Bank Valuations V Purchase price ??



From: John P

If I pay cash for an investment property, that I purchased at way below market value :

How long do I have to wait, or how do I go about getting the property financed up to its max LVR% ASAP, without the valuer & bank taking into account my low purchase price and so only lending on this figure and not the true market value?

Would appreciate any comments from the more experienced investors & finance brokers on the forum :

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Reply: 1
From: Tom Siviou


the valuers will be sus, so the safest value for them will be purchase price, esp if the bank instructs them. most banks have panels of valuers and particular firms that would do all the work in a particular area.

find out who the valuer is from the bank, then instruct the valuer yourself to do a val for mortgage purposes, tell the valuer you are thinking about a loan, but haven't decided who with yet.

if your purchase hasn't settled yet, even better, the price will not be recorded and you can tell the valuer you are thinking, but havent bought yet. tell him the asking price is what you think market value is , plus 20%. if it has settled, when you interview the valuer, make sure he understands the circumstances that lead to the reduced price. if he does, you will get a market val and an acknowledgement that you have made a prudent purchase.

then approach the bank and when it comes valuation time, offer the one you just happen to have. As a serious investor, it should be your policy to have a current valuation on your portfolio anyway, so theres nothing wrong with you obtaining your own val in the event you are considering a loan. But you need a bank that uses valuers, i think nab still use the local branch manager,so you may not get far with them.
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Reply: 2
From: Rolf Latham

Hi Peter

Many lenders will look at favourable purchases.

However many also will not. There is a generally accepted policy that the market value is determined by the actual purchase price. Any val over contract price deal will be considered on a case by case basis only, and only where mortgage insurance is not involved.

One major issue is that getting 100 % finance based on zero input implies there is zero real "hurt" money in the deal.

This will concern some lenders since the "flight" risk is high, especially on investment properties.


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Reply: 3
From: Keith J

What if you bought a dump for cash and renoed it. Then got the bank to value it after the reno. The original price paid isn't that relevant if you do a really good reno to bring it up to market value.
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Reply: 3.1.1
From: Kevin Forster

Most valuations are only valid for 6 months so if you bought well under market value, then a valuation after 6 months of purchase can be used by the bank.

The CBA (or the bank person I use) does that. So after 6 months if it has increased in value or you've reno'd it and the values increased substantially then get it revalued and increase LVR on it.

Hope this helps

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