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Purchased at auction.. bank won't finance now. How to cancel?

Discussion in 'The Buying & Selling Process' started by dublin_101, 20th Jan, 2016.

  1. dublin_101

    dublin_101 Active Member

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    Hi all... I had pre approval for more than half a million and purchased a property at auction for 500k.

    I've now been told by my broker that two banks have valued the property at 20% less than what I've purchased at.

    I informed the broker that 3 other properties in the same area sold for similar prices (one even 20% more) than mine in the same week, but her response was that the banks only value off homes which were sold a few months earlier.

    I'm now in a concerning position where I've already paid a 10% deposit of 50k and now been told that i need to find another 20% (100k) which i don't have.

    We will try with one more bank, but if that doesn't work then I'm in trouble.

    What are my options?

    How do i cancel? How much will it cost me?

    Are there any other realistic options? E.g extend the settlement date by a couple months?

    I'd appreciate any advice. Thanks.
     
  2. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Options:

    Take out a higher lvr loan and cop some mortgage insurance (at least you don't forfeit your deposit).

    Have broker order more upfront valuations with different lenders - hopefully one comes back at purchase price.

    Generate a desktop valuation with Cba.

    See if it qualifies under no val policy (ANZ would be a good start).

    Do you have equity in another property?

    Family members that could provide a security guarantee?

    These are a few options of the top of my head.

    Cheers

    Jamie
     
  3. Vicki S

    Vicki S Active Member

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    At auction you exchange unconditionally, my understanding is you lose your deposit under the contract terms of you don't complete. SS had some threads on this. Brokers here may be able to help.

    I see one has already responded as I was typing!
     
  4. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    I successfully challenged a valuation last year, initially the mortgage broker told me it was pointless challenging.

    The value came in at $850,000 (comparable house next door had just sold for $1,060,000), I went through the valuation with a fine tooth comb and found a number of errors. I sent it back and a more senior valuer had a look. They came back the 2nd time with a valuation of $910,000 (CBA), afterwhich I went to Aussie who came back with a value at $940,000.

    Just throwing this out there, but are you a member of a profession that has a credit union? I found the credit union for my profession bent over backwards to get a loan across the line for me when I had a preapproval go bad a few years ago.
     
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  5. dublin_101

    dublin_101 Active Member

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    Thanks so far for the responses guys.

    LVR - I was already at 90:10 (so that 50k deposit was the 10% and what other cash I have available was going to pay for the stamp duty).

    Forfeiting the deposit: ...I've never heard of it happen, but you'd have to be a real **** to hold on to one's deposit. Short of somebody disappearing on me, I don't think I'd have it in me to not return one's savings (in such circumstance).

    The third valuation being done is with ANZ, so hopefully they are a bit more realistic.

    The broker said as its a small suburb, the sample is small and they only value it on houses which have already settled. This obviously means the 3 or 4 sold in the same month cannot be used as yardsticks (very disappointing on my behalf). This is why I was thinking: is the option of asking to extend the settlement a decent option??

    In the past I've always disputed valuations when re-financing, which I always thought was a much different process. But buying a house, I would have thought that unless its something double of a house next door, then they would just accept it.

    Sorry not a member of a credit union.
     
    Last edited by a moderator: 20th Jan, 2016
  6. D.T.

    D.T. Adelaide Property Manager Business Member

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    In some states you don't just lose your deposit, you are also liable for the advertising costs and difference in price if/when they have to sell to someone else. Its not about being a c word as you put it, it's about you entering into a contract and then reneging on it.
     
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  7. Biz

    Biz Well-Known Member

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    You would still have to be a C word though I reckon. If it happened to me I would probably hold the deposit until I got a sale and then give them back the difference if the sale price ended up lower.
     
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  8. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    Do you have equity in another property that you can pull out with a re-finance? If you do it might be worth getting the ball rolling now so it's not a mad last minute rush.
     
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  9. dublin_101

    dublin_101 Active Member

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    Yes I fully understand that, but there is so much to play in the equation of buying a house. Personally, as much as i'd hate to have to sell again, i'd actually be scared to take a person's money in that way.

    Asking for expenses, etc. sounds genuine but saying 'bad luck' buddy would be something very controversial.

    I wonder if anybody actually knows of any genuine cases where somebody has bought with full pre-approval, paid deposit and then had the banks be dogs on them.

    I already asked a few people prior to this post, but nobody actually knew of any case of it happening.
     
  10. dublin_101

    dublin_101 Active Member

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    Yes I do but its minimal and I'm single income with four children. So re-financing for more deposit money throws my servicability into disarray.

    So from my side, I had the broker do an assessment of my loan capacity and said as is, you can get around 800k (which i was very surprised at). Anyway purchased the place for 501k and now its a case of 50k deposit plus 25k for Stamps.
     
    Last edited by a moderator: 4th Nov, 2016
  11. dublin_101

    dublin_101 Active Member

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    I'm thinking now that it may be smart if I ask for a 2 month extension. I don't think the vendor was buying elsewhere yet as they asked would I be open to their Mum staying on as a renter with the property.

    Then in 2 months maybe the other properties which had sold same period would have settled - and the banks can value off them??

    Does anybody know if asking for an extension could cost me a lot of money?
     
  12. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    My family is also single income with four dependant children. We spent the past 11 months trying to refinance, Liberty came through for us with a $600k pre-approval when all the others said we were at maximum serviceability.

    If you have some success challenging the valution the minimal amount in equity you can pull out might just get you across the line.
     
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  13. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    There you go then, if you can service an $800k loan, get that equity!

    Make sure the broker doesn't x-coll you though and sets it up correctly with a separate split for the new loan.

    You'll probably want to get onto it quickly as a refinance can take a 2-3 weeks if you need to change lenders.
     
  14. dublin_101

    dublin_101 Active Member

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    I'm now at a point that I don't believe the CBA pre-approval is/was worth much at all, apart from the weight of the paper.
     
  15. D.T.

    D.T. Adelaide Property Manager Business Member

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    I can't see a refi of an existing loan happening in time.

    Not the brokers fault - in my experience the bank who is losing your business isn't in a hurry to do so.
     
  16. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    The problem is to do with the val, not the pre approval - you don't need a full val to get equity under 80%, and it's a different property than the one you've bought so it should be no problem.
     
  17. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Theoretically accessing equity shouldn't change your servicing. You borrow an extra $50k against one property and $50k less against another one. Of course this is the theory and it's not completely true, but if your affordability is actually $800k against a $500k property it shouldn't be a problem.

    In 12 years I've only ever seen one case where a valuation didn't match an auction purchase price. in that instance, we obtained a second valuation from another lender and the problem was solved. If two valuations have come back consistantly under the purchase price, in my experience it does say something about that purchase price.

    Are you, the broker and the property all in the same state? If this is the case the ANZ will often take the contract price rather than a full valuation.

    It's quite possible that there's more going on here than meets the eye. Has the broker forwarded you copies of those valuations? There might be some insights here.

    The vendor is entitled to keep the deposit and they almost certainly will keep it if settlement ultimately doesn't happen. The real estate agent is entitled to their commission as they fulfulled their job of obtaining an unconditional contract. There's also costs for advertising and the auction to be paid and then there's the task ahead of starting all over again. This all comes out the deposit before the vendor sees a cent. I seriously doubt there's many people who would gratiously cover these costs for you.
     
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  18. Tim & Chrissy

    Tim & Chrissy Well-Known Member

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    Keep the faith @D.T. ! The refinance can happen in time! :D
     
  19. dublin_101

    dublin_101 Active Member

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    Two valuations came back the same price... saw one report, they are basing off September prices and once again not the best sample cases - an oblong shaped block or a one in a less desirable pocket. Nevertheless the market has moved since then and albeit an auction price, a same sized house which is not in a livable state on a corner sold for 20% more than mine on the same day.

    Yes me and broker are in the same state. ANZ was the last val to be done and I'm expecting results on that today.
     
  20. dublin_101

    dublin_101 Active Member

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    There is 1 month till settlement.

    Do you guys think calling the Real Estate Agent and letting him know would help? I.e would he actually be constructive with ideas, eg. extend settlement, help with banks, or would he potentially be hostile?