Terminating building contract - valuation issues

I have a loan currently for my block of land I purchased, however I have entered a contract with a builder for construction and have gone all the way through up till completing the pre start, everything was going well and we were just waiting on finance to be approved from our lender. The total construction costs for our single story house is just shy of 320k which included around 35k of upgrades (which we have now learnt is quite dear for a single story house in WA) however our lender has said that the valuation for the construction is only being valued at 265k and if we want to go through with it we need to provide a 70k deposit which we dont have. She has stipulated that there is no issue with our land cost and it is 100% to do with the construction costs and she has also got a second valuation done by another valuator. I am wanting to know if building contracts are subject to finance? How can the valuation come back so much less, does this mean we are being ripped of by the builder? We realise we will forfeit our deposit but can they charge us additional costs for terminating the contract even though we can not get finance?

 

Have you had a close read of the contract? A lot of those questions are answered on there.

As you said yourself, depending on what you're building, it sounds like $320k is quite a lot for a typically sized and specced single story home - so hence why the valuation might come in lower.

Were you going through a broker for your lending?

 

What specifically should I be looking for in the contract?

I have gone through the ANZ bank for finance (I already have my land loan with them)

 

Look for something which says something along the lines of 'subject to financing being approved for.....'

 

Low valuation on building contract is quite common apparently - not limited to WA. Just got one $37K below. I talked to several other home builders who got their val between 30-60K below cost.

This should be specified in the contract. Mine says that they can charge up to 30% of total if the contract is cancelled - in my case, it is not subject to finance.

 

You signed a contract without checking on that issue ?
No legal advice ?

 

It's a contract......What could possibly go wrong?

 

Yeah had another read over it yesterday, from what I can gather I think we can terminate the contract but we will have to pay them for any costs occurred and their time so far which I can understand, it just really depends on how much time they are going to try to charge me for I guess.

They do have a reputation for building good quality homes but yeah 320k for a single story home is quite extensive.

Going through ANZ (only because we get discounts and less fees etc through the company I work for if I went through them) and the lender got a second valuation when the first one came back low and the outcome was the same. The builder now wants to get another valuation done through a different bank, not sure if it will change the outcome.

 

From what I can gather (all the clauses and lingo get quite confusing) I think we can terminate the contract but we will have to pay them for any costs occurred and their time so far which I can understand, it just really depends on how much time they are going to try to charge me for I guess.

 

It doesnt say subject to finance anywhere but from what I can gather I think we can terminate the contract but we will have to pay them for any costs occurred and their time so far which I can understand, it just really depends on how much time they are going to try to charge me for I guess.

Would having a seperate land loan and seperate home loan be bad?

 

I have been hearing its quite a common occurrence. What are you going to do now that its come back $37k below?

From what I can gather I think we can terminate the contract but we will have to pay them for any costs occurred and their time so far which I can understand, it just really depends on how much time they are going to try to charge me for I guess and whether I am understanding the contract correctly!

 

I had someone have a look over it and there would be no issues if it didn't come back with a low valuation. But your 100% right I should have got legal advice before signing it as it might have helped me understand it more, big mistake I realise now, first time buying and the builder told me it was the standard contract that it set in place for all clients. I will know better next time.

 

It sounds like you didn't compare construction costs with other builders?

It is really common for prices, on new builds to increase beyond expectations by the time site costs and extras are added.

If you are comparing with a volume builder's prices with the price in your current contract, just check you are comparing apples with apples.

An advertised price of $200,000 can easily come in at much more $ after the addition of landscaping, site costs, and a few 'tweaks'.

 

I did a lot of research on builders and asked a lot around a lot, however I was working in WA and living in QLD and was trying to do as much as I could in the small amount of time that I would actually be in Perth, but I guess I should have done a lot more comparing.

Yeah I realise that it all eventually adds up, weve talked to a lot of people and from the sounds of it the building prices (advertised prices) was in fact cheaper than what our builders is, however it could be the fact that the quality is not as good, who knows. Just not sure what to make of it all I guess.

 

Is the builder dale alcock?

 

Homeone Forum is quite useful for info on new builds.

 

Forum is quite useful for info on new builds.

Cheers, is that a thread on property chat or a different website? (only new on this site)

 

Is the builder dale alcock?

No not Dale Alcock, did my research enough to know not to go with that company, saw and have heard some scary stuff happening with them!

 

Yes. Completely different quality now.