Browse Forums Home Finance 1 Oct 15, 2011 2:53 pm Hi,
So here's the deal, I've bought my own land in Lynbrook. Probably a little more expensive than I would have liked in retrospect Anyway, the problem is not the land's value (I'm not happy with it but that's a different story), the problem is the contract value. I've been quoted a little under 10K a square for a 3 bedroom + study, single story house. The house has: Ducted heating (4 star upgrade) Driveway in exposed aggregate 2*Stone pillars at the front Upgraded bricks and mortar Panel lift garage door Ecoclassic double glazed windows Extra insulation to get the 7.2 star rating Colorbond roof Among other smaller upgrades. Now the quote if for a custom build, the plans are custom and therefore I'm not going to get a volume builder price. Its approx 24.3 squares of house, including the double garage and alfresco. Is this price fair? One bank quoted me 200K (flat) for the house, the builder is confident that its below his cost price. All other builds I approached before signing the contract quoted 10-15K a square before the upgrades. The next bank 190K for the house. I'm now paying for a 3rd valuation with a company called "MyRate" they're rate is excellent so I'm probably going to switch loans if this comes through without an issue. Has anyone else has this issue? I'm not an owner builder, this is a contract including 20pages of PDF drawings and specifications, the builder has been great so far. Thanks Re: Construction loan coming in 20-30K below contract price 2Oct 15, 2011 4:06 pm the bank goes by the size and the location of the construction. upgrading to granite stone pillar or gold plated garage door will not move the bank. unless you are building a unique object with significant value they might take a 2nd look. I don't think any builder will actually move in and construct a house for you if the margin is less than 50%. so if the cost price is 200k, they should be charging you 350k for the least to start with. Re: Construction loan coming in 20-30K below contract price 3Oct 15, 2011 5:53 pm Ok, but I cannot find ANY builder who is willing to build a custom designed house of 24 squares for under 200K. Why does the valuation come back as that low? Has anyone been able to build a single storey house with even minimal inclusions for $8,300 a square ? As a fixed price agreement including the driveway? And if so please send me your builders name/number immediately Re: Construction loan coming in 20-30K below contract price 4Oct 15, 2011 6:10 pm rojak1 the bank goes by the size and the location of the construction. upgrading to granite stone pillar or gold plated garage door will not move the bank. unless you are building a unique object with significant value they might take a 2nd look. I don't think any builder will actually move in and construct a house for you if the margin is less than 50%. so if the cost price is 200k, they should be charging you 350k for the least to start with. Thanks but I'm not interested in guessing how much profit (or lack of) that the builder may be making. I'm simply asking about if its normal for the bank to fail to offer the full contracted amount as the value of a house build when its not an owner builder. Re: Construction loan coming in 20-30K below contract price 5Oct 18, 2011 10:38 am theanonyuser rojak1 the bank goes by the size and the location of the construction. upgrading to granite stone pillar or gold plated garage door will not move the bank. unless you are building a unique object with significant value they might take a 2nd look. I don't think any builder will actually move in and construct a house for you if the margin is less than 50%. so if the cost price is 200k, they should be charging you 350k for the least to start with. Thanks but I'm not interested in guessing how much profit (or lack of) that the builder may be making. I'm simply asking about if its normal for the bank to fail to offer the full contracted amount as the value of a house build when its not an owner builder. it's normal. Re: Construction loan coming in 20-30K below contract price 6Oct 18, 2011 1:13 pm I wont say it's normal- but i say it does happen...but not on a regular basis ( maybe 20% of the time). If the bank valuation is less then your "fixed price contract" then i would question the fixed price contract as cost of material is the same ACROSS the board and that's how the bank valuers it based on size and material and cost of the material + inflation ...then they would add the builders and another cost...so it sounds like the builder may be over charging you ( who knows). You can go to the building association website and check the cost of the materials with size quoted and work backwards. But some times it's easier just to find another building quote. ...i mean when you shop for plumbers you get 2-3 quotes. Also you did mention it was a custom build design, so 10% off from the bank's valuation is sort of within limits....normally it's 5% off- since it's custom build, it's hard for the bank to compare quality and selling potential. Lastly i would avoid jumping around to different banks...it will trash your credit file. Regards Michael Michael Chan | Australia wide Mortgage Broker Michael@ShapeHomeLoans.com.au | 1300 74 5626 | Fax: 02 8212 8909 http://www.ShapeHomeLoans.com.au Re: Construction loan coming in 20-30K below contract price 7Oct 18, 2011 1:32 pm Thanks Shape. I've got quotes from 4-5 builders and all were more expensive. Only 1 of the valuations will count, and I would assume the second valuation will also count since I'm paying for it to be done. So that will be 2 valuations. I'm unable to find any cost estimators on the building websites, do you have any links ? Re: Construction loan coming in 20-30K below contract price 8Oct 18, 2011 2:52 pm If you personally get a valuation done it will mean next to nothing to your lender. They normally have a board of valuers that they will use and that is it. For you to get a "valid" valuation done you would need to specify that it is to be done as if they were doing a Bank valuation. Bank valuations are normally less then a run of the mill valuation - as they value the property as if they have to sell it at a fire sale - no hanging around and waiting for the best offer. If the Bank valuation is coming in that low they are pretty much telling you that you are overcapitalising on that house on that land in that area. We built a custom design. Our contract price was $450k, our land was $750k - luckily we owned the land outright so were only borrowing for the build. Our valuation came in low - but that is because there was no comparative sales / records for our area. ie Our land is almost an acrea - blocks in this area are normally no bigger then 800sqm so they had no sales that would support the land size / price. At the end of the day you either come up with more money of your own / therefore borrow less or take heed of what the lender is telling you and shop around for a more competitive house quote. Some things are worth waiting for. Re: Construction loan coming in 20-30K below contract price 9Oct 18, 2011 2:55 pm I have a feeling the issue may be the overall cost, which includes the price of the land. Unfortunately I own the land and its not easy to get rid of it. I might just have to delay the build further to save more money Also note that my new valuation is through a lender, I'm not doing my own valuation. If it comes through the same I'll have to choose to stay with the current bank or not. I'm looking at another 10K of LMI Re: Construction loan coming in 20-30K below contract price 10Oct 18, 2011 3:18 pm [quote="theanonyuser"] Unfortunately I own the land and its not easy to get rid of it. I'm looking at another 10K of LMI /quote] If it helps there are banks that will give you a 20k visa card ( at home loan rate) which you can use for any short falls. Also ur first line suggest you have NO mortgage? ie you own the land outright??? Regards Michael Michael Chan | Australia wide Mortgage Broker Michael@ShapeHomeLoans.com.au | 1300 74 5626 | Fax: 02 8212 8909 http://www.ShapeHomeLoans.com.au Re: Construction loan coming in 20-30K below contract price 11Oct 18, 2011 3:22 pm Ooops sorry. The land I've paid off only part of it, so I should have anywhere between 35 and 55K equity depending on the valuation. The bank owns the land...although the land is in my name Re: Construction loan coming in 20-30K below contract price 12Oct 18, 2011 4:36 pm I thought so... Given you have to pay LMI again of 10k- it's not financially wise to change banks + you probably only had the land for less then 1 year?? Im not 100% sure of your situation, so wont make any further comments; but i suggest you speak to a broker to see what options you have....also you need to be open to new ideas and creative ways of investing and not be JUST driven by the rate ( since you chosen myrate) ; because there are plenty of lenders out there that offer: 1. Broker can organize and CHOOSE from a panel of valuer and the bank will accept the value- so it means we can organize a few of the valuation before submitting the deal. Also certain valuers are better in certain areas they service. 2. 20k Visa card ( as per previous post) 3. Order upfront valuation Note: the problem is NOT the bank, it's the valuer/valuation...even though ppl say the bank has a influence - they may but really they work independently still. So you can't target a bank based on their rate and just how friendly they are lol....but more on their "valuation policy and MAX LVR they are happy to lend too..." Regards Michael Michael Chan | Australia wide Mortgage Broker Michael@ShapeHomeLoans.com.au | 1300 74 5626 | Fax: 02 8212 8909 http://www.ShapeHomeLoans.com.au Re: Construction loan coming in 20-30K below contract price 13Oct 18, 2011 4:50 pm The bank will place a valuation on what they think they would get for that size house in the area. Doesnt matter that its a custom build. They would deduct what you would have to pay for the land loan and then whats left is the value they will offer you. Essentially they are telling you spending that much on that size house in your area is probably over capitalising and you wont get your money back Building NBG Buckingham 46 on Property in rural Victoria my Building Thread viewtopic.php?f=31&t=46837 Re: Construction loan coming in 20-30K below contract price 14Oct 19, 2011 7:30 pm I've had a chat to the new person, MyRates, and the valuation is back. The land is more reasonable this time, the house has come in at 190K. The explanation was that the tender is fair, but the "luxuries" will not be counted by the bank. However, due to my first home owners grant and my deposit, I should be ok to get the loan....at 90% I'm going to run a curiosity survey about the price in the building forum.... The biggest challenge will be if you take out a loan and then run out of money - you'll have an incomplete security and lenders do not like this so you can get stuck.… 2 19096 Hi, you've probably already resolved this, however, Commbank will probably pay the funds to you after you send evidence the work is done regardless the change in the quotes. 1 35321 Get some long brass machine screws and bolt right through the gate and put brass acorn nuts and washers on the other side. It will never come off 1 9074 |