Purchase price and valuation

Discussion in 'Property Finance' started by Singo, 11th Aug, 2013.

Tags:
  1. Singo

    Singo Member

    Joined:
    14th Jun, 2013
    Messages:
    845
    Location:
    Perth
    Hi all,

    When purchasing a property, if the LVR is less than 80%, the banks just take the purchase price as the valuation and move on. If the LVR is higher, the bank may get a valuation done. And the valuations are most if the times, the purchase price or may be less in some cases.

    But if you know that you have actually bought a bargain, is there any way to get the bank accept a higher valuation? What can be done to borrow against a higher valuation?
     
  2. Aaron_C

    Aaron_C Finance Broker

    Joined:
    11th Jun, 2011
    Messages:
    12,670
    Location:
    Melbourne, Victoria
    Even if the valuation comes higher, the bank will lend on the lower of purchase price anyway.
     
  3. Shahin_Afarin

    Shahin_Afarin Finance Broker

    Joined:
    6th Feb, 2012
    Messages:
    2,433
    Location:
    Sydney, NSW
    This is not with all lenders (only a handful). Most lenders will require a valuation even if the LVR is at 80%.

    Further to what Aaron has said - I would recommend waiting a few months and re-valuing the property with the support of recent sales and/or any additions or renovations made to the property. The other option is ordering kerbside or modelled estimate valuations available via some banks/scenarios.
     
  4. Singo

    Singo Member

    Joined:
    14th Jun, 2013
    Messages:
    845
    Location:
    Perth
    Thanks Aaron_C and TheFinanceShop.

    Well, for 2 of our properties, the bank did not do any kerbside or walk-in valuations. Most probably they did a desktop valuation and was happy with it.
     
  5. Peter_Tersteeg

    Peter_Tersteeg Finance broker/strategist

    Joined:
    29th May, 2001
    Messages:
    8,506
    Media:
    1
    Location:
    Melbourne
    The general policy of lenders is to take the lower of the valuation or purchase price. It's also fairly rare for a valuer to give a value different to the purchase price. If they believe it's worth more, they'll default to the purchase price. If they think it's worth less, they'll put the lesser value.

    It's rare to get a higher valuation and about the only time that it will be recognized is when there's been an extraordinary long settlement period, such as the case of off-the-plan purchases. In many of these scenarios where a lender will recognize a higher valuation, there's a significant risk that the value will actually drop.

    The other scenario we see quite often is when you purchase a property below market value from a relative. Quite a few lenders will recognize this scenario but a full valuation will always be ordered.
     
  6. Shahin_Afarin

    Shahin_Afarin Finance Broker

    Joined:
    6th Feb, 2012
    Messages:
    2,433
    Location:
    Sydney, NSW
    Banks will be happy with a desktop val if there is plenty of fat in the LVR.

    BTW are you cross securitised?
     
  7. Aaron_C

    Aaron_C Finance Broker

    Joined:
    11th Jun, 2011
    Messages:
    12,670
    Location:
    Melbourne, Victoria
    He's definitely crossed from the sound of things.
     
  8. Singo

    Singo Member

    Joined:
    14th Jun, 2013
    Messages:
    845
    Location:
    Perth
    Heavily cross securitised. Quite stupid of course.

    Took 106% loan to buy IP, using equity gain of PPOR. Then used PPOR and IP as well to buy another (102%). Quite a mess, but more than that. Paid salary straight into the PPOR loan, thus decreasing deductability. As PPOR is IP1 now. Now have 3 IPs (third settling soon), all linked together :(

    The only good thing is total LVR is 80%. Now thinking of moving banks and restructure the loans.

    IP2 has gained equity. So it can be on its own at 80%. So IP3 loan has to separated 80%+22% and the 22% securing against IP1.

    I am thinking to buy IP4 and move while buying it. And then sell off IP1.
     
  9. Aaron_C

    Aaron_C Finance Broker

    Joined:
    11th Jun, 2011
    Messages:
    12,670
    Location:
    Melbourne, Victoria
    You're probably best to fix the cross collateralisation first before you buy more...otherwise it gets a bit too difficult to unravel.
     
  10. Singo

    Singo Member

    Joined:
    14th Jun, 2013
    Messages:
    845
    Location:
    Perth
    Oops. I thought things can be done easier while moving banks. I could have separated IP2 while getting loan for IP3. But the banker told separating will take more than a month. And we didn't have that much time to get finance for IP3.

    The bank could have helped here. They would have known what they were doing. And I knew what they were/are doing. I thought it is not bad loosing a couple of thousands than missing out buying.
     
  11. Shahin_Afarin

    Shahin_Afarin Finance Broker

    Joined:
    6th Feb, 2012
    Messages:
    2,433
    Location:
    Sydney, NSW
    Normally the case when they do desktop vals. I wouldn't look at refinancing from your current lender unless there is a need. You can still unlink your loans with the same bank. If you are going to move banks it should be for a specific reason/aim.
     
  12. Singo

    Singo Member

    Joined:
    14th Jun, 2013
    Messages:
    845
    Location:
    Perth
    Well, it is a big4 bank, but the service we are getting is worse than what you can expect from a online provider. Well it started with a video conferencing and continuing in sending express mails with documents. I used to scan everything and email in the past. Now they are getting worse.

    By moving, we can get a better rate. Probably can get a loan for IP4 relatively easily if we can get one. Most importantly can speak face to face and discuss what we want. I thought restructuring can be achieved as well while moving.
     
  13. Aaron_C

    Aaron_C Finance Broker

    Joined:
    11th Jun, 2011
    Messages:
    12,670
    Location:
    Melbourne, Victoria
    Well, I would suggest it's time to get a move on. Asking you to cross your loans together for convenience is just a load of BS in my view.

    Obviously they either a) didn't know what they were doing or b) knew but didn't care anywhere. a) is ignorance, b) is recklessness. Hardly doing you any favours....
     
  14. Shahin_Afarin

    Shahin_Afarin Finance Broker

    Joined:
    6th Feb, 2012
    Messages:
    2,433
    Location:
    Sydney, NSW
    Yep well I think thats a fair reason to want to move...... The good news is that lenders are fighting for business more than ever (particularly sub 80%).
     
  15. Rolf Latham

    Rolf Latham Member

    Joined:
    2nd Mar, 2001
    Messages:
    18,791
    Location:
    Confused = Sydney, Brisbane and Gold Coast
    Cross coll isnt the end .........but if you want to keepgrowing it will certainly bring you closer to the "end" much more quickly

    Here is an ancient post, most of it still applies, and other things have been added.

    As the others have suggested,clean it up now,and note that moving banks, doesnt mean moving ALL your stuff.


    http://somersoft.com/forums/showpost.php?p=120656&postcount=6

    ta
    rolf
     
  16. Jamie M

    Jamie M Mortgage Broker - Oz Wide

    Joined:
    20th Jul, 2009
    Messages:
    4,085
    Location:
    Canberra and Sydney
    You might be able to get a lender to consider the valuation over purchase price if the property is OTP and the contract was signed at least 12 months prior to submitting the application (which doesn't seem to be the case here).

    For every other circumstance - your best bet is a reval after settlement as others have mentioned.

    Cheers

    Jamie