Off The Plan - Valuations?

[Pleasure Paulie]

Hi,

A friend of mine is purchasing a house off the plan for his PPOR. He said settlement is a few months away. however, he is getting told different things from lenders and I'm not sure what to advise him as I've never bought off the plan.

He is told by a few lenders they do a valuation off the contract and house inclusions and specifics for conditional finance approval and then do another val once complete in a few months for unconditional.

Then another lender is telling him they can't do a val off the contract and give conditional approval and only do a val once complete for unconditional.

What normally happens?

 

[Colin Rice]

Normal procedure is to complete a TBE or to be erected valuation using the building contract, plans & specs etc. to determine an estimated value and another full valuation once certificate of occupancy (bank speak for property can be lived in) when property is completed.

Different lenders have different time frames in regards to the application validity ranging from 3 - 18 months for OTP purchases.

Some allow TBE vals and others dont!

If the valuation on completion is less than the contract price (normal) then your friend has to make up the difference but if it goes the other way then less deposit or improved LVR (loan to value ratio) is the result.

 

[Aaron_C]

As FMS said they just value the property 'as if' it was completed for lending purposes. Best to do this upfront before an application so he doesn't waste time with dud apps that give **** valuations.

 

[Pleasure Paulie]

Thanks - you guys are awesome!

So the preference is a lender that does tbe val and then another once complete?

 

[Mick C]

Hi,

A friend of mine is purchasing a house off the plan for his PPOR. He said settlement is a few months away. however, he is getting told different things from lenders and I'm not sure what to advise him as I've never bought off the plan.

He is told by a few lenders they do a valuation off the contract and house inclusions and specifics for conditional finance approval and then do another val once complete in a few months for unconditional.

Then another lender is telling him they can't do a val off the contract and give conditional approval and only do a val once complete for unconditional.

What normally happens?

^ they are both correct answers, it's just different banks procedure.

But generally only a handful of banks will accept a 3-6 month contract, they would carried out a valuation based on the contract and plans and provide conditional approval and than carried out a full valuation when it's completed and issue unconditionally. I find this to be a better process as it allows the buyers to find additional funds if the valuation is short and gives you a good 3+ month to do that as well.

Most banks won't accept a contract till the property is completed; which means they will only offer unconditional approval so hence will only carried out the valuation when the property is completed.

 

[demoneyez]

Is the below scenario possible.

Be approved for a 95% loan based off plans ect
Get 5% of funding to help pay the developers 10% deposit requirement.
Get other 90% of properties value when property is built and ready to settle.

 

[Pleasure Paulie]

From my understanding if you go 95% LVR it limits your available lenders and rate.

Why do you suggest that idea?

 

[Colin Rice]

5% would need to be genuine savings, that is in a bank account for 3+ months.

You wouldn't get the approval at 95% as lender will want proof of 10% deposit!

 

[tobe]

Is the below scenario possible.

Be approved for a 95% loan based off plans ect
Get 5% of funding to help pay the developers 10% deposit requirement.
Get other 90% of properties value when property is built and ready to settle.

Approved at 95%? No. It won't be approved until the property is finished. You might get a conditional approval at that point, but the full approval isn't provided till settlement.