Hi Finance Guru’s,
I’m have run into a big issue regarding my development. I have just had an extremely low valuation come in and the lender has not instructed the valuer correctly. The deal is supposed to be assessed as completed or end value and 3 separate units on 3 separate titles. Instead it has been valued as 3 on 1. Obviously there is no comparable sales for 3 dwellings on 1 title. What puzzles me further is that the permit clearly states that throughout construction the subdivision will be carried out and titles will be lodged accordingly. So why aren’t they following these instructions approved by council? Val came in at $615
They also did a ‘if subdivided’ scenario which came in ridiculously off the mark also but I guess that’s a different story again. Val came in at $740
Existing loan: $306k
Construction: $370k
Reno: $15k
Interest through construction: $15k
Total funds required @ 90%: $785k minimumI have no idea how they come up with there figures. With a touch up, the existing house wont drop $80k off the purchase price of $320k. It would sell for $280k. There are comparable sales on RPData for new units that are single story, single bath 2 bed in the same suburb for just over $300k. Mine are double story, 2 bed, 2 bath and better design… How does that work? Obviously they’re on separate titles but people don’t usually subdivide etc prior to developing from what I’ve been told.
So my question is what do I do? This is my first development and I have 2 other sites ready to go with plans and permits depending on this deal getting up and going. PLEASE HELP!!!!
Sash
So many questions that need to be clarified.
Ok what does the DA say? How is it staged? Its either constructions first subdivision thereafter or vice versa. I dare say its construction first subdivision later as most DA's (in most Sydney councils) are structured this way. This is why the valuer has valued it as 3 dwellings on one title.
What is the building contract amount? Are there additional work outside the Building Contract?
One option is to order upfront vals with other lenders to see if they are prepared to give a higher valuation amount.
Regards
Shahin
TheFinanceShop | Elite Property Finance
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Hi Shahin
Yes thee DA is to do the subdivision afterwards. The building construction amount is for $370. There is also works to be done on top eg Reno etc. Is this always the case always when building dual ocs? Why won't they assess according to what the permit states and on completion and separate titles?
Could you please explain what I need to do? The lender is bankwest. Do I have any likelihood of getting the outcome I need?
Thanks for your help
Yep there you go – the valuer can only value the property as is. Why? Because if the proverbial hits the fan right after construction and before subdivision or you don't have the funds to do the subdivision of whatever reason then the bank needs to protect itself.
I would suggest getting an upfront valuation with another lender – I have done this (even personally) many times and you will find that the valuation will differ greatly because its quite a unique valuation. Are you running against the clock?
Regards
Shahin
TheFinanceShop | Elite Property Finance
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Hmmm that sucks. If they gave me the right amount then there would be no issue with funding! Yes I am running against the clock- I started a new job at the beginning of this year and it will be harder to get finance.
Are you dealing direct with Bankwest or via a broker? Also why on earth did you go through Bankwest?
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
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I've heard so many horror stories about Bankwest it's not funny. I'm pretty sure their is a whole website dedicated to Bankwest and how bad they are.
I'm dealing with my broker. They did 95% with an offset account and seemed like a good choice. If it were you what would you do? How can I get this deal to work?
Well you have no choice – they will not change the valuation. So what I suggest is that you tell your broker to order upfront vals with the lenders have provide that. Before he does that need to check that the scenario is an acceptable policy for that lender, i.e. don't bother ordering an upfront val with Macquarie.
Also if the val has come back lower – you need to get him to contest the val. It will not be easy but he needs to give it a crack.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
They have niches but you I would only use them as a last possible resort.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Sash wrote:Hi Finance Guru’s,I’m have run into a big issue regarding my development. I have just had an extremely low valuation come in and the lender has not instructed the valuer correctly. The deal is supposed to be assessed as completed or end value and 3 separate units on 3 separate titles. Instead it has been valued as 3 on 1. Obviously there is no comparable sales for 3 dwellings on 1 title. What puzzles me further is that the permit clearly states that throughout construction the subdivision will be carried out and titles will be lodged accordingly. So why aren’t they following these instructions approved by council? Val came in at $615
They also did a ‘if subdivided’ scenario which came in ridiculously off the mark also but I guess that’s a different story again. Val came in at $740
Existing loan: $306k
Construction: $370k
Reno: $15k
Interest through construction: $15k
Total funds required @ 90%: $785k minimumI have no idea how they come up with there figures. With a touch up, the existing house wont drop $80k off the purchase price of $320k. It would sell for $280k. There are comparable sales on RPData for new units that are single story, single bath 2 bed in the same suburb for just over $300k. Mine are double story, 2 bed, 2 bath and better design… How does that work? Obviously they’re on separate titles but people don’t usually subdivide etc prior to developing from what I’ve been told.
So my question is what do I do? This is my first development and I have 2 other sites ready to go with plans and permits depending on this deal getting up and going. PLEASE HELP!!!!
Sash
Sounds like you are out of your depth and too highly geared.
What do you mean they were supposed to value on end value and separate titles?
Will be very hard to get this over the line I think.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Bankwest is probably one of the poorest lender for such a development; due to inflexibility, no upfront val and also credit policy can be all over the place.
Also not sure what you mean by end value??? this is a RESIDENTIAL construction loan right?
Your only possible option based on what you have given and at such a high LVR, would be Homeside/NAB.
– allow upfront val
– allow for 3 construction under resi
Personally i always have good dealing with NAB for these sort of deals.
Mick C | Shape Home Loans
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Was the valuer HTW by chance? You want to make sure that the next bank uses a different valuer, or you will get the same result.
I have been in similar situations and did some research into which valuer gave the best valuations for that type of deal in that suburb. I then went with a lender that used that valuer on their panel.
The difference for me on the same sized development was $330k between valuers!! In my experience, HTW are the worst valuers, avoid them like the plague. Find out in advance if they will be the valuer.
Sorry guys I mean that they were suppose to be using the 'hyper something methodology' which I think means what it will be worth on completion on 3 titles? Sorry I don't know the exact terms.
I don't know the valuer because it went through Valex. In saying that I do have the valuers number that actually conducted the val. I guess I will try Homeside/NAB.
Is there anything else anyone can suggest?
I would agree with 99% of the things you say Matt but I am strong believer that its comes down to the specific valuer and not the company.
I have a some bad and surprisingly good interactions with the guys from HTW.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
No bank will value the property on 3 seperate titles if the DA is staged as construction and then subdivision which this is the case.
You will have to find another bank (and there is a few out there and they all offer vals) – order the upfront val and contest the hell out of it.
Has your broker contested the val with Bankwest?
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
The other thing I just remembered is that your total loan amount is under $1mil which is the sweet spot for several of the lenders as it falls under their DUA.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Could you please tell me the lenders that you think could help? Thanks heaps for your advice.
There are 4 lenders – I would start with CBA and NAB/Homeside. The problem with CBA is that although they offer upfront valuations – they don't provide upfront valuations for properties that have 3 or more units on one title whereas Homeside does.
So first get your broker to do the standard analysis – i.e. postcode, servicing (although if you service with Bankwest you will service with Homeside), etc and then order the upfront val.
Make sure that there is plenty of commentary and supporting documentation as possible sent to the valuer.
At 90% you don't want multiple hits on your credit file so do the upfront val and then go from there.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Thanks so much for your help. If my broker is incapable of sitting this out would you be interested in taking this situation?
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