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

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

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  1. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Sounds like a clawback : )

    ta
    rolf
     
  2. dublin_101

    dublin_101 Active Member

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    Sorry dude I totally disagree with just about everything you said. That sounds like a shark agent.

    A real estate agent would have spent the best part of 1 - 2 working days on this particular sale....so as unfortunate as it would be, I'd probably be willing to lose my 2 days of work if it meant not to burn somebody's 3 years of saving. I would not be able to sleep and I'd also be scared about karma..

    That said, the point of this post is to look at options. People on their high chair saying "bad luck, they did their job, your banks can't help, now bad luck" are nothing but unethical people in my eyes.

    Nevertheless I'm here to find options and advice, I will get through this, I'm not even trying to cancel as of yet, but still looking at options. Thanks.
     
  3. 158

    158 Well-Known Member

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    I'm not aware of the 'ethics clause' in real estate contracts. Can you point it out to me please?

    pinkboy
     
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  4. euro73

    euro73 Well-Known Member Business Member

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    Dublin ... sorry - you're wrong. Try that argument in any court in the land and you'll lose every time. It's as simple as this;

    You entered into a binding, unconditional contract to purchase the property for a specific price. Deal is locked in - unless your solicitor can find a loophole to get you out.

    Now you have run in to the valuation Russian Roulette game. Valuers , who banks pay for independent advice about property values, and who must provide evidence of comparable sales- believe the price you paid is too high - are sometimes a law unto themselves, although it's quite unusual they would "hit" an established property purchased at auction, so hard, to be fair.... you have found yourself in an unusual position to be sure. But unusual or not , any experienced broker here will tell you that the chances of having a valuer change their mind is 1 in 1000... although that's not a reason to give up - if I were you I'd be furnishing your broker with evidence of the higher sales you say have settled recently, and having the broker take it back to the bank, valex or RP Data - everyone really - and pushing it as far as possible with them...

    But assume for the moment that that gets you nowhere - let's turn our attention to ANZ. As this is an established dwelling, and you, the property and the broker are in the same state, you should not require a valuation, normally - ANZ would ordinarily lend against the contract price to 90% LVR for any property to the value of $1Million that meets the same state criteria , no questions asked... Im not sure why this isnt happening?

    You mentioned CBA was one of the two lenders approached. If your broker has no luck at ANZ- which I would find quite unusual given their no val policy stated by myself and several other brokers earlier, your broker should also try NAB ( if they havent already) who have a no minimum employment history policy which will address your probation issue, and who will also allow your broker to order a free upfront valuation ...
     
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  5. dublin_101

    dublin_101 Active Member

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    just got a text from my broker saying the ANZ valuation was a little bit higher than the others, by 10k only. Still about 90k off.

    The other sales have not settled yet, I'm going to try and call the agents to ask when they are going to settle....who knows, they may be having the same issues.
     
  6. euro73

    euro73 Well-Known Member Business Member

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    Ah, the plot thickens... so those arent settled deals? So you dont know for sure what the buyers really paid, or whether they are having val issues as well?

    You have a choice to make - either walk away from your 10% or you had best draw some extra equity out and try and cover the 90K shortfall.... if those other sales haven't settled yet, you have little or no chance of having the valuers change their mind...

    One other suggestion... for your broker. It's a bit of a hail mary given your probation issue, but its free and wont take the broker long... ask them to get a few more vals from any lender he ( or she) hasnt tried yet for an upfront val. Macquarie? AMP? for example... they may send different valuer firms and you may get a slightly higher result... and then you can ask your broker to consider taking the deal to the bank with the highest val , or to someone like FirstMac, who will allow your broker to "select"...excuse me..."nominate" that specific valuer.... at least you'll be assured of having two potential lenders where you'll have some shot ( probation issues notwithstanding) of getting the best possible valuation....

    Otherwise, equity permitting, you may have to cross with your existing lender... although this seems unnecessary. If I were writing your loans I'd look to avoid that if possible - and I suspect all the brokers here will agree with me :)

    It appears all roads lead to you needing to pull out more equity to cover the shortfall- and if that means you need to refi to do so... better get cracking... that process will take 3-4 weeks unless your broker can place you with a fast refi deal somewhere
     
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  7. sanj

    sanj Well-Known Member Premium Member

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    So 3 valuations have come in, 400, 400 and 410 and it's everyone else in the wrong and not you for paying too much?
     
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  8. JetstreamVic

    JetstreamVic Well-Known Member

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    I'm kinda out of sympathy for you.

    You probably beat someone who had been searching for that perfect house for years

    The vendor was probably waiting on your money to fund their settlement

    The agent probably missed an important family outing that weekend the auction was on.

    The bank doesn't want to overexposed themselves and be left holding the bag when you can't pay the bills and they for close.

    But hey, everyone's a c, because you didn't do enough research to
    - cover any shortfall
    - paid over market value for the property (how many valuations do you need to say you paid too much)

    If u came in here, owned the position ur in and not acted like the world owes you a favour for the position you put yourself in, different story.
     
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  9. dublin_101

    dublin_101 Active Member

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    They may have settled, but seeing they were sold the same weekend or one week earlier, they most probably have not settled.

    I'll call their agents tomorrow. I'm assuming its a time skew thing with the people doing the valuations - i understand their point for only comparing to settled sales, but that obviously means its 2-3 months behind the very current market conditions.

    I'll also speak to the broker and see what he thinks about extending the settlement and maybe that'll help with trying to get close the the valuation required.
     
  10. Terry_w

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

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    Euro's idea is good. Also try a local (to the property) RAMS franchise as they personally deal with the same valuers frequently and this can help them come back with a higher valuation.

    I had a similar one recently which client bought at auction and it turned out to be a former boarding house with 4 dwellings on title. 3 valuations come back short (with 2 banks refusing to lend based on the state of the property) and then they went to RAMS and got it through.
     
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  11. dublin_101

    dublin_101 Active Member

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    mate not here to argue. but you sound like a guy who has never had human contact with anyone.

    Once again, this is not something that has been done intentionally but is a very legitimate circumstance and I'd rather lose that perfect house then want to see somebody lose 3 years of savings.


    Once again, this is not something that has been done intentionally but is a very legitimate circumstance and I'd rather wait an extra month or two then want to see somebody lose 3 years of savings.

    Once again, this is not something that has been done intentionally but is a very legitimate circumstance and I'd rather miss out on a family event then want to see somebody lose 3 years of savings.


    Sympathy, not after it and don't need yours. and please don't add any more, you aren't adding value.
     
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  12. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    You could try NAB direct. They may want a full valuation from an indipendant valuer, but quite often they get an internal employee to do a desktop style valuation. I've seen plenty of cases where these valuations are significantly different from a registered valuer (for better or worse).

    Find out when the other properties settle. If they sold in January it won't be for a couple of weeks at a minimum. Valuers aren't allowed to use properties that have yet to settle as comparible sales. Better timing might help out here.

    What about a family guarantee? If a close friend or family has plenty of equity in a property, there's plenty of lenders that will accomidate you. ANZ will even take a guarantee from a friend who isn't related.

    I've had a few people come to me under threat of loosing their deposit, I've never seen a deposit refunded and I've been in finance for quite a while. The agent, the auctioneers, the advertisers, the solicitors all expect to be paid and the money is already in the agents account. Keep pushing to find a solution, don't give up and hope that everyone else will be generous.
     
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  13. Kesse

    Kesse Well-Known Member

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    I went to a presentation last year that was a valuer talking about their industry and some pain points. One of the points was using unsettled sales in their reports and the valuer said that even though it's not preferred, it can be done though I have no first hand experience with a valuer using unsettled sales.

    According to the Residential Valuation Standing Instructions:

    “Agents Advice”/Unsettled Sales “Agents Advice” and/or “Unsettled Sales” should only be included in addition to the 3 mandatory settled sales, and must be clearly identified. Additional commentary in respect to these sales, such as their source, must be provided. Reliance upon “Agents Advice” and/or “Unsettled Sales” as evidence to support an assessment of market value is at the Valuer’s discretion. However, the instructing party will not accept any assumption that the Agents Advice/Unsettled Sales will proceed to settlement at the advised sale price. Agents Advice/Unsettled sales evidence must be clearly identified in the valuation report, but may be recorded in Section 7 “Sales Evidence & The Market”.

    The valuer wouldn't be looking at unsettled sales, but it wouldn't hurt if these were presented to them via your broker. Whether the banks accept it or not is another story all together.....
     
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  14. Sackie

    Sackie Well-Known Member

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    happens all the time. Seen quite a few. People over pay for something becsue they dont really know the value of what they are buying. Valuation comes up short. They dont have the extra to put in. Good bye deposit. Simple really.

    I would really try to find a way to come up with the extra money, rather than lose the deposit. Especially if you really like the place and are planning to be there for a long time. Maybe a family loan, or equity from elsewhere.
     
    Last edited: 22nd Jan, 2016
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  15. ashish1137

    ashish1137 Well-Known Member

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    Give the guy a break. He asked for advice not opinion.
    If you cant help, please keep the opinions to yourself. I also remember you asking advice on your relatives who wanted to break the rent contract which was 2k per week (whatever the reasons are).
    Please be considerate. I am sure you will get ample options to ahow your knowledge.
     
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  16. Rugrat

    Rugrat Well-Known Member

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    We have a house awaiting settlement at the moment. If, for whatever reason, the buyers pulled out I would most definitely keep the deposit.
    As bad as I would feel for them, I still need to pay my REA, and my legal fees, plus some debt that has been hanging over my head due to the renovation and is awaiting settlement to pay. The are also the associated costs with relisting the property. When you add all those things together, the deposit actually doesnt go all that far.

    And then there is the fact that I am missing prime selling period whilst waiting for exchange and settlement with these buyers, time where I know I actually passed up higher offers then what we had agreed to (because my 'ethics' kept me to hold to our original agreement). But there is no guarantee I would now be offered those prices and I might actuallly have to take a lower price.

    I would feel bad for the buyer who lost their deposit that way. But at the end of the day, that would not be my fault nor my responsibility. They should have made sure they had finance 'before' they went unconditional.
     
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  17. Sackie

    Sackie Well-Known Member

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    Great post. Couldnt agree more.
     
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  18. Big Will

    Big Will Well-Known Member

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    Assuming the purchase is $500,000 and the agency is taking 2% commission that is $10,000. Of which the REA themselves would take $2,000 for listing and $2,000 for selling and the office takes $6,000 to pay their rent, admin staff, marketing and of course profits (why businesses exists).

    If the agent who listed the property wasn't the person who introduced you to the property they would only get $2,000 for about 6-10 weeks since the vendor signed the authority. There was most likely 4 Saturday open houses + private inspections + building and pest inspections + valuation + meeting the photographer + floor planner + home stylist + meeting the vendors 2-3 times before getting the listing and they only get $2,000 for all this! You work for 10 weeks for $2,000 and it would 250 weeks to save that $50,000 (or nearly 5 years). This is without paying for their living expenses...

    If you think the REA is made of money go take a job and start taking the easy commission and save up multiple $50,000 deposits.

    I feel for you and am sympatric however in my eyes everyone has done their job that was agreed except you are not able to fulfill your commitment (due to a bank value). Would you lend me $500,000 for a place you thought was worth $400,000? I know I sure wouldn't because if you defaulted I am left with a $100,000 hole I cannot recoup.

    If the valuation was $600,000 and you bought for $500,000 there would be no issues (but I would still only lend you to the 500,000 ($450,000 @90LVR plus get you to pay the LMI, exactly what the bank does!).
     
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  19. Big Will

    Big Will Well-Known Member

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    People are giving their opinion that is really what the forum is no one can give advice until certified.

    However I had to go back and like the @sanj due to your posts as it is really black and white everyone is saying the place is worth 400k (as the others haven't settled and he hasn't provided any details about the house) so if you have an apple but try and tell everyone it is an orange and 3 people come back and say it is an apple, how would you convince me the apple is an orange?
     
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  20. Jkat

    Jkat Well-Known Member

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    The OP asked for the options available to him. People have offered great suggestions, including:
    - other loans (personal loan, refinance, equity etc)
    - family members (borrowing money, someone going guarantor etc)
    - selling stuff (i.e. car or other high value items to raise the money)
    - other valuations/banks/credit unions
    Plus there have been other suggestions which I have forgotten (I am sure).

    People have been helpful and provided good information and avenues that the OP can consider and explore.

    However, in asking for people to offer up options that are available to the OP he has also made personal statements about the vendor being unethical for keeping the deposit that has taken him time to save, also made comments about the amount of time and work the RE agent puts into a sale and made comments about the integrity of the bank pre-approval. All of these comments is what other posters seem to have an issue with because they are misleading/false (i.e. bank would have loaned him up to the 90% he was pre-approved for but it is the valuation that has come short).

    Personally, as long as everyone is respectful (i.e. no personal attacks) then it is all fair game on the internet. Many of the people that post on this forum work in the industry and it wouldn't be fair to disallow them to opportunity to correct the OP view that other people are not disadvantaged by his ability to settle.
     
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