How do you ensure the Bank Evaluator won't knock back your finance?

[eyogina]

Hi
REA tells me the Vendor wants $370K, but recently knocked back $360K so he might consider anything in between. I am considering putting in an offer but my mortgage broker tells me that currently Bank Evaluators are knocking back finances and evaluating prices at 10% less, as most houses are overpriced. Is there anyway I can guarantee that it will be approved, other than paying for an early evaluation?
I think anywhere between $360K - $370K is OK for a 520sqm, 3 bdrm, double lock up garage, weatherboard (no cracks) slight dipping, in Melbourne's inner West, 10kms from the City, close to all infrastructure.

 

[MarkB]

The only way I know to 100% guarantee a finance application won't be knocked back is to not ask in the first place.

What you're talking about, controlling the behaviour of an individual you don't know and over whom you have minimal influence, is not possible.

Applying for finance is like that sports maxim - you miss 100% of the shots you don't take (and, invariably, some of the shots you do).

But you keep swinging anyway.

 

[Peter_Tersteeg]

I am considering putting in an offer but my mortgage broker tells me that currently Bank Evaluators are knocking back finances and evaluating prices at 10% less, as most houses are overpriced.

I'm definitely not seeing this. I haven't had problems with a purchase valuation for a very long time. Refinances are another story (but then they always are).

 

[Belu]

subject to fince = covered for this?

 

[Perp]

subject to fince = covered for this?

Yes and no. Yes, if your subject to finance clause is sufficiently buyer-friendly in its wording.

Let's say you have $80K in cash, and apply for $320K loan to purchase a $400K property. The valuation comes in low, at only $360K, but the lender approves you anyway, saying that $320K/$360K = 89%, and they're happy to extend you finance to complete, provided you pay LMI.

In this case, if your finance clause simply said "sufficient to complete", then you're stuck with a bad bargain. You'd have to buy the property at a price that you may now think is too high, because you're approved for sufficient funds to complete the purchase.

If your finance clause is more buyer-friendly and says "to buyer's satisfaction", then you could say that the requirement to pay LMI makes the offer of finance not satisfactory, and you could decline to proceed.

 

[eyogina]

Thanks, I like the 'to buyer's satisfaction' clause, and thanks Mark B for your comments, you're right. I've got so many clauses/wordings to remember now!!

 

[Perp]

What you're talking about, controlling the behaviour of an individual you don't know and over whom you have minimal influence, is not possible.

With regards to the valuation, if you're uncertain about the valuation, one can retain some control over it if the lender has multiple valuers on their panel.

Find out which valuers are on your lender's panel; your broker can usually help you with that. Then you approach one independently of the lender and order an assignable valuation, with you as the client. If the valuation achieves your objectives, then you assign it to the lender and you're good to go. If the valuation comes in low, you move to another panel valuer and try again until they come up with the right answer.

Of course it's not a risk-free strategy - you may pay more for the valuation than your lender does, you may have to pay for multiple valuations, and there's no guarantee that any of the valuations will come to the figure you want.

But sometimes different valuers view things quite differently - one residential property was recently valued 3 times in the same month at $650K, $735K, and $790K - which is a huge range! Even if all 3 valuers were on a lender's panel, if they get the $650K valuation first, they then won't accept the $790K valuation even though it's from a panel valuer.

So if you allow the lender to arrange the valuation, you're taking a chance that valuer C is the one they ask to value the property. If they happen to ask valuer A to do the valuation, you're screwed.

But if you ask valuer A to do the valuation for you as an assignable valuation, you just never show the lender that valuation - you simply wait until you get valuer C's valuation and assign that one.

 

[Bradsdad]

Hi
REA tells me the Vendor wants $370K, but recently knocked back $360K so he might consider anything in between. I am considering putting in an offer but my mortgage broker tells me that currently Bank Evaluators are knocking back finances and evaluating prices at 10% less, as most houses are overpriced. Is there anyway I can guarantee that it will be approved, other than paying for an early evaluation?
I think anywhere between $360K - $370K is OK for a 520sqm, 3 bdrm, double lock up garage, weatherboard (no cracks) slight dipping, in Melbourne's inner West, 10kms from the City, close to all infrastructure.

Ensure you contract is has a finance clause in it and use 100% of the PP as the finance amount. This way if the valuation comes in low you can always walk.
Depending on the LVR, there are some lenders who will just use the contract price with a val anyway.

A little unsure why your MB hasn't covered this off with you



Regards
Steve

 

[vbplease]

Thanks, I like the 'to buyer's satisfaction' clause, and thanks Mark B for your comments, you're right. I've got so many clauses/wordings to remember now!!

In the terms of the standard QLD contract it already says "on terms satisfactory to the buyer".. Does the VIC contract not say this?

Another major flaw in the VIC contract is the pest clause - it must be "major infestation" before you can cancel the contract.. Better right your own clause for that one too!!

 

[oracle]

Let's say you have $80K in cash, and apply for $320K loan to purchase a $400K property. The valuation comes in low, at only $360K, but the lender approves you anyway, saying that $320K/$360K = 89%, and they're happy to extend you finance to complete, provided you pay LMI.

Would it be a good idea to also put in a clause of subject to finance and lender's valuation at contract price or above. If then the valuation comes in at $360K you can go back to the vendor and re-negotiate the contract price. Or else just walk away.

Cheers,
Oracle.

 

[Perp]

Would it be a good idea to also put in a clause of subject to finance and lender's valuation at contract price or above.

Sure, but you always wants to put in the minimal number of clauses necessary to protect your position. Too many conditions and your offer is less attractive to the vendor, so if you can cover the valuation issue with your finance clause, it looks like you've got fewer conditions - kind of like "two for the price of one".

Admittedly, in most markets right now, you could probably put in as many conditions as you want!