All Topics / Help Needed! / Bank valuation too low. What do I do?

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  • Profile photo of MrmanMrman
    Member
    @mrman
    Join Date: 2004
    Post Count: 18

    I have been told by the bank that the property I want to purchase for $200,000 is only valued at $180,000. They will lend me 95% which is $171,000 which means I need to come up with the difference plus costs which is 29k plus costs. I have 30k at the moment but I wasn't expecting the valuation to be that low. Stamp duty will be about 10k.(SA)

    Settlement is in under 3 weeks.

    What are my options?

    George

    Profile photo of yarposyarpos
    Member
    @yarpos
    Join Date: 2004
    Post Count: 247

    Hi

    Have you tested this with other banks/lenders?  

     I recently changed banks and (as we got into the bidding war) my old bank said the valuation of a property I held was $200k  (based they said on sale of adjacent property…..that was a family sale brother to brother)…..a brief troll thru the Internet sites showed similar spec places all in $250-270k range.  New bank valued it at $250 k and was in line with other bank on other properties.    If you like your bank you may have to negotiate it up,  ask for a rethink, present similar sales if you have them.  They are conservative by nature and all the valuers they use are not professional/competent.

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

    George

    Get your broker to go into bat for you.

    If the property is sold through a reputable real estate agent then you should not have any problems in revising the valuation.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    0-40 Properties in a decade with an unencumbered value of over $35M. Email for a copy of my API article

    Profile photo of joelcjoelc
    Member
    @joelc
    Join Date: 2005
    Post Count: 14

    Did you happen to look at the property evaluation that was compiled for the bank?

    Try and find comparative sales in the area that best match your property, if you think that it's worth more then what you’re being offered then ask. 

    I too had what I thought was a low evaluation from a bank but then saw that there wasn't any recent comparative sales so I guess the evaluation was conservative for that reason.

    So over a period of 4 months after the conservative bank eval, 2 new units and one new house similar to mine sold in the same street as myself, I then paid for a independent evaluation done in 'lending format' (a.k.a a 'Residential Evaluation and Security Assessment for mortgage purposes') took it back to my lender, it was accepted and wasn't a drama. (the difference between the 2 evals was 50k)

    This slightly varies from your situation as you don't actualy own the property but if you think it's worth a bit more and the bank doesn't want to show you the report, in specific the 3 recent comparative sales within the report then I’d go shopping!

    I'm just sharing my experience, hope this helps!

    Profile photo of YossarianYossarian
    Member
    @yossarian
    Join Date: 2006
    Post Count: 136

    Alternatively, ask yourself the question, "If the bank's valuers are, on the balance of probabilities, correct, do I still like the deal". If so, forum shop until you can get the deal set. If not, find a better deal.

    Profile photo of MrmanMrman
    Member
    @mrman
    Join Date: 2004
    Post Count: 18

    The reason it was valued too low was because it is in an ex housing trust area and most of the buildings were sold off cheap and demolished and are now being sold as empty blocks with H&L packages. So using past sales as a comparison, 180k is pretty fair even though most of the buildongs were maisonettes and this is a solid brick house on a large corner block.

    Profile photo of m.pulleym.pulley
    Member
    @m.pulley
    Join Date: 2006
    Post Count: 45

    Why don't you tell the sellers the bank has valued the place at 180,000 and see if they will drop the price as the bank will not finance it for 200,000. Otherwise you are backwards from the start.

    Profile photo of PtialvPtialv
    Member
    @ptialv
    Join Date: 2005
    Post Count: 57

     Hi Everyone,

    As in this case if the bank has valued the house less than the offer made…and you don't have enough finance to get the deail through. Do you still have to buy the property anyway or you can say i cant get the finance so i am backing out.. how does this work. Pleae advise

    cheers,
    Bharat.

    Profile photo of LinarLinar
    Member
    @linar
    Join Date: 2004
    Post Count: 567

    If the bank valuation is low and you still want the deal, why not approach the vendor and see if he/she will give you an extension on settlement to enable you to source finance through another bank.

    A low bank valuation would be enough for me to grant an extension if I were the vendor.

    Cheers

    K

    Profile photo of tammytammy
    Member
    @tammy
    Join Date: 2005
    Post Count: 155

    Did you have a finance clause?
    Tammy

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