Im not sure what you mean by unable to sell it. If you cant sell it, (as opposed to not wanting to sell it) the bank cant/wont value it. the best you could hope for is land value.
Valuers probably wouldnt check licences, they would leave that up to the lender, or most likely the lender will ask you to provide council permits etc that can only be supplied if you hold the appropriate licences.
Owner building is dificult on a prgress payment, or valuation on completion basis, in that most lenders will heavily discount the end value as they do not have the same sort of iron clad contract they do with a volume builder.
This usually means you need significant equity in other properties, or the land itself unencumbered to be able to owner build.
We just did a loan for an OB who ran out of cash halfway thru the project. The valuer refused to value even the land which would have supported the debt.
The OB had to end up letting a licenced builder take over to get it valued... problem was that the guy had a fixed with a 20k interest penalty and it wasnt worth breaking for him so refi was out of the question
You need to choose which lender youre going to use for these very carefully as well
But OB's can be a can of worms for those who have little to no experience with them. Rare we havent seen a (great) blow out
ok what I was getting at - block of land with a debt on it. market dropped so sitting at 100% LVR. use cash to build a house OB. so now there is a beautiful home on a block - there should be good equity. HOWEVER... I cant sell the house on the open market as I would need to seek approval from the minister and obtain HOW insurance. so the value of the asset must be diminished? does the bank consider the fact that they can't just go and sell it, or does the valuer look around at the pretty gardens and do comparables and say it is worth X?
When the bank lends you money for construction they are working on the basis that the finished product is obviously worth more than the land + loan that they gave you. If the house is finished the bank would get someone to value it for you, regardless of whether it's owner builder or otherwise.
If you owner build, without the right permits, and then tried to refinance, the bank may find out, as suddenly having a house on what they thought was a vacant block might make the assessor ask questions. If you went to a second bank, it might be ok, but why go to the trouble of owner building without the right permits? The cost diferential cant be that much? As to selling the property, the next owner after a period of time might not be liable for you not having a permit, but that wouldnt necessarily mean you are not still held liable.
Why not just build a kit home, or OB with the right permits? Why not get plans for a house approved and see what that does to the valuation and LVR?
You can't sell an OB home within 3 years of construction without approval from some minister... just the rules. and if they agree to let you do it you need to provide a warranty on it for 7 years
I am saying build it with all the right approvals etc in place, but then even with all the correct approvals etc in place you are unable to sell it, so does this affect its valuation? at the end of the day its just as good as the house next door, except it is unsellable. Unless there is a law that says if the house gets liquidated then th ebank can sell it off like any other house?
I think this is the bit you need to find out about, because at this point it's not the OB that's selling it, but the bank, and if this is so it shouldn't be any different to the bank than any other liquidation sale.
Ob's are notorious for running out of money (or interest) before the house is finished, and this makes it harder for the bank to recoup if there is a problem, although this shouldn't apply to a valuation on a completed house.