Browse Forums Home Finance 1 Mar 07, 2016 12:20 pm We have a build contract for $375k for a 350sqm home. There are at least $50k of outstandings to be completed afterwards (driveway, flooring, etc). The land was purchased for $225k, and on recent sales is probably worth $235k. So the combined "cost" will be ~$650k. Our broker has just told us that there is a risk that the lender might think the property is over-capitalised because there are no sales for houses on non-acreage lots (like ours 840sqm) above $550k (there are plenty on 2000sqm lots, but we deliberately avoided acreage as we wanted town sewer and water and the better proximity to town). I guess my question is, do lenders not take the build cost as the "value" as long as it's in normal parameters. Ours comes out to ~$1,200 per sqm which seems like mid range build cost. Is there a real risk they look at it and say it's just too big a house for the area? There are similar sized (say 300sqm) houses in the lots next to us. Re: Valuation risk on build cost? 2Mar 07, 2016 12:51 pm HI, It could go either way - they look at comparable sales in the area - so what a similarly sized home on similar land with similar attributes has sold for, and they also look at "cost price", and they do use a measure exactly as you propose - cost per square meter. Your broker is perfectly positioned to get you a couple of valuations if necessary up front so you can see what the potential is. Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Re: Valuation risk on build cost? 3Mar 07, 2016 10:01 pm I agree with Bec, although your broker has said it's risky there's nothing stopping them from asking the banks what your options would be. Follow Our Build Here: viewtopic.php?f=31&t=75667 Building with Kurrajong Homes in Alumuna Walk Village. Re: Valuation risk on build cost? 4Mar 09, 2016 6:43 pm Thanks for the replies. I hope they look on a $ per sqm basis and realise it's sensible! The broker has said she would put the application in to get the valuation as a starting point. My problem is that it's a relatively new estate with some smaller standard size and cost housing on it, and some nice new large builds like ourselves (and very few if any settled H&L sales). So there really isn't a good comparable in terms of house size on like for like lot size. Is there any value me making the case to my broker on the valuation? And I mean by referring to similar new builds in the estate (land cost plus an assumed $/sqm build cost). Do brokers every argue the point on valuation? Or am I just making her angry by arguing the point (in a very nice way!) Re: Valuation risk on build cost? 5Mar 09, 2016 8:58 pm I can't imagine her being annoyed at you helping gather the data - I know i've spent a lot of time looking for this information for my clients to challenge valuations. I say get the info together just in case but be very sensible and make sure you're comparing like for like. You can ring local agents for any sales they may have, use the land price list if it supports your case, and look at average build prices. Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Valuation risk on build cost? 6Mar 09, 2016 9:44 pm Thanks Bec. That's the approach I will take. I'm in the land development industry, so I have access to all the databases for established house sales as well as listings, and sales and list prices for vacant land. May I ask one last question? What is considered a sensible $ per sqm build cost for a brick veneer project home with a large builder with medium inclusions? I've been using $1,200, but even that seems cheap according to some build construction websites. Am I way off base? Ours sits at $1,170 before optional extras like plantation shutters and rear decking. Re: Valuation risk on build cost? 7Mar 09, 2016 9:53 pm Gosh that's handy to know, I may hit you up next time I have a valuer issue... It depends on the quality of finish but certainly I've seen $1200/m as a cross check and it has been acceptable. If you still have grief let me know and I'll see if I can order an upfront Val somewhere else. Rebecca Jarrett-Dalton Property crazy expert mortgage broker, love building new homes! Two Red Shoes mortgage broker http://www.tworedshoes.com.au/building Re: Valuation risk on build cost? 8Jul 03, 2016 10:52 am I have the same concerns for valuation but building in Melbourne .. Is there a guide per sq metre range for valuation in Mel which would be useful to keep in mind before going to color selection and upgrades Building Metricon Glendale 39 in Melbourne North Re: Valuation risk on build cost? 9Jul 06, 2016 3:28 pm Everyones 'opinion' on what the per sq metre range means diddy squat. Talk to local agents and get a variance of price point. The only 'opinion' that carrys ANY weight is what the valuer writes. If you are lucky enough to actually meet the valuer who is writing your finance, you can CAREFULLY DISCUSS with him what other people (local agents, comparable developments in area) have achieved. This is where you hand him hard copies of the data you have gathered. But DONT get your valuer off side, when they are long gone and submit their valuation. Thats the final number. If you can borrow on that number, fantastic. Otherwise, roll the dice again and try another valuer / bank combination. No-body likes to be told how to do their job, especially the valuers who ultimately are wearing the risk. Ask him what his professional insurance costs a year to cover his valuation reports, and then see what he gets paid per valuation from the bank. Tens of thousands for the former, few hundreds the later. Generally. Valuers are always squeezed. Tough job, especially in a low, falling market or a sideways market. The last home I lived in didn't have a pool and when i went to sell it the agents were not happy, even telling me to put one in to sell the place. The agents weren't happy… 2 4257 Thank you so much everyone. This all makes a lot of sense. I guess when you talk to a builder who butters up everything to look very polished, you get to start believing… 7 17629 7 12028 |