Off-the-plan valuation 10% less?

[Bruc3]

Hi guys,

I am almost about to jump the gun on buying an off-the-plan (OTP) Apartment in Sydney (Australia).

A friend recently just settled his off-the-plan but valuation came under at 10% less than his purchase price and he told me that the Banks have told him that now days Off-the-plan will always come around 10% less than their purchase price. This is insanity if its true. How true is this? And what are other peoples experiences with recent valuations done on their OTP property?

This is making me so nervous to purchase OTP now.

 

[Rolf Latham]

its a generalistion that isnt true

Its more often the other way wound.

The OTP product may have been 10 to 20 % above the market when sold.

Not all OTP is the same obviously.

If you have lots of cash/equity and surety of employment, and one feels they can pick the timing of the market, then this may work for some.

ta
rolf

 

[Bruc3]

So has anyone recently settled an OTP property who would like to share their experience with the valuations? Did you see gain or loss, and buy how much?

 

[Bruc3]

its a generalistion that isnt true

Its more often the other way wound.

The OTP product may have been 10 to 20 % above the market when sold.

rolf

Yeah, I guess he could have overpaid for the property.

Anyway, I have decided to offer a lower price than the asking price just to try cover my behind just in case.

 

[Aaron_C]

My experience of OTP in Melbourne CBD has been 15-20% less than purchase price...

 

[Bruc3]

My experience of OTP in Melbourne CBD has been 15-20% less than purchase price...

Melbourne, that bad ay. Hope its not the same in Sydney.

 

[Brady]

Don't do too much OTP in Adelaide, but last one came back on the money... Mind you it took 3 years to complete from when deposit was paid and there was a reasonable amount of growth in that time... so really should of come back above if developers hadn't factored in growth. So to me still overpaid.

 

[Bruc3]

Don't do too much OTP in Adelaide, but last one came back on the money

Thanks for your feedback.

 

[tobe]

what does having evidence they are being returned at purchase or not tell you?

Everything will go swimmingly until it doesnt, then those still holding yet to settle OTP lose their shirts.

Have a look at surfers sales price history of OTP or the docklands in the early 2000's.

Theres much better and safer ways to make money IMO

 

[Jamie M]

OTP doesn't always come in lower - I've had some come in higher and we've been able to use the higher val for calculating LMI.

Although, I've also experienced the flipside where vals come in low. However - a bit of persistence can sometimes overcome it.

For instance, I ordered three valuations on an OTP property in Melbourne recently that came back with three different results. The first was $60k or so under, the second $10k under and the third right on purchase price.

If we were bound to go off the first valuation, the client couldn't proceed and would forfeit their deposit. We could work with the second valuation - but LMI was a bit costly.

Tread with caution with OTP.

Cheers

Jamie

 

[Bruc3]

For instance, I ordered three valuations on an OTP property in Melbourne recently that came back with three different results.


Cheers

Jamie

I am very cautious about OTP and aware of the risks. If the time comes and valuation does not look good, I will try to get a few different valuation.

 

[Aaron_C]

I am very cautious about OTP and aware of the risks. If the time comes and valuation does not look good, I will try to get a few different valuation.

The problem is that sometimes you end up getting the same valuer and obviously get the same result.

 

[Brady]

And to go to the lengths of getting 3 different valuations. Yes it's great that you might get a valaution on the money... but tell me does that mean the property is worth that. Has 2 out of 3 got it wrong? Or 1 got it right?

 

[Aaron_C]

And to go to the lengths of getting 3 different valuations. Yes it's great that you might get a valaution on the money... but tell me does that mean the property is worth that. Has 2 out of 3 got it wrong? Or 1 got it right?

Well Brady since valuation is more art than science, they're all right!

 

[Brady]

Well Brady since valuation is more art than science, they're all right!

Haha yes well never heard of a valuer saying they got it wrong...

 

[Bruc3]

Just to confirm. As long as 1 Valuator gives the price I want, then I can effectively loan 80% of that valuated price from the Bank right?

 

[tobe]

Bruc3. Get some specific advice. Relying on doing a couple of vals if something goes wrong with the first one isnt that great a risk strategy.

Its great you can afford to do an 80% lend, but there are a couple of the big four who specifically exclude diferent buildings, regardless of the valuation, or how much deposit you have. This is happening now.

If the property market turns, most valuers will have the same opinion, and as one or two lenders restrict their exposure to certain sites, so other lenders will follow. As some people cant complete and sell at a loss, their sales price becomes the new benchmark for the next valuation.
This is what happened to the docklands in the 2000's and isnt inconceivable to happen again.

 

[blackenator]

I purchased a block of land otp in sydney in September last year . The new release by the developers have my block of land about 40k more now than when I put my downpayment for my block. My block registers in June and the bank valued my land and they valued it at exactly what I paid for it.

 

[Jamie M]

And to go to the lengths of getting 3 different valuations. Yes it's great that you might get a valaution on the money... but tell me does that mean the property is worth that. Has 2 out of 3 got it wrong? Or 1 got it right?

Totally agree.

In this instance it was a matter of them proceeding with the purchase (which required a val closer to purchase price) or losing their deposit so the multiple up fronts were necessary.

Cheers

Jamie

 

[ems]

Were about to settle on a OTP unit in Gladstone. Purchased in 2011, purchase price 460k. One valuation came back at 420k, another 380k and waiting on one more. Were having to find the remainder. Be very careful. Not saying OTP can't work but with us we paid way over the top and add in a deteriorating market can equal disaster.