All Topics / General Property / i’m puzzled by this good deal

Viewing 16 posts - 1 through 16 (of 16 total)
  • Profile photo of aoao
    Participant
    @ao
    Join Date: 2006
    Post Count: 49

    Hi all
    I'm a first home buyer and am considering a good deal. Here are the details and i'd like to ask a few questions:
    It's a 3-bedroom full-brick unit in a block of around 200 units. The motivated vendor agreed to sell at around $535K and similar units were sold for $560-$570K. There's another large project (over 600 units) across the road with an average price for very similar 3-bedders at $635k-$650K, although they are not full-brick.

    and my questions are:
    1) do banks tend to value full-brick units higher than brick-and-veneer units if all other factors are the same?
    2) I only got 60K cash and don't want to spend all my cash for the down payment but want to enjoy the first home buyer's grant so now i'm in a dilemma. If the selling price on the contract is $535K i'll be able to pay less stamp duty. but the unit is worth at least $565k. If we put the selling price at $565K(the vendor would agree to do that) bank valuation shouldn't be a problem at all and thus i can probably fork out less cash. But again i have to pay more stump duty. Which approach would be in my best interest?
    3) Is it even possible to get an even higher valuation? cos the other big project 5 minutes away is selling comparable 3-bedders for minimum $635K and it seems they don't have an issue with valuation either. Is it possible that i can get my unit valued at close to $635K? When valuers do their valuation, do they only look at comparables in the same project, or do they take into account nearby similar comparables as well?

    Any comments/help would be much appreciated
    AO

    Profile photo of PandaQiQiPandaQiQi
    Member
    @pandaqiqi
    Join Date: 2007
    Post Count: 12

    Hi AO,

    My understanding is if the selling price for a property is over $500K, you will lose your first home buyer grant.

    Also, why would you want to value higher if you are only buying? If you plan to refinance later on, that's fine but always BUY "CHEAP"

    As with the valuation around the area, yes the new project will help to bring the price up in your area. (given similar comparables.)

    Hope it helps

    Panda

    Profile photo of aoao
    Participant
    @ao
    Join Date: 2006
    Post Count: 49

    Hi Panda
    Thanks for your comments.
    Why do i want to value higher? Because i want to fork out less cash for down payment. If it's valued at $650K most banks will be happy to lend you 80% i guess. that means i can borrow $520K. But the actual selling price is only $530K which means i only need to fork out $10K.

    Could anyone else help me with my other questions?
    Thanks!
    AO

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    My understanding is if the selling price for a property is over $500K, you will lose your first home buyer grant.

    This is not the case.

    Richard Taylor | Australia's leading private lender

    Profile photo of PandaQiQiPandaQiQi
    Member
    @pandaqiqi
    Join Date: 2007
    Post Count: 12

    My understanding is if the selling price for a property is over $500K, you will lose your first home buyer grant

    Sorry,

    Correction: Only for PROP. If this is an IP, you can still claim it next time round (provide is less than $500k)

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    My understanding is if the selling price for a property is over $500K, you will lose your first home buyer grant

    Sorry,

    Correction: Only for PROP. If this is an IP, you can still claim it next time round (provide is less than $500k)

    HATE to say this is till not correct

    Richard Taylor | Australia's leading private lender

    Profile photo of PandaQiQiPandaQiQi
    Member
    @pandaqiqi
    Join Date: 2007
    Post Count: 12

    Hi Qlds007,

    If is wrong please correct. We are all here to learn.

    This is what I was told by my own accountant.

    Cheers,
    Panda

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Panda

    The Federal Govt First Home Owners Grant scheme is administered by the individual States.
     
    The Grant is not effected by the purchase price of the individual property. If you buy a house for $501,000 you would still qualify.

    Certainly in some of the States the additional concessions in relation to the stamp duty for First Home Buyers maybe effected by a higher purchase price.

    Richard Taylor | Australia's leading private lender

    Profile photo of aoao
    Participant
    @ao
    Join Date: 2006
    Post Count: 49

    seems all the posts were a bit off-the-topic.
    Could anyone else help with my original questions?

    Thanks in advance
    AO

    Profile photo of elkamelkam
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    @elkam
    Join Date: 2006
    Post Count: 722
    ao wrote:
     I only got 60K cash and don't want to spend all my cash for the down payment but want to enjoy the first home buyer's grant so now i'm in a dilemma. If the selling price on the contract is $535K i'll be able to pay less stamp duty. but the unit is worth at least $565k. If we put the selling price at $565K(the vendor would agree to do that) bank valuation shouldn't be a problem at all and thus i can probably fork out less cash. But again i have to pay more stump duty. Which approach would be in my best interest?

    Sounds like a bad idea to me and probably illegal. Anyway, how would you carry it out. It's not like the bank gives you a fist full of dollars and  lets you go to the vendor to pay for the house personally, giving you a chance to keep the change.

    A settlement usually involves 2 conveyancers/solicitors and the bank representative who do the exchanging. I don't think all these people are going to lie for you. 

    To my way of thinking this would not be in your best interest anyway. 

    Since this is going to be your PPOR the interest on the loan is not tax deductible, so you want the loan as small as possible. 
    After settlement you can always have the house revalued and organise a LOC for the extra equity. If you use the money in the LOC for investing then it becomes tax deductible debt. If you want to use some of the money for private expenses make sure you organise a LOC with a split so as to keep these separate from your investing expenses.

    It seems that even using your $60K and the real price you will be up for LMI which to my way of thinking is a waste of money.  I am no expert in this area but understand from reading posts on this forum that it is possible to get some of this back if your LVR drops to 80% ? within a certain period of time.

    I don't know if this is possible with all lenders but I would be looking at a lender who does offer this and is also willing to do another valuation within say 3 months.

    Just my opinion
    Elka

    Profile photo of aoao
    Participant
    @ao
    Join Date: 2006
    Post Count: 49

    Hi Elka
    Thanks for your input.
    I'm not trying to do anything illegal here. The bottom line is that i can buy it under the market value and it's just a matter of playing numbers.

    Could anyone help me with the other 2 questions? I'll repeat them as follows:
    1) do banks tend to value full-brick units higher than brick-and-veneer units if all other factors are the same?
    2) Is it even possible to get an even higher valuation? cos the other big project 5 minutes away is selling comparable 3-bedders for minimum $635K and it seems they don't have an issue with valuation either. Is it possible that i can get my unit valued at close to $635K? When valuers do their valuation, do they only look at comparables in the same project, or do they take into account nearby similar comparables as well?

    Many thanks!!!
    AO

    Profile photo of NucopiaNucopia
    Member
    @nucopia
    Join Date: 2007
    Post Count: 102

    Hi  ao
    I was wondering  how reliable is your assumption on an ever  increasing value of the unit you intend to buy , when you consider 600 similar units will soon be on the market added to the existing 200 wow 800 units ??
    I would be worried about over suply  and being caught with an  over priced property….
    that's just MHO  
    BUT @ 535k it would want to a #$%^ palace as well !

    Profile photo of L.A AussieL.A Aussie
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    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488

    $500k+ for a 3 bed UNIT?
    In a 200 unit complex?
    AND for you first PPoR?
    And there is ANOTHER complex across the road?

    you are a lot more brave than me.

    Profile photo of Charlie MFSCharlie MFS
    Participant
    @charlie-mfs
    Join Date: 2007
    Post Count: 32

    Hi ao,

    1) The valuer will value a property based on looking at your property and noting whether it is 'inferior' or 'superior' to comparative sales evidence and the market in that area.  Obviously the valuer will be looking at what other units have sold for and that could be in the same complex or others in the immediate area.

    2) Yes it is possible to get a higher valuation on your unit – BUT – the lender will only lend a percentage of the purchase price.  As a new purchase a lender will not lend you extra money whether it values higher or values at the purchase price.

    Hope this helps

    Sharlene
    [email protected]

    Profile photo of aoao
    Participant
    @ao
    Join Date: 2006
    Post Count: 49

    Hi Marc
    Thanks for your reply.
    yes over $500K for a unit. It's in sydney's Innerwest and 1 minute to water.
    As i've mentioned before there's another complex across the road that has been selling for years and comparable units are in the mid 600K. I've got mine in the low $500K. Does that sound crazy?
    Please shed some lights as i'm a bit confused….

    Thanks
    AO

    L.A Aussie wrote:
    $500k+ for a 3 bed UNIT?
    In a 200 unit complex?
    AND for you first PPoR?
    And there is ANOTHER complex across the road?

    you are a lot more brave than me.

    Profile photo of L.A AussieL.A Aussie
    Member
    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488

    Yes, I reckon it's crazy; I know that people will pay huge amounts for units; but it doesn't mean they should. Just because 799 people bought those units doesn't make them smart; there are lots of people in the world with high incomes and no financial brains. It only makes them cashed-up, but now hocked-up.

    I hope the Sydney market recovers soon, and I hope the owners of those units have low LVR's but my guess is that they don't.

    The fact that you got yours a bit cheaper still doesn't mean it's a good deal. That's like saying I got a BMW for $80k when they normally sell for $90k. You still dropped $80k out of your wallet.

    Your unit may be cheaper than the other 199 in the complex, but that is a very expensive price tag for something with little ability to add value to, no land content (I realise not everyone wants land), and there are 600 more across the road. Are there any more projects in the pipeline that are similar and nearby? I'm tipping there are. This can impact on the supply/demand factor (see Melb inner-city apartments 3-4 years ago). 

    I guess if you are buying as a PPoR and are thinking long term living then it's not that much of a problem, but as an investment for cap growth…

    The fact that you are buying one of these units for a discount will be counter-productive for the values of all the others. If another one comes on the market next week the same as yours, the chances of it selling for what you paid are very good. And you can bet that the Bank will send in their valuer and he/she will say "well, there was one sold for only $535k last week, so that's what they're worth". I'm tipping there are a lot of very angry owners in that complex right now. You have effectively de-valued every unit in the complex. The good deal you thought you just got will have disappeared overnight. That's the danger of large unit complexes and I would never buy one as an investment.

    This affects future sales, given that many of these types of units are bought by investors who want rental yields and/or cap growth. In one transcaction your purchase has undermined the cap growth, and may retard future growth of the complex for a few years or maybe even more; especially if it is mostly investor owned.

    Do you know how many of the units are rentals? How many of the other 600unit complex are rentals? If the majority of them are owner-occupied you may be o.k, but if the majority are I.P's then this could be a problem.

    Anyway, good luck with it.

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