All Topics / Help Needed! / Low valuation

Viewing 20 posts - 1 through 20 (of 43 total)
  • Profile photo of MarySueMarySue
    Member
    @marysue
    Join Date: 2012
    Post Count: 18

    Hi All,

    I need some advice in relation to a low valuation I've just received. I've never had a property valued before but I'm looking to use equity to purchase another investment property.

    I purchased a property in August last year. The medium was $365K. I bought the house for $280K. It was valued at $325K. 

    With a lot of work done over the past few months, the property has been brought well above $320K.

    I've been watching the real estate market closely (it's my day job to do so) and property prices have increased by around $20K in the area.

    So my thinking was; a $320K property with value added such as solar panels, new kitchen, tiling, new paint inside and out, new carpets, new BIR, new floorboards, landscaped gardens – I'd have added atleast $30K bringing the property up to $350K.

    The banks "independent" valuer didn't think so and came in with a cool… $320K.

    During the 20 minute valuation, he didn't want to speak with me – let alone see the before pictures.

    I have the pictures of the house at a $320K valuation and also at purchase of $280K.

    The valuer has also compared my property to houses that were purchased in a low market.

    The "on par" property only has a carport, not a two car parking garage with roller doors at either end.

    It doesn't have an extra double garage like my place has.

    It has a flat tin roof. It doesn't have solar panels or high ceilings. It's 60sqm less living space. The quality of renovations is not even on par. For example, my whole property has been painted whereas the "on par" property has only had the front done.

    I know some of you will think "just another person who thinks too much of their hard work".

    And I've analysed that as well but the evidence is there. I haven't jimmied my figures to suit a high expectation.

    So my question is, do I dispute his valuation? Do many people have much success with this?

    Or do I deal with another bank?

    As I mentioned before, I haven't gone down this valuation path before. I understand if I were to try with another bank, my best option would be with a bank that will send out a valuer before making an application. As too many applications will look bad on my credit score.

    It's also been suggested to me to get my own valuer.

    However, will a bank still send their own valuer? And take the lowest valuation?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    The first valuation, was that before you signed the contract?

    Once you pay for something that largely determines the valuation. So getting it for so low would mean it is really only 'worth' that much.

    Did this valuer provide comparable sales?

    Banks can only use valuations if the valuer is on their list and the valuer has been instructed by the bank. Speak to a broker who may be able to use a bank that allows upfront vals such as ANZ or Homeside.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of wilko1wilko1
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    @wilko1
    Join Date: 2010
    Post Count: 510

    Are you selling or keeping the property ?

    If you can get hold of the valuation report or at least get your bank manager to let you have a look for a couple minutes to see what properties they used as like sales. I had one valuer use a 2 bed maisonette as a comparison for a 3 bed maisonette and it reduced the valuation by 20k which on a 200k house was 10 percent. I also don't know if theres any truth to this but i have found that i seem to get higher valuations when refinancing to 80 percent then when i refinance up to 95 % with capped LMI, Almost like valuers are including a extra buffer on themselves.

    Profile photo of wilko1wilko1
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    @wilko1
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    Post Count: 510
    Hannah998 wrote:

    The "on par" property only has a carport, not a two car parking garage with roller doors at either end.

    It doesn't have an extra double garage like my place has.

    It has a flat tin roof. It doesn't have solar panels or high ceilings. It's 60sqm less living space. The quality of renovations is not even on par. For example, my whole property has been painted whereas the "on par" property has only had the front done.

    I would say solar panels would not impact in the valuation at all.

    extra garage space with roller door- minimal

    high ceilings – depends on the house

    roof – hardly anything unless structurally unsound or damaged

    Your extra 60 sqm of living though in the main house should have influenced the valuation as valuers work on a combination formula of land size/$ per meter squared, living and undercover area size.

    You might even be better getting a desktop valuation.

    For example bought the absolute worse house for low 400,000s on street that was selling homes for 550,000 plus and a desktop valuation with another bank after i said i had renovated it. (Think i cleaned the gutters and some gardening) came in at 500,000.

    Profile photo of MarySueMarySue
    Member
    @marysue
    Join Date: 2012
    Post Count: 18

    Thanks for your replies.

    I'm keeping the property and using the equity to finance to buy another place.

    I have been given the 3 properties which the valuer compared my property – one below, one "on par" and one "inferior".

    The latter is at $355K and to me, they are more on par.

    I've also just found another property one street away which sold for $365K that's more on par too.

    The broker was going through Macquarie Bank as I'm wanting a 95% lend.

    What I'm wanting to achieve is $70K equity and get a $280K loan.  My broker has said I need to get 95% lend with that kind of deposit.

    This is a new broker as well. I'm really struggling to find a good broker that knows what I need.

    Profile photo of wilko1wilko1
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    @wilko1
    Join Date: 2010
    Post Count: 510

    Lots of banks do 95 % lends. Pretty much all the big 4. I personally wouldn't be using Macquarie bank and perhaps your broker is using them because their commissions are higher.

    Im just trying to understand when you say you want 70k in equity and a 280k loan.

    if you lend up to 95 % with LMI capped at 2%. And you get your house revalued to what you believe is around the 360k mark. then youll have a loan off approx 350k With 70K in equity that you would then use as cash for a deposit on a new property.

    You wouldnt be able to have a 280k loan with 70k equity. Your refinance only lets you borrow your equity.

    or are you saying You want your New loan for your new property to be around 280k. Time to wait for some posts from the brokers on here so you can get some better advice!

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hi Hannah

    There's a couple of ways to approach this.

    First, you can challenge the valuation by finding three comparable sales within the last 6 months that argue your case. 

    Secondly, if that fails, have your broker order an upfront valuation via another lender. Hopefully you land a different valuer which ends in a different result.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
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    Post Count: 5,069
    Hannah998 wrote:
    Thanks for your replies.

    I'm keeping the property and using the equity to finance to buy another place.

    I have been given the 3 properties which the valuer compared my property – one below, one "on par" and one "inferior".

    The latter is at $355K and to me, they are more on par.

    I've also just found another property one street away which sold for $365K that's more on par too.

    The broker was going through Macquarie Bank as I'm wanting a 95% lend.

    What I'm wanting to achieve is $70K equity and get a $280K loan.  My broker has said I need to get 95% lend with that kind of deposit.

    This is a new broker as well. I'm really struggling to find a good broker that knows what I need.

    Hi Hannah

    If your property is valued at $350k and you have a loan of $280k – you have $70k in actual equity, but the bank won't allow you to access this.

    The max some banks will go up to is 90% of the properties value (in rare cases it's 95%). 

    So in this instance, a $350k valuation means you may be able to access $35k – which is why your broker has mentioned a 95% lend for the next purchase.

    There are a heap of lenders that do 95% investment lends – you are not just restricted to Macquarie.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
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    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    Macquarie is the last lender you should be using for 95% application. They don't have their own DUA at all. 

    In hindsight you shouldn't have gone with Macquarie and you should have ordered upfront vals.

    Has the broker contested the valuation? 

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
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    Residential and Commercial Brokerage

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
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    Very hard to get a loan increase to 95%

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of MarySueMarySue
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    @marysue
    Join Date: 2012
    Post Count: 18

    I'm wanting another $280K loan to buy a second property.

    The broker said we can contest it but I'm trying to work out if that will be worthwhile or what my options are.

    When the broker did the numbers, I needed the current property #1 valued at $350K for a new $270K loan for property #2.

    I asked her if I'd be able to use my currently property as security on the next loan and property #2.

    My Mum currently has her property as security on property #1.

    She said yes but wasn't very clear about my options. She seemed more interested in releasing Mum's property – not sure if that has to be done?

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Personally, here's what I'd do.

    Step 1: Contest the valuation.

    Step 2: If step 1 fails, order a valuation via another lender (it needs to be an upfront valuation so you don't receive another hit to your credit file).

    Step 3: If you get a $350k valuation, take the loan up to 90% LVR and do the $35k equity release. Release mums property at the same time. It's rarely a good idea mixing the folks assets in with your investing plans.

    Step 4: Take out a 95% IP lend for the $280k property (using the $35k from step 3 as the deposit/costs). Look to use a lender with a Direct Underwriting Authority (DUA) with the mortgage insurance provider as 95% IP lends aren't the easiest to get across the line. If your borrowing capacity permits – CBA could be a good option here.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of MarySueMarySue
    Member
    @marysue
    Join Date: 2012
    Post Count: 18

    Thanks Jamie.

    Mum will only suggest I use her title again to buy more property – so there isn't a concern there.

    Ok, I think I will most likely contest it. 

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    No worries.

    A good start would be a residex report or similar. Something that provides some comparable sales within the area. Your broker might have access to these.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
    Join Date: 2012
    Post Count: 1,271

    The broker should be able to contest it straight away. He needs to formally lodge it via Valex but informally he can contact the valuer and speak to him over the phone. 

    Whatever you do – refrain from getting further hits on your credit file without being 100% sure that the application will be approved.

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
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    Profile photo of MarySueMarySue
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    @marysue
    Join Date: 2012
    Post Count: 18

    Can someone please explain desktop valuation? I've never heard of this before.

    When I spoke to the bank, the pulled an RP Data report which showed my property between $280 – $360K. And that was before the renovations.

    Profile photo of MarySueMarySue
    Member
    @marysue
    Join Date: 2012
    Post Count: 18

    I also want to note that the suburb my property is located has a medium house price of $370K.

    Profile photo of TheFinanceShopTheFinanceShop
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    @thefinanceshop
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    Its a system val meaning they enter the information about the property and it splits out a report. Most likely that the valuation the bank will require is a 'Full Valuation'. If you have done renovations then it will definitely need to be a full val.

    By now you should have contested the val whilst concurrently ordered a couple of upfront vals.

    Regards

    Shahin

    TheFinanceShop | Elite Property Finance
    http://www.elitepropertyfinance.com
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    Residential and Commercial Brokerage

    Profile photo of JpcashflowJpcashflow
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    @jpcashflow
    Join Date: 2007
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    Hi Hannah 998,

    Hope it all works out the way you want it to.

    You say at the start that you invested 30K of your own money for landscape "etc"? Maybe you can put a file together for tha valuer with all the receipts to show you have actually spend 30K.

    But just keep in mind (open mind) because you spend 30K on your house this does not mean your house will go up by 30K.

    Jpcashflow | JP Financial Group
    http://www.jpfinancialgroup.com.au
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    Your first port of call in finance :)

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    Hannah998 wrote:
    Can someone please explain desktop valuation? I've never heard of this before.

    When I spoke to the bank, the pulled an RP Data report which showed my property between $280 – $360K. And that was before the renovations.

    Desktop's are statistical estimates based on comparable sales within the area. It's a system generated report that doesn't take into account the improvements you've made to the property.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

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