Hello, I have been trying to find information on this site for the last couple of days and finally decided I should probably post because everyone's situation is different Back story, My partner and I are looking at purchasing land to build our home on. We had a pretty strict budget (420k). We have found a piece of land in our price range and a house, which takes us bang on 420k. The issue is the land is unregistered and is looking to be registered in Nov. The developer has council approval and has started stripping and filling the land. We have a CBA home seeker approval with a guarantor who owns the property outright as well as a 20k deposit. My partner and I have not been affected by covid (I am in education, partner is in aged care) we earn about 100k pa and don't assume that will change moving forward. We have signed a COS for the land subject to finance, which is due next week, however, we cant get formal approval due to the valuer not being able to value the land. We don't feel like we are high risk, we have no defaults on a credit report, although my partner had a couple of late payments on his car loan. We obviously would love to go ahead but the risk of losing the deposit if something out of our hands goes wrong (banks changing criteria) I just feel really uneasy and unsure about the situation and am obviously not an expert as it is our first experience trying to buy land. I have done so much research, with very mixed info. Sorry for rambling, but my question is, if CBA for whatever reason doesn't give us formal approval, does it look like we have any other options? Payement is due 14 days after settlement.
Welcome SamW87, 99% of the people here can be categorized by the below: 1. investors buying existing properties, Australia wide, some buy overseas (with huge land value) 2. some small scale developers buying huge land, and extracting profits with tax minimisation techniques. only few will be in similar situation than you. My comments are 1. New is not always good. 2. New land and estates tends to have small land size, no character. 3. Often have no efficient public transport. because of small frontage and small garage on street parking is often the cause for neighborhood dispute. I would not pay any deposit, (may be less than $1,000 max), until I get a formal approval from the bank accepting the total price I will be paying for the development. there are heaps of horror stories whereas someone pay the builder deposit, but the builder did not pass on the funds to the developer, now they have no land, and no deposit back. when I buy my first home I buy existing, paid stamp duty, paid LMI, houses within 20km over 550 sqm in size, the best choice I have made.
The good news is CBA Home Seeker approvals are credit assessed, so unless one of you loses your job or your income reduces before formal approval you should be fine. Likely that the finance clause for the land contract will be extended, the developer should agree to this seeing as the land is not registered yet, you should not have to pay the total deposit prior to the land being registered. In my experience, in QLD, most developers will just keep extending finance clauses until the land registers. Buyers put up $1000 up front as part of the EOI that secures the block until then. You pay the deposit for the land to the developer not the builder.
Getting to the bottom of it, the real problem here seems to be that the land can't be valued. At the same time there's a family guarantee in place, from an unencumbered property. Realistically there isn't a problem here. You've got a proper pre-approval. If the land valuation falls short of the purchase price, the guarantee amount can easily be increased to cover the shortfall. Whilst nobody likes to pay more than what a property is worth, you'll still get the finance if you want to proceed. You're not going to loose your deposit.
Thank you for your reply! We put a holding deposit of $1400 on the land but the rest of the 5% deposit is due next week. Our conveyancer has already extended the finance clause for 2 weeks but that still doesn't give us enough time to get finance as the land isn't due to be pegged until next month and can't get the valuation The owner's vendor said the owner is unlikely to extend any further after this 2 week is up. Our only issue is the land is the only one in our price range and I guess that is because it is untitled. We don't have too many other options at this stage.
Thank you so much for the reply That actually makes me feel a lot better about the situation! If you don't mind me asking, I just have another quick question. In regards to our assets, the bank has put the 25k home builders grant on, but if for some reason the land doesn't get registered by the end of the year and we cant sign the contracts, will that potentially affect our formal approval?
Thinking about this logically, what would change if they sold it to someone else? The new buyer will also have the same issue. What has your broker/banker advised you to do?
Unlikely to affect your formal approval, what is more likely is that the lender will take more equity from the Guarantor's property to compensate.
Broker has given us a worst-case scenario and advised us that they just had a low-risk case declined from the bank due to not meeting the criteria anymore. It scared me a little bit, considering we have so much to lose. Just hoping that this hasn't been a regular thing that the banks are doing at the moment due to COVID Broker said that we are in a good position but obviously under the circumstances, cant give us a 100% guarantee. Thank you so much again for your advice!
the banks knows the most about the current situation, especially the big ones because they have a lot of bank accounts... i.e. number, age, count by suburb of loan deferrals, type of properties. unit / houses etc. i.e. who is getting job seeker / job keeper, by suburb i.e. who is not getting rent...
Thank you, that is reassuring I've just heard so many horror stories whilst doing my research! I know not everyone is in the same situation but just nice to have a second and third opinion!
Honestly, unless your income decreases or you go and get a car loan or some other activity that reduces your borrowing capacity before settlement you won't have an issue. If the contract is subject to finance and you can't get the finance for whatever reason, then you don't lose your deposit.the example your broker/banker used is rare and it's likely that one or more of the applicants either lost their job or had a reduction in income. Low risk means nothing if your financial situation changes.
If the cost side is so tight, have you thought about the building side of it? Hate to pull scary stories on you, but how water tight is the deal? Suggest exploring the likelihood of cost blowouts, builders going under, half-finished house (probably worst case) etc? The Y-man
Thank you for your reply! We have found a house plan through simonds and have put a tender deposit on to lock in the price and site costs for the land, it puts it within our range the house and land package it just short of 418k then we have our 20k deposit to use if any other costs arise we also get the 20k fhog and hopefully the 25k home builders grant.
I have too, did some numbers on new builds, I am sure the 418k is all inclusive right ? - the slope of the land is included right ? - landscape, driveway and fencing is usually extra... it is just that generally people factor in 10% extra as a safe buffer.
