like aircon, floors and concrete, do we need to provide all these quotes for the valuation?? Re: Another valuation question? 2Oct 08, 2009 12:50 pm Hi Rizzo, Correct me ifI am wrong but if you are doing prestart that means you would already have your finance approved?? If that is the case, the bank has done their valuations already so the answer would be no, they don't need the quotes. Re: Another valuation question? 3Oct 08, 2009 5:22 pm No, we only signed the contracts on Monday and did pre-start on Wednesday. We had pre-approval, but the bank wouldn't go any further until they had a signed contract, and the builder said at pre-start that they would get all the paper work off to the bank for us. From what I have read in other threads, people have been told to send in any quotes for extras after handover as well for the banks to do their valuations, so this is why I'm confused. Some people send in everything and others only what the signed contract says. The plans we signed off on in the contract are mostly correct, but there are some minor changes at pre-start, so won't the bank need the final plans to do the valuation??? I'm so confused!! Re: Another valuation question? 4Oct 09, 2009 3:34 am hi, i think i know where you coming from with the quotes. i had to have quotes for things that were to be done by myself nt the builder but these things were not after handove they are before i am given the keys, basically my bank loan was subject to extra conditions. for example drive way, storm waters, paths, carpets all need to be done before hand over. what happens these things go onto my total value of the loan, so the bank is lending the money on top if you get my drift. generally a house is valued at house and land together, and where the market is at. i know with my valuation they looked at similar house selling in the area and how much for. sometimes add extras that are not seen as an increase to the value of your home, can hurt valuations...ex: over capitalizing good luck, kind regards building heysen4e through SarahHomes at Milang IM THE PROUD OWNER OF DIRT house into council 22/08 Unconditionally approved 25/09 mortgage docs signed 29/09 land settled 09/10 land titled 22/10 start date about two weeks away!!! http://www.mymilangbuild.blogspot.com/ Re: Another valuation question? 5Oct 09, 2009 10:43 am singlemum2daughters hi, i think i know where you coming from with the quotes. i had to have quotes for things that were to be done by myself nt the builder but these things were not after handove they are before i am given the keys, basically my bank loan was subject to extra conditions. for example drive way, storm waters, paths, carpets all need to be done before hand over. what happens these things go onto my total value of the loan, so the bank is lending the money on top if you get my drift. generally a house is valued at house and land together, and where the market is at. i know with my valuation they looked at similar house selling in the area and how much for. sometimes add extras that are not seen as an increase to the value of your home, can hurt valuations...ex: over capitalizing good luck, kind regards Thanks. I'm still confused (I have done this twice before, but we were borrowing way under 80%, so it didn't matter then). This time we are borrowing just under 90% so that's why I'm questioning it. My bank said they wouldn't lend us money for the extras like flooring, concreting etc, unless it was in the building contract, which it's not because we can get these things done for half the price of what the builder charges, and the builder won't let us in the house to do these things until handover has happened. I know not all upgrades/extras are going to increase the value of the house, but most of it is electical and things like adding a kitchen outdoors. So big things. We will be paying for these ourselves, so it's not a huge deal if they aren't added into the valuation, but was just wondering if bank valuers will look at these for the purpose of valuation?? Even if they added $5000 to the valuation because of them, it would mean we will pay less LMI, if you know what I mean. So bascially, I'm really just wondering if they don't want to know about them, or if they do take them into consideration? As if they do, it means we have a bit more leway. Re: Another valuation question? 6Oct 09, 2009 11:02 am We're having similar predicaments as you are, in that we want two major expenses (flooring and ducted a/c) added into the loan, but NOT done by the builder as their mark-ups are way too high However our bank says they dont allow for anything else which isnt included in the building contract so that means we either pay cash for these items after handover, or pay higher prices so that they're done by the builder hence included in the loan as well. Also, is it possible to have the builder add in say $10k of pre-start allowance before the contract is done, so that when we go to pre-start we know that we can spend up to this amount and still have it included in the loan? 12 March 2010 - Land titles received 3 April 2010 - Signed building contract 14 April 2010 - Prestart 28 April 2010 - Loan approved 30 June 2010 - Slab completed 27 August 2010 - Brickwork completed 22 September 2010 - Roofing completed 30 September 2010 - Internal walls plastered 12 October 2010 - Lock Up 19 November 2010 - PCI 26 November 2010 - Handover 29 December 2010 - Moved In https://forum.homeone.com.au/viewtopic.php?f=31&t=32584 Re: Another valuation question? 7Oct 09, 2009 11:23 am aLLaNNa1 We're having similar predicaments as you are, in that we want two major expenses (flooring and ducted a/c) added into the loan, but NOT done by the builder as their mark-ups are way too high However our bank says they dont allow for anything else which isnt included in the building contract so that means we either pay cash for these items after handover, or pay higher prices so that they're done by the builder hence included in the loan as well. Also, is it possible to have the builder add in say $10k of pre-start allowance before the contract is done, so that when we go to pre-start we know that we can spend up to this amount and still have it included in the loan? Hey, I was reading through lots of old posts last night, and had seen this mentioned a few times about people putting in a prestart allowance. I wish I had of read about that earlier We did get alot of upgrades put into the quote to start with, so we actually had alot in the contract anyway, but there is always something else you think of later. This is going to be our family home for a long long time, so we want it done right straight up. Our last house we left out alot, saying we would get it done later. We never did a thing, and now that house is a rental, so probably a good thing, but this one will be our home and I don't want to keep looking at things wishing I had of just got them done with the build. We have enough to pay for variatons, plus a little for those extras after handover, but we should be able to save most if not all of the rest in the 10 months it will take to build. Our back up plan if we don't have quite enough, is to get a personal loan to finish it off, then when the property value goes up, consolidate it back into the home loan, depending on how much we need. We are well within our borrowing capacity, so we are lucky that is an option for us. Good luck with yours, I would ask the builder about doing a pre-start allowance. Re: Another valuation question? 8Oct 13, 2009 8:05 pm Hey Everyone, From a Mortgage Brokers point of view. It is ALWAYS best to include every single little quote or replacement quote, variation with the valuation. I have seen in many circumstances changes that are made along the way that (if you have a lender that does a final inspection valuation) and it is not as quote/originally valued. They will withold final payment. Until the items are rectified etc. Most lenders obtain a valuation from a valuer. This in a lot of cases is the land purchase price/market value plus the construction cost. If you construction contract does not have fences, driveways etc. and is $150k. with $100k land. You are most likely getting a valuation of $250k. If it includes fences and driveways with a contract price of $165k. You will more often than not get a value of $265k. If the driveway and fences are being done by an alternate tradesman to the building contract these can still be added in and included as part of the valuation. Building contract of $150k plus $15k of quotes/tenders for driveway and fences. Property values to $265k. Without them, the valuer has no idea of knowing its going to be put on the site. So his comparable sales in the area are for houses without driveways and fences etc. If you are looking to optimise you lending include everything. Have your broker outline the variations up front to the lending institution to avoid issues. The bank needs to make sure what they get at the end of construction is exactly what the decisioned on to start with. Otherwise they do not have a fair market valuation for your property. They have one for a property similar to yours but not quite the same. Lenders do not like this which is understandable. Take the time at the begining of your build project to get everything just right. Variations part way through construction may cost considerably from the builder and may also require the lender to re-value. Hope this helps. Regards, Trent Re: Another valuation question? 9Oct 13, 2009 8:32 pm OMG Your situation brings back those awful memories as I was in the exact same spot as you are about 6 months ago, have a read of my thread if ya interested, might take a few pages of reading to get to where our valuation went REALLY bad! Best of luck. Building Thread viewtopic.php?f=31&t=13002 Site start: 8th July 2009 Handover: 11/12/2009! 5 months total build time. 40 sqs of luxuary...Bliss! Re: Another valuation question? 10Oct 13, 2009 8:42 pm Quote from my building thread, page 4 pinkfairymagic UPDATE... After requesting my case be re-instated and an urgent valuation ordered, 4 days later be have an answer... It came in $60k short... We are gutted as this now means we proberly not continue with this process as we unfortunatly don't have a spare $60k loose in out back pocket. We are also going to appeal the decision but it's not looking good, will keep my blog here updated though. Thanks for everyones help. And another from page 4 pinkfairymagic It could be as simple as them forgetting to add my a/c, fences extra variations etc etc to it, but I highly doubt it. I also think they would have struggled coming up with comparative sales within the last 6 months in our area, as there hasn't been ANY at all that they can compare with. The next closest town is 80kms away and MUCH cheaper to build/buy, so surely they couldnt have compared to there? In the end we did find out that they forgot to add in all the extras when they did the valuation and because we disputed it, the valuer got the sh*ts and didn't bother re-doing it, although said he would, we knew better. Best of luck Building Thread viewtopic.php?f=31&t=13002 Site start: 8th July 2009 Handover: 11/12/2009! 5 months total build time. 40 sqs of luxuary...Bliss! Re: Another valuation question? 11Oct 13, 2009 8:45 pm Thanks pinkfairy. Off to have a read now. I'm just hoping they take in a little of the variations, if not that's cool, but I'm stressing that our land val may come in slightly lower as we bought in January last year, and that was at the end of the peak around here. If that happens and we have to use our extra's money to make up the loan difference, we could be in trouble coming up with the money for everything else in the end. So fingers crossed, it comes in at what we bought it at at least. Re: Another valuation question? 12Oct 13, 2009 9:55 pm Trent Davidson From a Mortgage Brokers point of view. It is ALWAYS best to include every single little quote or replacement quote, variation with the valuation. If you construction contract does not have fences, driveways etc. and is $150k. with $100k land. You are most likely getting a valuation of $250k. If it includes fences and driveways with a contract price of $165k. You will more often than not get a value of $265k. That is really interesting. Our builder doesnt supply fencing and driveway as part of the building contract however provide the opportunity to include an allowance for them as line items in the building contract. This effectively turns into a cash back at the end so you can have these things done. Our broker told us to be very careful about how large these were as the valuer can ignore. It depends if your borrowing at the top of your LVR %, however if you are, include large extras like this in the contract could be risky unless you have the money sitting in the bank? If by chance the valuer was to ignore them and they value at the contract price minus allowances, you would need to find this extra money as part of the shortfall between the mortgage and building price, or remove the allowance and have everything revalued, hoping it doesnt change. The allowance would find its way into your bank account eventually of course, it could just change how much you need to find at the start. From our experience, our valuation was short just over the cash allowances for fencing and driveway we included (which of course could have been unrelated). As it was only a few $k and we had the $$$ spare it was all ok. Something else to think about with this however? Re: Another valuation question? 13Oct 13, 2009 10:25 pm Yes. with this approach the cash at the end can catch you out as the valuers will not consider it. As this can be considered in some instances as 'gapping' a contract for the lending purposes. I was in fact referring to driveways and fences that were actually going to be put in guaranteed. Ie instead of allowances. Actual quotes for work or actually within the contract and thus the completed property at the end has fences and driveways etc. If it is actually going to be put on the property then it is easy to argue a point of difference if the valuers didnt include it. However, if it is just an allowance there is no room to mitigate with the valuer if they come in short. If it is all included as hard costs for what is being done. Rather than what may be done through allowances then the valuer has to value accordingly and if they dont. The broker has recourse to approach the lender and valuer regarding any shortfall. Trent Re: Another valuation question? 14Oct 13, 2009 10:34 pm I think anything not in the builder's contract, that you want finance for, you need quotes. but that doesn't guarantee they will finance it unless they agree in writing... so keep an eye on it A thankful person is a happy person. [/color]My hobby design blog: http://aviewondesign.blogspot.com/ Re: Another valuation question? 15Jan 20, 2010 4:50 pm Trent Davidson From a Mortgage Brokers point of view. It is ALWAYS best to include every single little quote or replacement quote, variation with the valuation. ... Without them, the valuer has no idea of knowing its going to be put on the site. So his comparable sales in the area are for houses without driveways and fences etc. If you are looking to optimise you lending include everything. Have your broker outline the variations up front to the lending institution to avoid issues. The bank needs to make sure what they get at the end of construction is exactly what the decisioned on to start with. Otherwise they do not have a fair market valuation for your property. They have one for a property similar to yours but not quite the same. Lenders do not like this which is understandable. Take the time at the begining of your build project to get everything just right. Variations part way through construction may cost considerably from the builder and may also require the lender to re-value. I'm glad I found this. Thanks for providing the advice Trent. My mortgage broker told me the exact same thing. My situation is that I have signed a PPA and the builder is just about to start drawing up the working drawings and contracts. I realised that they had not included a few major items in the variations, such as stone benchtops, glass splashback, bulkhead in theatre room, painting the house (not included in WA) etc. So I asked them (via my building broker) to add these to the variations (they have already added about 20 variations with no issues). The problem is that we will not have enough cash to pay for these outright, so we need them built into the loan. For some reason they are refusing to do this however, arguing that "they have never heard of a bank asking for costed variations to be included in the valuation". Even better, the sales guy said "most clients these days are letting their brokers or banks know that they want to make some changes or add some features and the brokers and or banks are making allowances for this in their pre approvals" and that "it is too early to quote on all the possible changes"!!! They have told me that they will only "add an allowance that can be adjusted at prestart" and that they have a price rise coming at the end of the month, so I have to decide now. What makes it even more frustrating is that my building broker is agreeing with them (and he's meant to be on my side!). Does anyone have any suggestions on how I can get around this, or if the 'allowances' will help at all for the valuation of these particular items? If the items are not added until prestart (after valuation) will the bank need to re-value the house? Or will they take these variations into account at all? I just don't want to end up at the situation of not having the ability to pay for these changes and therefore not being able to put the things in the house that we want (and wasting money on cheaper alteratives now and having to upgrade down the track). Thanks in advance... Built with Sw1tch H0mes >Build thread< House status 15/12: Gates and A/C finally installed! Sep 09 Bought block, Dec 09 Engaged builder, Jul '11 Moved in Re: Another valuation question? 16Jan 20, 2010 5:00 pm Rizzo Thanks pinkfairy. Off to have a read now. I'm just hoping they take in a little of the variations, if not that's cool, but I'm stressing that our land val may come in slightly lower as we bought in January last year, and that was at the end of the peak around here. If that happens and we have to use our extra's money to make up the loan difference, we could be in trouble coming up with the money for everything else in the end. So fingers crossed, it comes in at what we bought it at at least. Hey rizzo, how did your valuation, variations etc go? Is it all sorted now? Be interested to know in light of my situation. Cheers Built with Sw1tch H0mes >Build thread< House status 15/12: Gates and A/C finally installed! Sep 09 Bought block, Dec 09 Engaged builder, Jul '11 Moved in Re: Another valuation question? 17Jan 20, 2010 5:16 pm If for example the land you are building on is valued at $200,000.00. and you are constructing for $200,000.00 (contract price). A lot of the lenders will value this as $200,000.00 land and $200,000.00 construction. Meaning say for instance with a 90% lend you get to borrow $360,000.00 (fees etc ignored for ease of numbers). IF you have a building contract with the variances and stone bench tops etc and these variances/additions cost more etc. Technically your building contract is going to be say for instance $220,000.00. Lenders value. $200,000.00 PLUS $220,000.00 total value $420,000.00. 90% = $378,000.00 The banks need to know what the security is going to be. What they dont know they cant value. And what they dont value they cant lend on. Simple as that. If the builders want to factor it in as an 'allowance' then that is how they want to do it. IF you get a savvy Valuer though that sees a construction contract with $20k of 'fat' built into it then they may query it. And when they query it. Its best if you can come back with. 'These are for variations such as. Painting, stone bench tops etc.... as these are not included in the construction contract' Funnily enough this is one of those situations where the bank/institution and the client have the same goal in mind. Both want to have a FULLY completed security at the end of construction . Regards, Trent Davidson Property Finance Consultant Residential Lending LJ Hooker Finance Brisbane North Credit Representative Number: 387283 under Australian Credit Licence:380270 Re: Another valuation question? 18Jan 20, 2010 6:16 pm Ok so the extra variation allowance can still work in my favour as long as I have items earmarked to spend it on? That sounds ok, and hopefully the bank will agree. What would occur if at prestart time we decided to drop one of these items (something worth $5000 for example)? Will the bank still lend the full amount or will they see the change and want to re-value it? One other question - what amount of detail are banks currently asking for to enable pre-approval? Thanks for the reply... Built with Sw1tch H0mes >Build thread< House status 15/12: Gates and A/C finally installed! Sep 09 Bought block, Dec 09 Engaged builder, Jul '11 Moved in Re: Another valuation question? 19Jan 20, 2010 6:41 pm Hey Westy, We ended up sending through the amended contract with the variations with the final plans, and the valuer included them in our valuation. It was lucky he did though, as our block came in under value, so if the variations hadn't of been allowed for, we would have been screwed. We do however, still need to do the internal paint, flooring, concreting after handover, but should be able to save enough for that. Good luck with everything Re: Another valuation question? 20Jan 20, 2010 8:27 pm Hi Rizzo Were the variations in the contract just the items that the builder was going to do for you, or were you able have the variations that you wanted to do separately, included in the valuation as well? westy Built with Sw1tch H0mes >Build thread< House status 15/12: Gates and A/C finally installed! Sep 09 Bought block, Dec 09 Engaged builder, Jul '11 Moved in Hi, Apologies - I know there is plenty out there on this but struggling to put together the puzzle. We're planning our garage/external laundry to master bedroom and… 0 11121 You can really use anything you want the main consideration would be how it looks once painted/finished - or the look you want. Cabinetmakers use MDF because its cheap… 2 9971 I would say both styles you have pictured are steel. The lower chord of the first pic would be a massive lump if made using timber considering the size of the rafters. If… 1 6157 |