Property valuated lower than purchase price. What are the options?

[simonksl26]

I'm still new in property investing. Just need some advice from you experts out here.

Recently I got a property for A$373.5K. I have already paid the 10% and my settlement date is 1 September 2008. I am getting a loan from St. George Bank. During their valuation, they value the property to be A$365K. The bank has allowed me to loan 25%. So instead of A$280K (25% of A$373.5K), I can only loan A$273K. That means I have to come up with the additional A$7K.

Here are my questions.
1. Am I making a bad deal in this investment since I am getting the property for A$373.5K while the exact value is A$365K? My first thought about this is "****! I am cheated!"

2. Is there any options I have now other than to proceed with the loan of A$273K and come up with the additional A$7K in payment?

3. Is it possible to look for another loan company and hope that the other company's valuation will be higher? Or it will not make any difference in the property value whether one company make the valuation or the other company?

4. Is it possible to negotiate with the price of A$373.5K with the agent now that I have already paid the 10%?

Hope you guys can help and give me some advice. Thanks!

 

[tobe]

1.
most probably. Valuers are conservative, but 95% of the time, they will agree with a sale contract on market. Was the purchase through a marketing company? Or a licenced real estate agent?

2.
You can try another lender.

3.
Yes, but make sure you have enough time before settlement, and a competant broker.

4. You cant technically negotiate on the price. If you are still within the finance clause, you may be able to withdraw from the purchase.

 

[Qlds007]

Tobe has pretty well wrapped it all up.

Try and find out who the Dragon used to carry out the valuation and you can always try and get a new lender to use a different valuer.

With a settlement date not far away it is likely that you are pretty pushed for time so if you cant extend the settlement date then you maybe stuck with what you have.

 

[simonksl26]

Tobe has pretty well wrapped it all up.

Try and find out who the Dragon used to carry out the valuation and you can always try and get a new lender to use a different valuer.

With a settlement date not far away it is likely that you are pretty pushed for time so if you cant extend the settlement date then you maybe stuck with what you have.

Yeah, considering that my settlement date is just 2 weeks from now, it's either I reject the offer or just go ahead with it. Anyway, they waive off the stamp duty of 16K. So I guess I still not in the losing end.

 

[Qlds007]

If it was me I would certainly be inclined to get the Bank to value the property at what i have paid for it otherwise you will have issues in the future.

Rejecting the offer and extending the settlement by a week or two could end up saving you $$$$ in the long run.

If they are prepared to cover the stamp duty maybe the property was overpriced but a 2nd opinion would never do any harm.

 

[Rolf Latham]

Hiya Simon

If u are doing a 3 % ish Sing dollar loan then the valuation isnt that bad.....

Where is the property please ?

ta
rolf'

 

[simonksl26]

If it was me I would certainly be inclined to get the Bank to value the property at what i have paid for it otherwise you will have issues in the future.

Rejecting the offer and extending the settlement by a week or two could end up saving you $$$$ in the long run.

If they are prepared to cover the stamp duty maybe the property was overpriced but a 2nd opinion would never do any harm.

Hmm... what sort of issues would I be facing in the future? As far as I see it, I am actually loaning less and having to pay less interest. Of course, I know the interest is tax deductible.

I believe the property is completed few months back. I was told by the agent that they are trying to complete the sale of the property. So they are willing to waive off the stamp duty. I got the feeling that they have overprice the property a bit to cover some of the cost for the stamp duty waiver.

 

[simonksl26]

Hiya Simon

If u are doing a 3 % ish Sing dollar loan then the valuation isnt that bad.....

Where is the property please ?

ta
rolf'

Hi Rolf,

Yes, I am doing the Sing dollar loan. Last week, the loan rate was 2.53%. How is the valuation isn't that bad due to the SGD loan? Sorry for such a noob question

The property is just opposite Southern Cross train station in Melbourne. I guess it should be a good location.