Land valuation came up short?

Discussion in 'Loans & Mortgage Brokers' started by acwilliams, 12th Sep, 2018.

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  1. acwilliams

    acwilliams Member

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    Hey guys,

    I’m hoping someone will be able to give advice/experience and just stop me from stressing really!

    My fiancé and I have put down deposits for a house and land package with Metricon in the mandalay estate in Beveridge.

    Our contract with Mandaly has our land price at $285,000. We are currently in the final stages of our loan application, was simply waiting on the valuation for the loan to be approved. And then yesterday our broker called and told us we had hit a bump in the road... our land valuation has come back at $260,000 so $25,000 short! This is through CBA . Honestly this was never something I had ever thought would be an issue or had been worried about, apparently this has been occurring a lot with mandalay.

    My broker has immediately requested land valuation with three other lenders. What are our chances that one of these lenders will come back with a higher valuation that matches the purchase price? My broker did not seem concerned and said it was highly unlikely that none of them would give us a valuation close to what we need but I’m still stressing, we have put our savings and hopes into this house and land package and would be devastated for it to fall through due to something out of our control.

    Our broker has said he will seek valuation from every lender available to us if needed but I am wondering what our other options are, we don’t have another $20,000 to put into this especially with land titlement being so close... we might be able to put in another ten possibly but it’s not something I would really want to do.

    Would there be any chance of mandaly lowering the purchase price if all the valuations come back low?

    Would we be able to put property, such as our cars which we both fully own into our loan as collateral to make up the difference?
    Would we be able to take out a personal loan to cover any difference?

    Also would anyone be able to offer any advice on how quickly banks such as Westpac, ANZ and mebank get out their free valuation reports?

    Any and all help or advice would be appreciated. As I said my broker doesn’t seem concerned as I think he has faced this problem with mandaly before but I can’t help but stress!
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    what stage of the contracts? Are you locked in?

    Consider that you might be paying too much, but if you are locked in there would be no reason why they would give you a discount. But best to wait and see what the other valuers say first.
     
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  3. acwilliams

    acwilliams Member

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    We are a couple of weeks away from our land titling so I’m assuming that would mean we are locked in. I just thought if we can prove that they are overcharging for the land with evidence from a number of valuers that might be forced to lower the price because they would have difficulty selling it possibly if it’s getting valued at 25k under asking price. But I didn’t realistically think there was much chance of this occurring.

    I’m hoping for good news from other valuations, it’s just hard when it’s something out of your control.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    It would be worth asking, and you never know if it happens to many it could mean problems for them as they would have to go to the trouble of trying to resell
     
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  5. acwilliams

    acwilliams Member

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    Yes I believe this is what our broker is intending to do if the other valuations come up too short. As he was saying we are living up to our end of the contract but they wouldn’t be as they are trying to overcharge us if the land has been overpriced.
     
  6. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    There's a reasonable chance that a different valuer will yield a different result. In most cases, this does work.

    In the event that it doesn't, you are going to have to come up with the difference. The alternative is that the developer will keep your deposit and sell the site to someone else.

    A personal loan may help with the shortfall, but there are restrictions on this. It's definitely worth exploring though. Lenders can't use cars as security.


    The banks property reports are a very basic RP data report. You'll find many brokers offer similar reports that are actually more detailed. Unfortunately they're not designed for new developments or vacant land.
     
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  7. acwilliams

    acwilliams Member

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    Thank you for your response I’ve got all my fingers crossed that these other valuers yeild a more positive result or at least closer to our purchase price.

    We will defiantly look into a personal loan for the shortfall but hopefully this doesn’t need to occur! It’s unfortunate that lenders don’t accept cars as equity, we would have happily put them up :/
     
  8. tobe

    tobe Well-Known Member

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    Your brokers doing the right thing. Only change I would make would have been to order the second opinion vals before coming to you with the bad news on the first one.
    The developer may offer to rebate some of the difference at settlement. I’ve seen this lately with OTP.
    Hi long ago did you sign the contract for the land?
    You said this is a H&L package, so I’m assuming the build contract is ready and you are getting both valued together?
    Land on its own is more likely to be undervalued.
     
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  9. acwilliams

    acwilliams Member

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    Thank you I’m glad to hear he’s taking the right course of action I also wish the second Val’s had of already been ordered might have stopped me from freaking out so much! But I think he did order them as soon as he found out and then called me.

    I’m also glad to hear that there has been some precedent for developers lowering their price, especially if it’s clear their overcharging.

    The contract for our land I believe was signed in Feb.

    The build contract is ready but I’m not sure if they were glued together as my broker hasn’t only told me that the land valuation came back short.

    Thank you for your reply!
     
  10. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    This is a common challenge with any off the plan development , land, units, townhouses.

    As TOBE has said, being a specialist build guy, the best rescue may be to get a combined land and build val asap

    ta

    rolf
     
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  11. acwilliams

    acwilliams Member

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    Thank you! It does seem to be a reoccurring problem which has surprised us as we didn’t realise land valuation could cause such a headache. If the other valuations also come up short I’ll ask our broker if he’s been receiving house and land Val’s . Would this be the case if we have two seperate contracts? One for the land and one for the build?
     
  12. tobe

    tobe Well-Known Member

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    If he had the build contract he would most likely have submitted them together with the land contract and had an as if complete valuation ordered.
    It’s not uncommon to have this issue I’m afraid. Hopefully the other lenders valuations stacks up.
     
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  13. acwilliams

    acwilliams Member

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    Thank you for your knowledge I will definitely make sure to check that this has happened if we encounter more problems!

    Fingers crossed the other valuations are more generous, as our broker experienced this problem a couple of weeks ago with someone in our estate I’m hoping he gets a good outcome as he did with them!
     
  14. tobe

    tobe Well-Known Member

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    Are they the Metricon brokers that you are using?
     
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  15. acwilliams

    acwilliams Member

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    Yes, loan gallery
     
  16. Brady

    Brady Well-Known Member

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    You signed in Feb, when did you provide the contract to your broker?
     
  17. acwilliams

    acwilliams Member

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    He’s had access to it the whole time
     
  18. equityma

    equityma Well-Known Member

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    Beveridge is the next neighbor to my previous titled land in Mickleham in 2018

    The only reason to have an undervalued land valuation is that there're not enough houses built in your area coupled with lower properties prices therefore you have NO way to escape this dodgy valuation methods.

    I believe you bought the house&land package UNconditionally.

    Ask yourself a question. If the bank won't lend you the money to pay for the piece of land then where would you go to get money to build your house?

    Did you sign under a contract to say you MUST build your house within 2 years similar to Merrifield estate ?

    I had my bank support for my purchased land from day one but when it came to a settlement period, the bank forgot to ask me to sign some paperworks and the settlement day was delayed for just ONE day.

    The vendor claimed I was in default and They charged me 8k for a 190k land. Luckily my bank was fully responsible for this ripping fee.

    Let imagine how much will the Vendor swallow the fees if my bank delayed for a week or so.

    Do not let the Vendor beat you to the ground. You must borrow 20k from friends and relatives and pay your bank for the shortfall.

    At the end of the day you will find you will be able to build your dream house to overcome the biggest fear for a property buyer that is DEBT.
     
  19. tobe

    tobe Well-Known Member

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    They are specialists in house and land.

    It’s frustrating, hopefully one of the other vals will work.

    Let us know how you go.
     
  20. tobe

    tobe Well-Known Member

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    No val possible until roads are in and block pegged, which is usually astound the time titles are lodged a month or so before POS registering and settlement.

    Stupid OTP risk management by valuers affects H&L market in new estates.