Unapproved loan after winning at auction

Hi all,

Has anyone experienced successfully buying at auction with a conditional loan and later found out that after a bank valuation it was not approved?

What to do to get around it?
Thanks
 
Dont buy at auction if you finance isn't 100%.

That's a tad hard if it's a valuation shortfall unless you're providing a very healthy LVR which can take a valuation battering.

To the OP:

Generally we will make sure we have options available for contract of sale valuations to avoid these situations when we're wary of potential valuation issues (a lot more common in very hot markets).
 
Hi all,

Has anyone experienced successfully buying at auction with a conditional loan and later found out that after a bank valuation it was not approved?

What to do to get around it?
Thanks

1, Use a lender that will accept the contract of sale as valuation
2, Use a broker on her to valuation shop (order valuations with multiple lenders until you get the result you need)

where and what did you buy?
 
The best way to get around this would be to try a different lender who will use a different valuer. So in effect shop valuers.

Its pretty rare for valuation issues following an auction I believe unless there is an additional significant factor involved - so a second valuer will likely value at the auction price hopefully.

Good luck!
 
In hundreds of loan applications for auction purchases, spanning a period of over 10 years, I've had it happen once. The circumstances were very unusual.

A client purchased one of the properties on "The Block" reality TV show. The valuer made comments that the TV show had over marketed the property and the purchasers had paid $200,000 too much for the property. They didn't have a spare $200k laying about.

I spent about a week researching the local market, researching which valuation firm various lenders use, the valuation firms history in the local market. We then targeted a particular firm and the lender to match that firm. I also provided a large amount of other compatible sales in the area to support the purchase price (I actually think they paid a fair price for the property).

The second valuation came in $10k under the purchase price, on the basis that there was a furniture package included in the contract. Fair enough.

A new application was made to that lender and the loan was approved.


Moral of the story is if you do your due diligence and keep your head at auction day, the odds of a bad valuation are negligible. In the highly unlikely event of a problem, there are almost certainly going to be alternatives.

The valuation is usually the easy part. Make sure you actually will qualify for the loan before attending an auction.
 
That's a tad hard if it's a valuation shortfall unless you're providing a very healthy LVR which can take a valuation battering.

It is harsh but it is reality and one of the reasons auctions can be risky. I would never bid at auction and would advise others to do the same unless they are absolutely confident finance can be arranged or is in place.

If not you put a hefty deposit at risk.
 
Hiya op

You need to get in touch with a decent finance person - they'll know how to approach it.

First step is to see if the deal can be done via a desktop valuation (or no valuation at all).

If that's not possible - a couple of new upfront valuations need to be ordered via different lenders.

They'll also look at the possibility of raising equity in other property (if possible) and/or borrowing at a higher LVR.

Cheers

Jamie
 
Hiya op

You need to get in touch with a decent finance person - they'll know how to approach it.

First step is to see if the deal can be done via a desktop valuation (or no valuation at all).

If that's not possible - a couple of new upfront valuations need to be ordered via different lenders.

They'll also look at the possibility of raising equity in other property (if possible) and/or borrowing at a higher LVR.


Hi BG,

What LVR are you at (this will influence whether you can just use the contract price)?

Jamie hit the nail on the head - unless your hamstrung to choose a particular lender for a niche reason (e.g. unusual employment scenario, servicing issues, etc) - you're likely to have several options to go ahead.

This is where a good broker is most valuable - getting out of tight ones. :)

Cheers,
Redom
 
Hi all,

Has anyone experienced successfully buying at auction with a conditional loan and later found out that after a bank valuation it was not approved?

What to do to get around it?
Thanks

Speak to an experienced broker from the forums. Several have already answered this thread.
 
We had a situation recently, where a buyer arranged a preauction finance application, and a valuation was done. The buyer ended up bidding above the valuation (which we believe was too low) and at figure which we believed was closer to fair market value. He ended up having to place his application with another lender. All went through.
 
We had a situation recently, where a buyer arranged a preauction finance application, and a valuation was done.

Yep - that's a good example as to why a pre val shouldn't be arranged - 99% of the time, the val will come back at purchase price.

It's good they got it done in the end though.

Cheers

Jamie
 
We had a situation recently, where a buyer arranged a preauction finance application, and a valuation was done. The buyer ended up bidding above the valuation (which we believe was too low) and at figure which we believed was closer to fair market value. He ended up having to place his application with another lender. All went through.

That's why you don't order a valuation for a purchase prior to finalising the purchase price.

It's almost impossible to get a valuation amended after the fact, and even if you do, if the loan is above 80% the lender often can't accept the amended valuation due to restrictions from the mortgage insurer.
 
Yep - that's a good example as to why a pre val shouldn't be arranged - 99% of the time, the val will come back at purchase price.

It's good they got it done in the end though.

Cheers

Jamie

Why on earth would anyone order a preva l

Its $500 plus you should know how much its worth plus you might not even get it!

Also, unless its the same valued why would a post vale be affected by the preval
 
I do recall the valuer commenting that he had never done so many pre-auction valuations before. Yes, it is not the wisest thing to do, however that's obviously what some financiers are doing with preapprovals.
 
Why on earth would anyone order a preva l

Its $500 plus you should know how much its worth plus you might not even get it!

l

lots and lots of reasons

Not for the scenario here agreed , but for refinances, top ups, potentially bodgy securities - mainly to protect one's credit file, and for those tight on equity, a improved val outcome

In most cases, an upfront val wont cost much.

ta
rolf
 
Why on earth would anyone order a preva l

Its $500 plus you should know how much its worth plus you might not even get it!

Also, unless its the same valued why would a post vale be affected by the preval

I don't know. For an auction - do your due diligence, get your finances in order (as far as practical) and stick to a budget.

Cheers

Jamie
 
lots and lots of reasons

Not for the scenario here agreed , but for refinances, top ups, potentially bodgy securities - mainly to protect one's credit file, and for those tight on equity, a improved val outcome

In most cases, an upfront val wont cost much.

ta
rolf

But the refinance and top up would be for the vendors. Not the sellers. I'm wondering why a buyer would do it unless they were so sure they were going to win the auction or it was a frozen cold market
 
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