brokers - equity release

[tj22]

ok so say you've found a property you think its good value you could get it for 200k and comparable sales shows 250-260 for similar properties. but when you do a RP data Automated valuation report it comes in at 200k.
land size is a bit bigger then the comparable sales

if you used a variable home loan IO 5 years. 20% deposit.

how easy would it be after settling to go to different lenders / your lender and show them the recent comparable sales? and get a equity release?

is this possible? have any brokers done this before? thoughts?

Cheers

 

[Corey Batt]

Unless you do significant improvements to the property, you will need to wait 3-6 months for a valuer to recognise a higher value. The way around this is to do significant renovations to the property.

AVM models can be hit very hard after a cheap sale too, which can take even longer unless there is a *large* volume of sales well above the price.

 

[Brady]

Send me address and I'll tell you $50-60k instant equity, very BMV. 20% discount.

Refinance to different lender, straight away. Same Lender 3 months.

I would say there have heaps of people who have refinanced for better val at different lender and lots who have revalued after 3months to release equity.

 

[albanga]

Send me address and I'll tell you $50-60k instant equity, very BMV. 20% discount.

Refinance to different lender, straight away. Same Lender 3 months.

I would say there have heaps of people who have refinanced for better val at different lender and lots who have revalued after 3months to release equity.

Hey Brady,
What about the exit costs though if moving to a different lender. Immediately after settlement I imagine they would be quite high (also if you paid LMI this would not be an option).

 

[Redom]

ok so say you've found a property you think its good value you could get it for 200k and comparable sales shows 250-260 for similar properties. but when you do a RP data Automated valuation report it comes in at 200k.
land size is a bit bigger then the comparable sales

if you used a variable home loan IO 5 years. 20% deposit.

how easy would it be after settling to go to different lenders / your lender and show them the recent comparable sales? and get a equity release?

is this possible? have any brokers done this before? thoughts?

Cheers

I've seen it before, in Sydney. No renovations done, wasn't even purchased BMV. The market improved and the val came back in strong within 6 weeks of settlement.

Hit up Brady and see if its worked.

Cheers,
Redom

 

[Redom]

Hey Brady,
What about the exit costs though if moving to a different lender. Immediately after settlement I imagine they would be quite high (also if you paid LMI this would not be an option).

Variable. 20% deposit. Exit costs will be low (around 1000). Could potentially be a clawback from the broker, but i would think most brokers dont charge these for existing clients.

 

[Marty McDonald]

The biggest issue is your sale at $200K will massively influence the valuer / data collector for a long time afterwards

 

[Brady]

Hey Brady,
What about the exit costs though if moving to a different lender. Immediately after settlement I imagine they would be quite high (also if you paid LMI this would not be an option).

For this type of purchase would be looking to have a product that has minimal/no establishment costs. Exit fees no longer exist. But discharge costs do.

CBA No Fee Home Loan rate isn't the best 5.2% but no establishment fee, no settlement attendance fee, no monthly fee and no discharge fee. Costs would be govt mortgage registration costs. Other major banks offer similar product.

OP said 20% deposit so assuming they're paying for purchase costs as well and only borrowing 80% there wouldnt be any LMI.

 

[Redom]

The biggest issue is your sale at $200K will massively influence the valuer / data collector for a lung time afterwards

With Marty - most likely won't yield much fruit.

But if you want to give it a go, order a val and hope for the best. Most of the time it wont work, but that doesn't mean always.

 

[Peter_Tersteeg]

I've seen this quite a bit. You buy for $200k and believe it to be worth $250k. A refinance shortly afterwards and the RP Data report now suggests it's worth $205k because you bought it for $200k. Bank valuer agrees.

It's worth a shot if you genuinely have compatible sales in the are for a higher value, but valuations are defined by the data available, the the most compelling indicator of value shortly after settlement is the price you bought it for.

 

[Jamie M]

The biggest issue is your sale at $200K will massively influence the valuer / data collector for a lung time afterwards

Spot on -that's my take on it too.

I guess an option that can be explored is a quick refinance after settlement to a lender that provides a favorable desktop valuation....in the hope that the sales data hasn't been registered yet. I haven't tried it - but might work.

Cheers

Jamie

 

[Brady]

Yes often the valuers will say that if you bought it on the OPEN market then that's the value. Would want to have a good amount of strong comparable sales, woudlnt want to be relying on just one sale and a good explaination as to how you can pick up property 20% BMV.

 

[Rolf Latham]

What about the exit costs though if moving to a different lender. Immediately after settlement I imagine they would be quite high (also if you paid LMI this would not be an option).

Cost of doing business which some peops can not cope with.

oddly enough I have seen people walk from a 50 k gross profit with a 15 k cost

ta
rolf

 

[albanga]

hmmm this conversation gets me thinking to my own scenario.

My property is owned 50/50 with my brother but I am going to buy him out for at this stage an agreed 460k but market value I am very confident to be about 520k.
So it is likely the best thing to do would be to pay market value and then have an arrangement with my brother to gift back the difference after settlement?

This way when I then go to get it revalued likely soon after it will be valued at the correct 520k?

 

[Brady]

hmmm this conversation gets me thinking to my own scenario.

My property is owned 50/50 with my brother but I am going to buy him out for at this stage an agreed 460k but market value I am very confident to be about 520k.
So it is likely the best thing to do would be to pay market value and then have an arrangement with my brother to gift back the difference after settlement?

This way when I then go to get it revalued likely soon after it will be valued at the correct 520k?

Is there going to be funds borrowed? If so whats the LVR going to be?

I've had higher valuation accepted when there wasnt LMI involved (<80%)

This can happen because it's a purchase between know parties (not at arms length)

 

[Rolf Latham]

hmmm this conversation gets me thinking to my own scenario.

My property is owned 50/50 with my brother but I am going to buy him out for at this stage an agreed 460k but market value I am very confident to be about 520k.
So it is likely the best thing to do would be to pay market value and then have an arrangement with my brother to gift back the difference after settlement?

This way when I then go to get it revalued likely soon after it will be valued at the correct 520k?

Favourable purchase

commonish

CBA is good at it as Brady said, but others will consider same

its essentially a "gifting" of equity instead of cash

ta

rolf

 

[Mick C]

1. Refinance straight away if you need the funds within 3 month of settlement- Note it takes on average 5 weeks to refinance as well from application ( some fast refin lenders can do it within 2 weeks or so)

2. Stick with existing lender and do new val 3 month later ( presuming market improved a lot or purchased under market)

P.s make sure your comparing the same type of properties in term of conditions/ age and location....also i find houses in the $200-300 mark, land "size" makes no difference- so it common for a 700 sq house to be valued at the same price ( give or take 2%) as a a 600 sq property ( comes down to material/ condition/ location/ age and configuration)

 

[Marty McDonald]

hmmm this conversation gets me thinking to my own scenario.

My property is owned 50/50 with my brother but I am going to buy him out for at this stage an agreed 460k but market value I am very confident to be about 520k.
So it is likely the best thing to do would be to pay market value and then have an arrangement with my brother to gift back the difference after settlement?

This way when I then go to get it revalued likely soon after it will be valued at the correct 520k?

Yes this way. I always strike the transfer price at actual market value rather than the favourable price then there is a gift of equity at settlement or rather some of the funds required to be paid to the vendor to complete are forgiven.

This way true sale price is recorded in the data and makes it easier for future valuing purposes especially desktops. I also always find it easier to get a valuer to agree to a contract / transfer price rather than to acknowledged the sale is below market value. Stamp duty is payable on market value as well so no one is losing out.

 

[albanga]

Is there going to be funds borrowed? If so whats the LVR going to be?

I've had higher valuation accepted when there wasnt LMI involved (<80%)

This can happen because it's a purchase between know parties (not at arms length)

Numbers I believe are going to look something like:
Current Loan = 280k
Purchase = 260k (520/2)
Closing Costs = 10k
Total Loan Amount = 550k

I will then have around 130k in my offset so 420k total loan amount.
So LVR on that is just above 80.76% (I am sure I can scrounge to 80%).

So given I would be under 80% is it even necessary for the bank to know my brother will be gifting 30k back to me? Would this not only be relevant if I was going to be above 80% and that money would be required to put me under?

 

[Terry_w]

Yes this way. I always strike the transfer price at actual market value rather than the favourable price then there is a gift of equity at settlement or rather some of the funds required to be paid to the vendor to complete are forgiven.

This way true sale price is recorded in the data and makes it easier for future valuing purposes especially desktops. I also always find it easier to get a valuer to agree to a contract / transfer price rather than to acknowledged the sale is below market value. Stamp duty is payable on market value as well so no one is losing out.

From a legal POV you would want to transfer at market values well as under the bankruptcy laws under market value transactions get special attention - similar under succession laws. Also under tax laws you would want to be able to maximise deductions of interest on any loans.