It's been a hard slog to get it there, but we've got a happy result.
To give a bit of background, I got some interesting information from the sales agent. The average purchase cost of the 4 properties was around $950k. The average reno cost was around $750k. Hard costs for completion of the project thus averaged $1.7M per property.
Needless to say, given the average sale of $1.4M ('ish), these preperties were well over capitalised.
The contract of sale is one of the more volumous that I've seen, including building permit, plans, inclusions, etc. The real interesting part is reading through the various privacy and non-disclosure clauses special conditions. Essentially the pruchasers cannot talk to the media for about 5 years unless it's authorised by Watercrest productions.
The first valuation came back $190,000 below the purchase price. Absolute disaster because this client simply doesn't have the cash to make up that shortfall.
We went into investigation mode and looked at a number of different contingencies including top-ups of other properties, family guarantees, even vendor financing.
The obvious solution in this case however is to simply use another lender and hope for a better valuation result. This has its own challenges. Due to the size and other circumstances of the loan, we're limited to the mainstream lenders unless the applicants are willing to pay very high rates. About 50% of the mainstream lenders outsource to ValEx which is like a clearing house for valuations.
Given the first valuation was done through ValEx, I was reluctant to use a lender who would also use them, but this gave as almost no other decent options.
What we did manage to determine was that the individual valuer who performed the valuation is not on ValEx's authorised list for one or two lenders. They don't use them because their valuations were coming in consistantly low.
We ordered the valuation there a few days ago and got back the result this afternoon. Instead of $190,000 below purchase price, this one was only $10,000 below purchase price!
We've decided not to argue with it over $10k. I suspect the valuer just decided to knock that off for the furniture package, but it's not going to cause any stress. The client's happy, we'll negotiate a massive discount for them and they'll get to move into their new home in about 6 weeks.
In summary:
1st valuation was $190k below purchase price.
Did lots of due dilligence on the area, comparible sales and quite a bit of due dilligence on the valuers. Based on all our research, I'm actually inclined to suggest that whilst they didn't get a bargain, they probably paid within a reasonable margin of error.
2nd valuation (with more than a little guidance from use) was $10k below purchase price.
In essance I'd say it's a pretty good result.
To give a bit of background, I got some interesting information from the sales agent. The average purchase cost of the 4 properties was around $950k. The average reno cost was around $750k. Hard costs for completion of the project thus averaged $1.7M per property.
Needless to say, given the average sale of $1.4M ('ish), these preperties were well over capitalised.
The contract of sale is one of the more volumous that I've seen, including building permit, plans, inclusions, etc. The real interesting part is reading through the various privacy and non-disclosure clauses special conditions. Essentially the pruchasers cannot talk to the media for about 5 years unless it's authorised by Watercrest productions.
The first valuation came back $190,000 below the purchase price. Absolute disaster because this client simply doesn't have the cash to make up that shortfall.
We went into investigation mode and looked at a number of different contingencies including top-ups of other properties, family guarantees, even vendor financing.
The obvious solution in this case however is to simply use another lender and hope for a better valuation result. This has its own challenges. Due to the size and other circumstances of the loan, we're limited to the mainstream lenders unless the applicants are willing to pay very high rates. About 50% of the mainstream lenders outsource to ValEx which is like a clearing house for valuations.
Given the first valuation was done through ValEx, I was reluctant to use a lender who would also use them, but this gave as almost no other decent options.
What we did manage to determine was that the individual valuer who performed the valuation is not on ValEx's authorised list for one or two lenders. They don't use them because their valuations were coming in consistantly low.
We ordered the valuation there a few days ago and got back the result this afternoon. Instead of $190,000 below purchase price, this one was only $10,000 below purchase price!
We've decided not to argue with it over $10k. I suspect the valuer just decided to knock that off for the furniture package, but it's not going to cause any stress. The client's happy, we'll negotiate a massive discount for them and they'll get to move into their new home in about 6 weeks.
In summary:
1st valuation was $190k below purchase price.
Did lots of due dilligence on the area, comparible sales and quite a bit of due dilligence on the valuers. Based on all our research, I'm actually inclined to suggest that whilst they didn't get a bargain, they probably paid within a reasonable margin of error.
2nd valuation (with more than a little guidance from use) was $10k below purchase price.
In essance I'd say it's a pretty good result.
