Bank Valuation came under by 70k on Unit

Discussion in 'The Buying/Selling Process' started by MightyWill, 22nd May, 2014.

  1. MightyWill

    MightyWill MightyWill

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    Hi all,

    At the stage where I am in cooling off and I was planning on putting down a 20% deposit. My broker said that banks may not do a valuation if you got 20% deposit. Anyway, yesterday we were told that the bank (CBA) will do a desktop valuation. Today?s result is that it came in at 70K short. I was pretty sure it would come in short by about 20-30k given that recent sales in the area went around 650 mark. My purchase price was a few thousand above 700k. The reason for this is because it?s on a north/east corner with views and an internal size of 97sqm not inc the 12sqm balcony (floor plan is very spacious). There is also a car park. New OTP ones in the area are starting around 630K for a 2 bed at a low floor to about 800k for high levels with a view. These are prob 80sqm internal as well. My one is about 10 years old but in new condition.

    Now my mortgage broker will escalate where they will do a physical valuation; meaning they will go inspect the property. Will condition, aspect, corner, and views be counted as part of valuation? I would say that 12 months ago when prices weren?t so hot, it would have been 630k for the place, but prices have well picked up over the past 6 ? 12 months right? Doesn?t the bank take this into account? How do others make it all the way through with no extra cash to fund ?

    Let?s say the physical evaluation comes in at 650k, I would still need to get 50k from somewhere. The positive side is that I will reduce the interest repayments on the loan.

    Any thoughts? Is this the norm that a 2 bed unit high rise comes in at 50 ? 80k less from a valuation? If this is the case, I would be seeing more listed properties as under contract and then back on the market cause buyers couldn?t find the additional funds.
     
  2. The Y-man

    The Y-man Member

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    That's a bit scary. Common if you were buying OTP, but unusual in an established one. Hope it all works out ok for you.

    The Y-man
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker/strategist

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    It's very rare for valuations at purchase to come in under the purchase price. Probably less than 1% for purchases that aren't off the plan.

    Generally the CBA will simply perform an online report and if your purchase price is within the range on the report they'll fund against the purchase price.

    If the purchase price is outside this range they'll then upgrade to a drive by or full valuation. If these valuations don't work, they you're going to have to either come up with extra funds or pay some mortgage insurance.

    They do all this as a cost saving measure. An online report costs peanuts whilst a full valuation costs a few hundred. They have the historical data to tell them that within certain parameters the online valuations are sufficient to mitigate their risk in the purchase.

    If you feel you've paid a fair price for the area it's unlikely you've got anything to worry about. Even if there is a problem with the valuation, chances are another lender will use another valuation and come to a favorable result. People do pay more for than the average price for some properties because those properties are legitimately worth more than the average.

    If you feel you've paid too much for the property, then the question is why and what are you prepared to do? Either you want it so bad you'll pay a premium, or you should renegotiate. Keep in mind a properly worded finance clause will protect you form a low valuation if your cooling off period has expired.
     
  4. Shahin_Afarin

    Shahin_Afarin Finance Broker

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    My concern is that you currently do not have a plan B which could prove to be costly.

    Get your broker to order a couple of upfront valuations via other lenders (of course use different valuers) unless the loan can only be put through to CBA which I doubt.
     
  5. MightyWill

    MightyWill MightyWill

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    Cooling off ends this Monday COB so will hopefully get the full valuation done by COB Friday. It the full report still comes in looking bad, I could perhaps get my conveyancer to extend the cooling off until I figure out what to do.

    Selling points is that it's a North East corner on level 8 out of 14. 8 is very attractive for chinese buyers but that's not the reason why I went for it. Both bedrooms are big and have north facing windows, kitchen has massive island bench and a really good layout lounge layout, etc, no wasted dead space.

    Whiles others in the complex sell for around 630k for level 2 up to 675K for no view or crap south facing and not a corner, I thought paying an extra 30-40K when your already spending above 600K is not much at all for a better unit all together.
     
    Last edited: 22nd May, 2014
  6. Peter_Tersteeg

    Peter_Tersteeg Finance broker/strategist

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    Don't forget that valuations are somewhat subjective as are property prices in general. A 5%-10% variance is quite reasonable.

    Best of luck, chances are you're getting worried over nothing. :)
     
  7. Propertunity

    Propertunity Real Estate Buyers Agent

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    That's never a good reason to seek to extend the COP. Figure out your Plan B, C & D's now. ;)
     
  8. Jamie M

    Jamie M Mortgage Broker - Oz Wide

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    Hi Will

    There's still a decent chance that the CBA full valuation will come back at purchase price.

    In the mean time, it wouldn't hurt to order another upfront with a different lender.

    Cheers

    Jamie
     
  9. MightyWill

    MightyWill MightyWill

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    Yes, broker now going through ANZ with 60% chance they will just accept purchase price with no valuation.

    I've got back the desktop valuation report. Nothing really selling over 700K apart from 3 bedroom units. With mine coming in at a few thousand over 700, it doesn't look good. All other 2 beds going for 620 - 670k, but like I said, they are not corner position with north east facing and bigger internal size. Maybe the internal size is similar but layout and convenience and position of unit is not as good. Broker says I am paying too much and now I have doubts.
     
  10. mumbai

    mumbai Member

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    Get out of it when you have time!
     
  11. Brady

    Brady Big 4 Banker

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    You said that upfront valuation will happen before cooling off expires, so just hang in there :)
     
  12. MightyWill

    MightyWill MightyWill

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    Ok so I have told the agent about the valuation coming in at 70k short and that a full valuation is being done and we may need to extend cooling off. I also said for the interest of all parties, will the Vendor consider a sale price just below 700K as 698K sounds a lot lower than 706K. This would prob avoid any alarm bells going off at the bank. The response from agent is that there are other buyers waiting and vendor will most likely not extend cooling off. I also mentioned I'm going to another lender at the same time.

    Far out, so stressful. It's going to be worse if the full valuation doesn?t come back by Friday COB. The ANZ approval prob won't happen until mid next week.

    On Monday, I will need to make a decision based on if the cooling off gets extended. If it can't be extended, I will have to pull out. If it get's extended, I wait for the ANZ approval and in hope they won't do a valuation.

    Does cooling off include the day you sign? I signed on Monday so does that mean it ends next Mon at 17:00?
     
  13. mumbai

    mumbai Member

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    Why so late for the anz valuation? If it happens in the morning tomm, you can get an idea by end of the day or Monday at best.

    Cooling off will end Mon, but worth checking your contract. It is pretty common to extend the cooling off period. Get it on now with your solicitor!
     
  14. Brady

    Brady Big 4 Banker

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    Was the contract subject to finance?

    If it was subject to finance was is the finance amount on the contract and what deposit have you put down?

    Often find that a short valuation can 'hurt' an application :)
     
  15. MightyWill

    MightyWill MightyWill

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    Nope on the finance as I already had my finance pre approved prior and pretty much getting full approval during cooling off. The 76k under on valuation is a very big surprise. Still got Fri and Mon to extend cooling off and amend contract if required.
     
  16. The Y-man

    The Y-man Member

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    Subject to finance has pretty much NOTHING to do with pre-approvals.

    Finance pre approved simply means they'll lend you money IF the propoerty stacks up etc.

    Subject to finance means if the bank won't lend you money, your don't have to buy.

    BIG difference Will.

    The Y-man
     
  17. Scott No Mates

    Scott No Mates ...and people wonder why?

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    Devil's advocate - have you done your due diligence?

    Did it stack up at this price?

    Is it a ppor or IP?

    Is mortgage insurance an option (brokers)?

    Are you over paying compared to other units?
     
  18. impala67

    impala67 Member

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    +1 - Good luck and all the best with it.
     
  19. RetireRich101

    RetireRich101 Member

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    If you are number 8 in your apartment, the valuer would not give any weights.
    If you have a view, valuer may to his/her discretion to give some weights over apartment in the complex that don't have views. Your desktop valuation doesn't have eyes and it cant tell if you have a view or not.

    Desktop valuation may have inaccurate floor area of your property which was provided to them in the past by new purchase, RE Agent, Valuers which updates the rpdata database. If it has a smaller floor are, it will use apartment of similar size as comparable.

    If you identify any floor area discrepancy with your desktop report, you should bring this up with your valuer on Friday.
    A valuer is only human, and is unlikely he can tell the floor area with his naked eye. Very often he will be in and out in 10min of inspecting and definitely won't measure your floor space.

    You should at least between now and Friday look for comparable floor space justify your is bigger. You said 97m2 internal for your whereas the new/OPT comparable are 80m2..this is a difference of 17m2 which a large bedroom with ensuite.

    I think you need to be technical with valuer, not just saying "mine is spacious" Talk metre2..

    If you Valuer goes in on Friday morning, he will likely have the report on your Broker desk that afternoon, or COB at the latest. This won't be optimal if you can demonstrate how spacious your apartment is compare to the comparable. Your optimal result is provide him 3-4 pages before he goes to your property NOT after. Disputing a handed valuation you will get 1% of winning as most Broker here will tell you.
     
  20. ZachAnSel

    ZachAnSel Member

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    Hi Will, how much money do you lost if you pull out the contract?

    In the other side, is it possible to borrow from family? Or your cash buffer to cover 70k. Sorry just throwing some ideas.