Two free standing homes on one title HELP

Hi all,


I currently have a land loan with CBA on a block of land that can easily be subdivided.


At first, I designed a duplex (attached) and CBA got an external valuer to value it and it came at a 20% discount to the GRV since the land is not yet subdivided thus they used the “in one line” method.


The valuer then advised me/gave me feedback that if I have 2 separate building contracts for 2 free standing homes it will mean it will no longer be valued using the “in one line” method thus meaning the valuation is higher and hence allowing me to meet my intended LVR.


Now even though I designed 2 free standing homes and got 2 separate building contracts for the homes from my builder, CBA still ordered an “in one line” valuation. My builder has clearly stated in each of the tenders that they will draft up the subdivision plan, do the DA work, extra Torrens work (extra water metre, NBN, sewage etc) and so on.


My Questions please:

1. Who is right, CBA or the valuer? Since the valuer is adamant CBA should order 2 separate valuations even if the land is not yet subdivided as the builder will do the subdivision work and it will be finalised post construction.
2. Are there any banks that offer construction loans at the GRV? I’m happy to move the land loan to another bank if it means getting what I need to build.
3. Any advice for me apart from “subdivide it then come back for a construction loan”

Thank you so much in advance, appreciate any feedback.

 

The CBA can choose to value your project any way they like as it is they who are putting up the money.

 

Lenders do tend to err on the side of worst case value. Not a "best use" value. Revaluation after subdiv is a common way to then access equity release.
Do you need to subdivide ? The cost may not exceed the value benefit and whether you keep or sell may influence this too. Subdividing the land could impact land tax, rates etc

 

You can't order 2 seperate valuations when there is one title and no application for subdivision.

Its a one to one relationship so one title = one valuation.

If the development is in Sydney then its unlikely that the council or CDC is going to allow for subdivision prior to construction.

You may need to look at ascertaining some upfront valuations to see if you can get a more favourable end value.

Is the construction via DA or CDC?

 

My builder needs a letter/statement That clearly shows my bank has approved or conditionally approved the loan before they go ahead and put the DA plans and subdivision plans to the council.

Without getting the valuation I want it means I can’t get to the LVR required thus can’t get the pre approval.

any ways around this ?

What makes this really annoying and hard is the fact that the land can easily be subdivided and I have the funds to be able to pay for council fees and so on

 

DA

 

Technically builders don't need an approval from the lender in order for them to do anything. Its more of a nice to have - we have done a number of projects and our builders have never requested this.

Back to your question - you need a higher LVR as you don't have the funds to complete the construction based on the current valuation amounts - is that correct?

If so then you need to look at ordering upfront valuations with other lenders to see if you are able to get higher loan amounts. Do you have any equity in existing properties that you can access.

Depending on the shortfall are you able to go into LMI territory?

As the builder provided you with a tender? I assume yes since you wouldn't have been able to order a valuation without it.

 

Back to your question - you need a higher LVR as you don't have the funds to complete the construction based on the current valuation amounts - is that correct?
Yes


Do you have any equity in existing properties that you can access.

No this is my first home



As the builder provided you with a tender? I assume yes since you wouldn't have been able to order a valuation without it.
yes he has , 2 tenders for 2 different homes

 

Ok you need to look at alternative valuations - this doesn't mean just different lenders but also different valuer (different valuers can use the same valuer).

Secondly you need to consider going above 80% and paying LMI depending on the final valuation figures.

 

I am currently aiming for 90% LVR

do you know any banks that offer 95% plus ?
Happy to pay LMI

 

Ok you need to look at ordering valuations with other lenders to see what you can get and yes 95% including LMI capped (that is 92% plus LMI) is possible but doesn't give you a lot more in funding.

As a side note and admittedly we have extremely limited information but it seems you don't have a lot of room for unforeseen issues and if this is your first construction project then this is a worry.

Playing devils advocate (trying to help you) what if you hit an issue half way through construction and you need an extra say $50,000 in funding to keep the project moving. How will you tackle this?

 

Thanks for this.

when you said in Sydney it is not possible to subdivide before construction, is that what you have seen overtime ?

Just thinking to myself if I subdivide my land into two different lots and then go back to CBA then they will consider two different valuations for two different houses which will mean that I will not take a haircut on the gross realisation

 

If you have seperate titles then its problem solved but its extremely difficult and uncommon for a council in Sydney to allow subdivision prior to construction particularly when its an attached duplex.

Don't take my word for it - definitely suss it out with the council.

 

Sure thank you for this. My design currently is non attached homes, 2 free standing homes.

 

Free standing is better but its still unlikely the council will grant it in this order.

That said have a discussion with the council and check out the DCP to see what is permissible.

 

Can you build one, subdivide, get valuation for the vacant block, then get the remaining loan balance?

 

To confirm, you’re saying:

1. get a valuation for one house and get the loan for that
2. Wait till that house is finished
3. Subdivide the land
4. Get valuation for other house
5. Get loan
6. Start that construction for the 2nd home


Is that right ?

 

Thank you so much

 

how big is the block?

What zone are you in?

What council LGA

@Anthony416 might be able to help.