Valuation on a new build too low from ANZ

Hi there

Just wondering if anyone can offer any advice. Had a pre-approval from ANZ for $550k and then had all our contracts drawn up and house designed according to our borrowing power, we couldnt finalize everything Finance wise until we had the exact figure from the builder so once we did we took everything to the bank with a total spend of $558k (so knew we had to chip in a bit more) in the meantime the builder has submitted everything to council for approval which has all come back and now the builder is waiting on us to commence. ANZ submitted the contracts to the valuer and it came back at $520k so a lot less then what we need and expected it to be. We have used this valuer before with other established homes and have yet to be happy with a valuation. Just wondering if anyone knows can we organize our own licensed valuation and take that to ANZ or if maybe we should look at a broker who could organize a valuation from a different agency? Only hesitation with not going through ANZ is they have all our banking history and our current loan for the block of land we purchased 18 months ago. Thanks

 

It's unusual for a valuer to not agree with the building contract. Is $520k the build cost or the total cost? If it's the total cost, it could be that it's the land component falling short, not the construction component.

Unfortunately getting the valuer to change their mind is near impossible and ANZ is very unlikely to accept an alternate valuation that you order outside of their system. You could try to get ANZ to order a different valuation from a different valuer but I doubt they'd do this.

Probably the best option is to get a broker or organise a valuation from a different lender prior to submitting an application. Don't let them submit the application until the valuation is back as you don't want to trash your credit file with unsuccessful applications as well.

 

Thanks so much for your reply. We had the land valued prior to submitting the total valuation and it had equity in it so it must be falling short in the construction component. $520k is the total cost from the valuer for land and build but as I said total cost for the land and build for us would be $558k minus our deposit. Maybe we should try the broker and as you said order up front valuations.

 

Vote 1 fu$k off the ANZ!

There seems to be some very good brokers on here! I am sure some of them should be able to help you with this.

 

Do you have a copy of ANZ's valuation? It will actually have the breakdown of the 'improvements costs' which is your construction component. This will tell you where the valuation is coming up short.

If you had the land valued by anyone other than the ANZs valuer (such as a real estate agent), it's not worth anything in the eyes of the bank.

 

Best bet is to:

a) attempt to contest the valuation. This won't be easy - but if you can find some comparative sales and/or incorrect info in the report, prepare an argument for a higher valuation result and see what they say (I've successfully contested an ANZ construction val before - we ended up getting them to increase the land value).

b) at the same time as contesting the valuation - have your broker order another upfront valuation with a different lender. If it's assigned to the same company - cancel the order.

Cheers

Jamie

 

Hi 21 Doors,

Valuation to fall short from construction is very weird. Is there something missing in the contract to to make the value fall short?
I would say the land has maybe fallen short!!.

 

I would say the valuation has very little to do with ANZ and the result would have been the same regardless of the bank. Rightly or wrongly the number comes from the valuer, not the bank.

As for why the val come in short, it depends on the market. As Jamie said you need to look at the sales used by the valuer and if possible find more that suit your case. Preferably settled sales of comparable new homes within the last 6 months.

In the end of the day, it's the market not the building contract that determines the value.

 

Which city and suburb is the build in? If its Melbourne outer areas, the vals on new builds are a bit tighter again!

 

Its actually Dubbo NSW

 

No we asked ANZ for a copy and they won't give it to us. We have another app with them on Tuesday so I'll be asking if she can break it down as we are very intrigued to know where it is coming up short, as we spoke to her about taking a few things out but she said whatever we take out will decrease the value by what's taken out so doesn't make much sense something in there is obviously not worth what we will be paying for it.

 

In addition to the last reply no the valuation was done by the same valuer.

 

That sounds like a banker not a valuer talking. Can you at least get the number of the valuer concerned? They may be willing to spend 5 mins explaining the rational behind the valuation assessment and if changing the building contract would change the end value.

I wouldn't trust many bankers to give you advice on impacts on a valuation.

 

Make sure you have not over-specified the fit-out.

 

How do you mean? We gave them the quotes for everything.

 

If you have too many luxury items or extras that you want included in the construction costs, then you have a risk of the contract value being greater than building costs of homes typical in the area.

Examples can include, spa baths, expensive wood floors/tiles or carpets, expensive kitchen fit-out, etc, etc.

Valuers look at the possible resale value and if build costs + land are greater than likely resale value then the bank will be carrying risk.

That said though, a broker may be able to help you out

 

The shortfall isn't too bad. Your best bet is to try and make up the shortfall to proceed with the loan.

That said, you can double check the valuer has all of the documents. Sometimes a variation gets missed, or the specifications etc.

the valuer will make a note in the valuation about the shortfall. If the banker won't give you a copy ask them to read out that part of the report at least. if they can't do that, get a broker to re order the val. ANZ system will spit out the same report.

 

Tobe has touched on an important point - most val shortfalls I come across are due to valuers missing all associated variations or external receipts.

ANZ generally releases valuations - so I'd be pushing for this info.