Any banks give loans based on value of build?

[ej89]

Hey guys,
Was wondering if it's possible for a bank to calculate LVR on completed product rather than what I would pay for it?
e.g. I am building a 4 bedder on small land in the Ponds.. Comparable sales vary from 800k to $1m. I will have a completed product with a good builder for 615k.
The same builder is building 20 houses that are the same (with different facades) for 800k..

When it comes to registration of the land and coming up to building, are there any banks that look at the value pre-construction and do my LVR from there or will 100% of banks look at LVR based on what i'm paying?

If I went the family pledge way and did 100% LVR, could they calculate my LVR at the final valuation on comparable sales or will they always wait?

615k worth 800k= 76.87% LVR.


Sorry if this seems like a silly question..

 

[Mick C]

Hey guys,
Was wondering if it's possible for a bank to calculate LVR on completed product rather than what I would pay for it?
e.g. I am building a 4 bedder on small land in the Ponds.. Comparable sales vary from 800k to $1m. I will have a completed product with a good builder for 615k.
The same builder is building 20 houses that are the same (with different facades) for 800k..

When it comes to registration of the land and coming up to building, are there any banks that look at the value pre-construction and do my LVR from there or will 100% of banks look at LVR based on what i'm paying?

If I went the family pledge way and did 100% LVR, could they calculate my LVR at the final valuation on comparable sales or will they always wait?

615k worth 800k= 76.87% LVR.


Sorry if this seems like a silly question..

Not for a resi build...an def not for 1 single house build if it's 3-4 + House than yes maybe.

Deal to small to be considered as a end valuation LVR.

 

[tobe]

why do you want finance structured this way?

For instance, if you are using a family pledge, you can get 100% finance for the land value and cost of build, after that you can have the place revalued and access the equity at that later point? Wouldn't that have the same effect?

There are most likely a couple of ways to solve this problem, but give us more detail on what the problem is, that you need end value rather than cost price on a single residential property.

 

[ej89]

Not for a resi build...an def not for 1 single house build if it's 3-4 + House than yes maybe.

Deal to small to be considered as a end valuation LVR.

So they couldn't look at Elderton Homes and say ok they have sold the same house for 800k 20 times over and this guy has it for 615k, shouldn't it be worth 800k too?

Also, let's say they don't do that.. How long after the build can I get it valued so I can pull equity out and re-use it.. Talking to agents in the area, they say the house I'm building has been selling for mid-high 800s and they think I would've made 200k equity by the time it's built..

 

[tobe]

Even if the valuer recognized the extra value, the bank will use the lower of the two, the cost price or the valuation. If it makes you feel any better, they do the same with established properties as well, banks love having it both ways.

You can have another valuation performed as soon as the build is completed by a different lender. if you wanted to stay with the same lender you may have to make the case for a new valuation before 3 to 6 months after the build is completed.

 

[ej89]

Even if the valuer recognized the extra value, the bank will use the lower of the two, the cost price or the valuation. If it makes you feel any better, they do the same with established properties as well, banks love having it both ways.

You can have another valuation performed as soon as the build is completed by a different lender. if you wanted to stay with the same lender you may have to make the case for a new valuation before 3 to 6 months after the build is completed.

Thanks mate!
Would that apply to land too? I bought 320sqm for 398k and two weeks later they are selling the same land for 550k. How would valuation on that work?

 

[Brady]

If land is already secured I can't see why they couldn't look at comparable sales, by that I mean the lower of current land value + construction costs or value based on comparable sales. If land is settled shouldn't be any reason for the valuer or bank to use the purchase price of the land + construction costs.

 

[ej89]

If land is already secured I can't see why they couldn't look at comparable sales, by that I mean the lower of current land value + construction costs or value based on comparable sales. If land is settled shouldn't be any reason for the valuer or bank to use the purchase price of the land + construction costs.

Thanks.

If I went with say CBA,Would they compare my completed product with someone elses completed product (if they went with westpac), or does it all come down to actual sold properties? Sorry for all the questions. Just wanna learn about this stuff

 

[tobe]

Thanks mate!
Would that apply to land too? I bought 320sqm for 398k and two weeks later they are selling the same land for 550k. How would valuation on that work?

Ive worked in construction for a long time, and have had this question a few times. In my experience, while land is now selling in later stages by the developer at higher prices, this doesn't mean a valuer will recognize an increased value in your land. The usual reason for this is developer incentives and rebates, this makes estimating the true value of the land difficult for the valuer, as the sales price isn't necessarily what the clients actually paid.
The developer wants a track record of different stages selling for higher and higher prices, so they incentivize later stages so the sticker price looks higher. Valuers are a wake up to this tactic.

Secondly, for a valuer to see what you paid, and then decide to have a different value would mean they need a compelling reason. Valuers insure the bank against loss. If they make a mistake on their valuation and that means the banks lose money, they are sued by the bank. They aren't going to stick their neck out without a significant reason.

That said, if you were to settle the land, then later have the land revalued (so not at the same time as purchase) at a higher value, most lenders would base their lending on that most recent valuation.

The only exception is where the contract of sale is older than 12 months, then some lenders will allow the higher value than purchase price.

Has it been 12 months in your case?

 

[tobe]

Thanks.

If I went with say CBA,Would they compare my completed product with someone elses completed product (if they went with westpac), or does it all come down to actual sold properties? Sorry for all the questions. Just wanna learn about this stuff

The valuer does the comparison, rather than the bank, and its not between completed product (what someone else paid a land developer and a builder), its compared against what has sold (or 'resold') in the area.

Unfortunately in a lot of new estates the only 're sales' initially are forced sales for mortgagee auctions, divorces etc, which are very often sold at a loss.

 

[ej89]

Ive worked in construction for a long time, and have had this question a few times. In my experience, while land is now selling in later stages by the developer at higher prices, this doesn't mean a valuer will recognize an increased value in your land. The usual reason for this is developer incentives and rebates, this makes estimating the true value of the land difficult for the valuer, as the sales price isn't necessarily what the clients actually paid.
The developer wants a track record of different stages selling for higher and higher prices, so they incentivize later stages so the sticker price looks higher. Valuers are a wake up to this tactic.

Secondly, for a valuer to see what you paid, and then decide to have a different value would mean they need a compelling reason. Valuers insure the bank against loss. If they make a mistake on their valuation and that means the banks lose money, they are sued by the bank. They aren't going to stick their neck out without a significant reason.

That said, if you were to settle the land, then later have the land revalued (so not at the same time as purchase) at a higher value, most lenders would base their lending on that most recent valuation.

The only exception is where the contract of sale is older than 12 months, then some lenders will allow the higher value than purchase price.

Has it been 12 months in your case?

It's been three weeks haha I bought the land a few weeks ago and the release after was 40k higher. The release after that will be 100k higher and there are lots 10sqm bigger than mine selling for 160k more than I paid..

I bought in a NW suburb in Sydney.
Land price 398k.
Build price for 4 bedder 2 bathroom single garage 215-220k through Elderton Homes (high quality finishes).
All up: 613-620 mark.

There are 3 bedroom single storey houses and 1 garage (lower quality builds) selling for low to mid 800s on smaller land than mine in the same estate. There are also 4 bedder 2 bath 2 garage selling on 395sqm selling for $950k-$1m.. Elderton will be doing H & L packages of the exact same house i'm building with them for 800k+ on smaller land..

Now you can see why I have so many questions regarding valuation haha unsure what it'll show.. All I know is anybody who bought before me in that estate has made a ton of money, and because there wont be any more land selling after the next release, the demand is still there for housing and the prices have shot up even more than they currently were in the last couple of months..

 

[Brady]

It's been three weeks haha I bought the land a few weeks ago and the release after was 40k higher. The release after that will be 100k higher and there are lots 10sqm bigger than mine selling for 160k more than I paid..

Three weeks difference going to be tough to show land is worth more, if it was worth more you would of had to pay more. Unless there was something else to the purchase, maybe purchased privately, not off the open market, destressed sale, etc...

I bought in a NW suburb in Sydney.
Land price 398k.
Build price for 4 bedder 2 bathroom single garage 215-220k through Elderton Homes (high quality finishes).
All up: 613-620 mark.

How many sqm is the build? Are you getting a lower build price due to your relationship with Elderton? Going to be hard to get the bank to lend on higher figure until building complete if this is the case.

There are 3 bedroom single storey houses and 1 garage (lower quality builds) selling for low to mid 800s on smaller land than mine in the same estate. There are also 4 bedder 2 bath 2 garage selling on 395sqm selling for $950k-$1m.. Elderton will be doing H & L packages of the exact same house i'm building with them for 800k+ on smaller land..

Selling means nothing until it's sold. If they're sold then possibly could try argue for higher valuation. Just because Elderton is selling H & L packages for a price means that they're worth that much. I'm also confused as how they're doing packaged for $800k+ if they're selling for $950-1M?

 

[ej89]

Three weeks difference going to be tough to show land is worth more, if it was worth more you would of had to pay more. Unless there was something else to the purchase, maybe purchased privately, not off the open market, destressed sale, etc...

off market release but it was done by out of town agent and seems like it was sold cheaper than shouldve been. Next release went up $150/sqm. There's one block currently that 333sqm and there are three people fighting over it at 550k. Agent told me it'll go higher than that.. Not sure how a one off block like that affects my valuation.

How many sqm is the build? Are you getting a lower build price due to your relationship with Elderton? Going to be hard to get the bank to lend on higher figure until building complete if this is the case.

18 squares. Acacia 18. That's the price completely built.

Selling means nothing until it's sold. If they're sold then possibly could try argue for higher valuation. Just because Elderton is selling H & L packages for a price means that they're worth that much. I'm also confused as how they're doing packaged for $800k+ if they're selling for $950-1M?

when I say selling I mean they have been sold for that much. The ones selling for 940-1m are double garage and land is about 60sqm bigger. Mine is 320sqm block and single garage.

The price Elderton gave me on their packages was just a rough figure because they wont be released for a couple of months.. If they see crapper houses selling for more they will increase it for sure.

 

[ej89]

Sorry about the messiness of the reply. Hard to do it off my phone haha

 

[tobe]

Do you have a fixed price contract yet? If you do, you could get Brady or a broker to order a valuation, and you can see for yourself what a valuer will estimate your place to be worth. You could also have a look at RP data or similar and get an idea.

Estate agents hearsay is notoriously unreliable. valuers can only use settled sales in their reports, so the sale the estate agent is talking about wouldn't be used by the valuer yet.

 

[westminster]

Would the P&N Bank end value product work in this situation for a single dwelling?

 

[ej89]

Would the P&N Bank end value product work in this situation for a single dwelling?

Who/what is P&N?

 

[Mick C]

Police and Nurse Credit union/ Bank.

Westminster- Answer to your question...Nope.

 

[Rolf Latham]

Would the P&N Bank end value product work in this situation for a single dwelling?

I recall they only like WA security too

ta

rolf

 

[ej89]

Do you have a fixed price contract yet? If you do, you could get Brady or a broker to order a valuation, and you can see for yourself what a valuer will estimate your place to be worth. You could also have a look at RP data or similar and get an idea.

Estate agents hearsay is notoriously unreliable. valuers can only use settled sales in their reports, so the sale the estate agent is talking about wouldn't be used by the valuer yet.

Don't have a fixed price yet. I don't go off what agents tell me. I go off what I see is sold on realestate.com