Low Bank Valuation

Hi all,

Just looking for some advice.

We are building a house and the bank has valued the build at the exact price of the builders contracts which is great but the contract doesn't included the flooring, driveway etc as we were able to negotiate better deals externally saving over $20k.

The issue is the bank won't add the flooring to the house value leaving us $25k short on our valuation.

This in my mind is ridiculous as how can flooring not add value to the house.

When asked the bank said if the flooring was included in the builders contract it would of been included in the valuation but as it is not we have to cover the cost ourselves.

How can this be the case and are there any options to include the flooring etc in the valuation. We have invoices for the flooring including installation.

Chris.

 

What reason did the bank give for not including it?

Since you mention the flooring has been installed, does that mean the house build is completed?

 

Hiya

Did you provide the quotes for the additional items to the builder and explain that these would be purchased outside of the contract?

Cheers

Jamie

 

Hi Jamie,

No we didn't provide the builder with the additional items. Is that an option could they include them in the contract? We have provided the bank with the invoices but it is clearly not enough.

Cheers

Chris

 

Hi no nothing has been built we are still trying to get the loan to start the construction but can't as the valuation is so low due to the bank not including the flooring, driveway etc

 

Why not just get the loan and save for the flooring and driveway while the house is being built?

Plenty of people do it this way - you can use sheets for curtains for a while until you can afford something better, put rugs on the concrete slab while you save for carpet, diy spread a load of crushed granite or roadbase instead of a concrete driveway etc.

 

The bank are probably not going to lend you extra money over and above the actual written contract build cost.

Build the house. Save up during construction and add the driveway and flooring as you can afford it. Believe it or not, that is what we all did back in the 1970s! We lived on bare concrete for 18 months till we could afford carpet!
Marg

 

Get the quotes, have your builder include them as cost items in the contract. Get a new valuation done. If your bank won't do it, get a broker, or your broker to order one thru the same bank, or another.

You can't start the build without these quotes in any case as the bank won't lend anything without a fixed price contract that ends with a certificate of occupancy. No council is going to give you a certificate of occupancy without floors, bathroom and kitchen etc. and no bank is going to pay for the slab for a contract that doesn't end with a certificate of occupancy.

The bank won't take the risk of holding a half finished house. At best they will only start paying if you show them the cash for the floors and driveways etc.

 

That is definitely one way - unless the OP has already paid the floor supplier...and can't get a refund.

Incidentally, I don't think occupancy will be an issue as there will be floors, they just won't have covering. No different to the polished concrete floors expensive builds have!

The OP is also not saying the house won't have a bathroom or kitchen!

 

Indeed, I may have overdone comments about certificate of occupancy. But the bank is going to be reticent to fund a property that isn't finished. The bank wants a saleable asset to lend against, not something incomplete likely to attract discounting at any potential mortgagee auction.

Regarding the quotes, the work doesn't need to be carried out by the builder. It's a common misconception. Just need to provide the quotes, from another company, to the bank along with the build contract.

Most builders want to finish their job before letting other companies in, so they won't let you paint, or do the plumbing etc. floors and driveway landscaping can be done after handover so builders can't make you use their trades etc.

 

The OP says, in the first post, that s/he has provided the quotes to the bank already and was refused.

However the bank is prepared to lend the cost of the build as per contract - just not with the flooring submitted separately...

 

That's why I suggested getting a broker order the Val with the same lender, or complain at the bank to have it looked at again. It's not clear if the bank has actually issued loan docs and will actually fund, just the valuation was set based on the docs initially provided.

It's odd because it's not a big deal to have the valuer amend the val with the new info. It's likely inexperienced staff at the branch or miscommunication.

 

Yep it's an option.

Your broker or banker could have passed on for you.

See if you can get the valuation changed on the basis of the additional items.

Cheers

Jamie

 

I'm an expert in this matter as I'm building a house where I am providing a lot of my own items.
Valuer absolutely hated it and tore me a new one, pretty much told the bank not to lend me the money (CBA) but I had the cash PLUS the 10% buffer they demanded.

I provided all quotes but didn't make a lick of difference, the valuer still undervalued it by about 150k.
They found a property about 10 suburbs away that was not completed and sold very undervalued and used this as their basis.

Also @tobe they do not require a certificate of occupancy. My house is unfit for living based upon the fixed build contract, apart from having no fixtures and fittings their is no balustrades! Valuer sure made a point of that mind you! Haha
Regardless the bank still lent the money.

I just need to suck it up and once completed will refi and take all my cash back out.

 

They do want a COO The assessor has taken the val report together with your quotes and cash in the bank as their risk hedge.

 

Listen to Tobe he knows construction loans.

 

Yeah fair call but I did not provide many quotes and definitely did not have quotes for balustrades.
I actually provided them a spreadsheet with some indicative costs.

Nothing to stop me from blowing my cash buffer as well so their is still risk their for the bank that upon completion it would be uninhabitable.

 

Definitely easy resolution for this (and a good topic for posterity for any person applying for a construction loan with construction/fitting components not within the build contract) - always provide this upfront so the third party invoices can be factored into the build costs and valuation.

Depending on the actual numbers, you can have val shortfalls if you do not provide all components where the valuer will take off an arbitrary amount of the value - so providing the full picture to the bank so they can have a final end product works in your favour.

 

YEP!
So basically get everything included into the contract, get valuation for finance and use that figure.

Once approved get a post contract negative variation done and then just purchase them using your own funds.

Wish I did this from the start!