Valuations are based on previous sales in the area of comparable property
During the last cycle I purchased property for a slightly higher price than Bank valuations, but this was at the beginning of the cycle, after many years of property stagnation, and it was property that value could easily be added to with minor reovation and future subdivision, so a slight premium was worth it, and has paid off many times over
Now, we are arguably in a falling market and property may well drop and stagnate again for a period.
If a property does not stack up on valuation, it would likely be because comparitive property in the area has recently sold for LESS indicating a falling market.
The price the vendor is asking may be the price they sold for in the peak of last year, but things have changed, as you are seeing.
Looking at the world financial situation , I would suggest that there is no rush to jump in as there may well be further drops in prices and interest rates, followed by stagnation for a bit.Sometimes its worth listening to what the banks and their valuations are trying to tell you.
Happy Hunting
CF+
AJTS – but in Australia, most property go for auction ? I don't that this is true, maybe in the centre of cities but not out of the city.
Yes, all your valuation checks or pest inspections or building inspections and your loan approval or deposit needs to be arranged before the auction. Which can be expensive for nothing, thus have never purchased at auction, good to visit auction and see what price it gets passed in or buyer interest.
Playa Chicken
In Australia, you need to put down some sort of deposit after you agree on a price. Theory says 10%, but usually 5% or even $100 if you can swing it, law says if you pull out without valid reason you loose 0.25% ( unsure at the moment if its off your deposit or full price – think its full price – but if you only have $100 down then that's all they can take – I think, please correct if wrong someone thanks.
I think I'm liking the New Zealand system better
Vicky
WJ Hooker wrote:In Australia, you need to put down some sort of deposit after you agree on a price. Theory says 10%, but usually 5% or even $100 if you can swing it, law says if you pull out without valid reason you loose 0.25% ( unsure at the moment if its off your deposit or full price – think its full price – but if you only have $100 down then that's all they can take – I think, please correct if wrong someone thanks.
Yep, even purchased once and exchanged contracts with 0 deposit and pulled out during the 5 day period after doing DD.
Agent made noise about the .25%, but it was only noise, other agents may be willing to push harder.
Plenty of info here
CF+
Hi, Yan
At the end of the day, you should still include property, in addition to equities (and hopefully a business) as part of your wealth-creation strategy. Like some of said here, better to lose that 0.25% and treat it as a lesson learnt. You will make back that lost money with the next purchase.
The lesson is to ensure you have viewed enough inspections and auctions to have a strong idea is that what is an acceptable price for a property. In the current economic conditions, it is better to go conservative, offer a lower price, and risk being rejected by the many vendors who still have high expectations about what their property is worth; then to overpay.
All the best.
Daniel LeeThanks everyone, all your suggestions are very helpful and encouraging. I am so glad that I found this forum and meet you guys here.
Ummm, re losing your deposit. If it's not too late, I'd perhaps consult with a lawyer. Not sure the terms of your contract, but typically our terms (and I believe standard REIQ terms) have a finance clause, where the contract is subject to the approval of finance to the satisfaction of the buyer. If you are not able to have finance approved, to your satisfaction, you have a valid out. Personally, I would not be satisfied with the finance arrangment where you have to pay $5K LMI. You have not been offered a finance arrangement to your satisfaction. You have a valid way out of the contract. Seek the advice of your solicitor. Or growl at the real estate agent and say that you'd be happy for them to find you another property to look at….. their business sense might see them try to keep you as a potential buyer, rather than risk their business relationship with you for such a small sum of money.
SYan,
If you signed the offer 'subject to finance' you should not lose your deposit.
Hi Guys,
the update on this issue:
I have another independent valuation done, and it is very generous, it is 520K which is 60K more than bank's valuation. what should I trust? confused again.
Thanks
Yanby who?
Independant valuer approved by realestate
or approved by banks??STICK WITH THE BANK !!!
Banks have been valuing and lending against property since land was invented !!!
THEY know what cycle we're entering long before the general market catches on…
REA and herd mentalities drive prices up… Banks follow conservatively, but then back off real quick when prodded by the possibility of high risk lending…
We all should know that BANKS ARE DESIGNED TO MAKE MONEY
Trust what they told you the first time… GET AWAY FROM THIS HOUSE… There are 1000's more all around you !!!
Have I missed something or are we discussing potentially walking away from a tiny deposit of $1,250? i.e. $500k @ 0.25% as opposed to potentially overpaying for a property by $40,000? Or has someone put the decimal point in the wrong place and you actually mean a 2.5% deposit?
The other thing to consider is that if you have gone unconditional could the vendor not pursue you legally if you fail to settle? If there is no fear of legal reprisal I would cancel the contract let them keep the $1,250 and then if you still want the property go back to the negotiating table with your valuation in hand and make a new offer …. otherwise move on to the next property.
Hi Yanhong, if you listen to the likes of Scamp, you'll never in this life ever own any property. Run a check of his posts and you'll see what I mean.
Having said that, you still are faced with a decision. Before your last post about the higher valuation, I was going to say that $40k variation is NOT big. It's less than 10% of the offer price. It's still worrying because it affects your loan amount.
What I'd have suggested was to use the valuation to barter the price down. Since you have a subject to finance clause, you can argue that the finance is available only for the valuation price. If the seller doesn't accept the valuation, then you won't have to lose your deposit.
You can try lodging a withdrawal based on the loan amount you're able to get. i.e. 80% of $460000 = $368000 therefore you can only proceed with the purchase at $460000
If you're VERY uncomfortable with going ahead, then just losing $1250 is not such a big deal.
Good luck,
KY
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