Post Auction Valuation Issues

Hey there,

We won an auction after having a fully assessed pre-approval from Macquarie Bank with a LVR of 89% (we were told its ok to bid at the auction). After winning the auction, Macquarie sent out their valuer to value the property and it has come back as as a risk category 4 (whatever that is). They are now saying: "we consider the contract price to be at the very upper end of an acceptable market range. It is out opinion that the current purchase price might not be achieved if the market weakens from it's current position and we will not lend if LVR is not at at least 80%".

Additionally, our broker said "Credit advised that it wasn't them making the call on the lending limit of 80.00% I was advised that when a report gives a risk rating of 4 their system now limits borrowings automatically and will not allow them to go into mortgage insurance territory.".

We are now left extremely concerned as we do not have the capacity to extend the LVR to 80% and we have 5 weeks to settle.

We found lots of flaws in the valuation, for example it said there needs to be $10,000 of essential repairs added to the property but that is not the case at all. They also used extremely low comps. Additionally, the risk ratings dont really average out to be a 4 as you can see in this image attached.

Can we challenge the valuation here or is it better to take the hit on our credit score and go find a lender that is going to be nicer on the valuation and happy with our deposit?

Really appreciate any advice here. Very stressful!

 

In my experience it's very hard to fight a valuation report and also this would be a black and white policy.

Was there a reason why you went to Mac Bank for an LMI application ? Policy specific ?

You might be better of going to other lenders right now instead of fighting. Especially when it's LMI.

Risk rating 4 is actually normal these days..if its a risk rating 5 and LMI then you might have some concerns.

 

Thanks guys. I believe the broker selected Mac as they had a faster turn around time and good rates and said she was not aware of this policy. The broker has also recommended not fighting. I am just concerned that this happens again and we will keep lowering our credit score and might get into a situation that we cannot secure the funding and therefore lose our deposit.

 

5 weeks is plenty of time - good news.
Try other Vals and banks.
Credit score stuff is largely fluff if your buying one property. Dont worry about this.
We've moved to a positive credit reporting system where there is far more richness in the data they collect on you than in the previous negative model. Given the richness of the data here, the weight of enquiries solely on your credit score is lower than in the past.

 

Unfortunately very common these days particularly in Sydney. First challenge this valuation via your broker if you can.

I would also immediately look at other lenders.... use a very experienced broker...who knows their stuff. I think you may find lenders like RAMS, Pepper... the majors will be lot more conservative but maybe worth a try. A standout broker can sort this out.

 

Is LVR 89% inclusive of LMI (or plus LMI?)
If possible , proceed with 88% plus LMI to stay under 90%. Get your broker to order a couple of upfront valuations & it should be sorted out pretty quickly.

 

Do this, you'll be fine, hard not to be a bit stressed about these things.
The credit score isn't going to be too affected with 1 or 2 enquiries, easily explainable.