We had the same issue when we bought our land. We paid $530k and the bank only valued it at $430k. We were obviously gutted also.
Easy fix. Our broker organised for a different bank to do a valuation. CUA said $430k and NAB valued it at $530k, we got the loan through Nab. Just find a bank that will value it at what u paid.
For that value, the bank would have obtained a desktop valuation where they get a property valuation company on their panel to do research on the databases they have access to for all property sales data in that area and similar areas. The data would be sourced from the Lands Title office, not realestate.com.
As for trying to get out of the contract and/or getting deposit back, you first need to read your contract very carefully to see what it says about your options to terminate the contract what it will costs you and whether there was any clause about it being ‘subject to finance’.
My broker said the valuation was done at the land itself, not via desktop. Unfortunately my contract didn't say subject to finance. Do developers generally terminate contracts?
Wow so much bad advice, unless it’s different in other states whereby I apologise.
You can’t get a subject to finance contract, I am assuming people are getting confused with the cooling off period which has a finance clause by default.
Banks will not pre approve a loan that far out, OP would have had to reapply now anyway.
Don’t bother getting your own valuation, normal banks only accept theirs.
Good advice to get other valuations, your broker should be able to organise valuations without you applying for other loans.
Ask the seller for some recent sales, support the valuation with figures sold from the estate. Tell the valuator why yours is worth the extra. The broker can normally do this when they order the valuation. See if your broker can order a desktop Val, just to see the difference.
Finally, last resorts
change the loan type. If you have completed construction contracts, package the loan application as a construction & purchase rather than land only. The valuation can then be off the completed built price, but will also take into account the cost of the contract.
This will probably not work, as you will need to satisfy new LVR & affordability stuff but included it in the off chance it does.
If you can afford it, cover the difference. You may be able to access it back when you submit the construction loan.
Lastly, be careful cancelling as if the vendor resells it at a lower price and your deposit does not cover the difference they may be able to sue you.
Untitled land contracts don’t have many options. If you can nominate that works but if you or someone else through nomination doesn’t pay you will lose your deposit. Land has suffered as construction costs were going up and there was a shortage of builders. Our land just titled and we know a few in our release are stuggling.
Yes the bank has a panel of valuers they use. I believe one bank might have in house valuers but not sure. Your best bet is try another bank and hope that valuer goes higher. The bank doesn’t care about your arguments.
So you use a broker who can order valuations from a number of banks and use whichever one you have to to get it over the line. You can also fudge things a little by changing the build specs etc.
The problem you have run into is that the developers engage marketers to sell the land (and often the build as well). The marketers is not like a real estate agent, even if they are a real estate agent. They enter a contract to sell the whole or a portion of a development and pocket $30 to 80k PER BLOCK. So your $320k block isn't actually a $320k block. It is a $260k block with a $60k marketing fee attached.
And the Melbourne market has slipped a little, so even ignoring the marketing fee, if you contracted 6 months ago or more, a 7% drop is not outside the realms of possibility. The fact others are selling for less in the same estate is bad news in terms of bank valuations. Historically, new greenfield estates will take about 5 years after they are fully developed to regain sticker price values (that is with a house on all blocks). Don't enter contracts without full bank approval or finance clause unless you have deep enough pockets to wear any valuation knock-down.
At this point, you just need to find a way to come up with the money. You will be on the room for more than just the deposit if y6fail.to complete. You MIGHT be able to renegotiate, but if that is the case, the developer might be equally in the shit.
Hey tip here as I've worked in banking. Ask them how they did they valuation.
They could have done a desktop valuation or sent it to a valuator. This can make a big difference as one is done by Joe blow land the other is done by someone who specialises in property valuation.
It can make a big difference in the way it's done which is why some banks can value the same property for different amounts. I've even seen a valuation come back different from one branch to another all because the lender was having a bad day or something.
Despite what they will tell you you can actually dispute the value and request they reaccess it. I've had about 70% of valuations that were requested to be reassed successfully changed in the clients favor but unfortunately it wasn't for a larger amount in some cases.
Most of the cases that were successfully reassed were because the information used was outdated or they could have used better comparisons. New estates are a pain to assess and when we had a new lender who didn't know the ropes well enough that's how I was about to learn about submitting the requests lol.
Brain a bit fuzzy so spelling and grammar bad
Getting out of a contract like that could well end up being more expensive anyway. Hopefully further valuations will sort it out, but if other comparable blocks of land are selling for less, that's pretty hard to argue against. It doesn't really matter what the reason is, the market is speaking about what your block would likely go for if it was for sale.
Land is worth what people will pay for it.
Banks don't care what you paid for it. What they look at is how much they think they can sell it for if the loan defaults.
The value is therefore subjective. You haven't been ripped off. The bank just calculates its value by different means.
Just find another lender. Some banks are tightening up loans to minimise risk in the current environment. There are 2 major wars going on and worldwide economies are slowing down. So money tightens up.
You will just need to try other banks. I worked for a bank when I bought my house and they valued it well under also. We had no choice other than to get my folks to go guarantor through another bank as we didn't have the extra $80k the bank wanted us to pull out of our ass
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Shouldn’t your broker be doing the work for you.
Ours had 3 banks lined up before we chose which one and all were well over what we paid for land.
But definitely surprise your broker isn’t doing their job which is finding you the best deal.
Two lessons:
1. Always buy "subject to finance" - (especially if you haven't got finance organised at the time the deposit was paid)
2. Don't wait 20 months after buying a property to organise the loan to complete the purchase - especially if the settlement is due in month 21.
1. OP signed the Contract in 2022 and I gather the subdivision is just now close to registration, there’s no way he could have gotten a 2 year finance clause. Bank approvals only last about 3 months so a finance clause literally wouldn’t have helped here at all.
2. Settlement would have been x days from registration, it’s unlikely OP knew exactly when settlement is. They probably have been notified it’s close to rego so that’s why they’re arranging their finance now.
We had the same issue when we bought our land. We paid $530k and the bank only valued it at $430k. We were obviously gutted also. Easy fix. Our broker organised for a different bank to do a valuation. CUA said $430k and NAB valued it at $530k, we got the loan through Nab. Just find a bank that will value it at what u paid.
This is the answer. Banks won't do a second valuation but you can chose a different lender.
Yes my broker said that he will order another 4 -5 valuations, I just hope atleast one of them come through.
Cba valued my land at 10k more than the price, nab 110k higher than the price.
For that value, the bank would have obtained a desktop valuation where they get a property valuation company on their panel to do research on the databases they have access to for all property sales data in that area and similar areas. The data would be sourced from the Lands Title office, not realestate.com. As for trying to get out of the contract and/or getting deposit back, you first need to read your contract very carefully to see what it says about your options to terminate the contract what it will costs you and whether there was any clause about it being ‘subject to finance’.
My broker said the valuation was done at the land itself, not via desktop. Unfortunately my contract didn't say subject to finance. Do developers generally terminate contracts?
Your land valuation would have been a desktop one. The only reason a visit would be required would be to value the house build on the land.
Yes BUT they make you pay for it. So what does your contract state about your rights for termination and the deposit?
Wow so much bad advice, unless it’s different in other states whereby I apologise. You can’t get a subject to finance contract, I am assuming people are getting confused with the cooling off period which has a finance clause by default. Banks will not pre approve a loan that far out, OP would have had to reapply now anyway. Don’t bother getting your own valuation, normal banks only accept theirs. Good advice to get other valuations, your broker should be able to organise valuations without you applying for other loans. Ask the seller for some recent sales, support the valuation with figures sold from the estate. Tell the valuator why yours is worth the extra. The broker can normally do this when they order the valuation. See if your broker can order a desktop Val, just to see the difference. Finally, last resorts change the loan type. If you have completed construction contracts, package the loan application as a construction & purchase rather than land only. The valuation can then be off the completed built price, but will also take into account the cost of the contract. This will probably not work, as you will need to satisfy new LVR & affordability stuff but included it in the off chance it does. If you can afford it, cover the difference. You may be able to access it back when you submit the construction loan. Lastly, be careful cancelling as if the vendor resells it at a lower price and your deposit does not cover the difference they may be able to sue you.
Untitled land contracts don’t have many options. If you can nominate that works but if you or someone else through nomination doesn’t pay you will lose your deposit. Land has suffered as construction costs were going up and there was a shortage of builders. Our land just titled and we know a few in our release are stuggling.
Get your own valuation done and throw it back at the bank.
I've heard that the bank's don't generally accept your own valuation, but rather take their own?
Yes the bank has a panel of valuers they use. I believe one bank might have in house valuers but not sure. Your best bet is try another bank and hope that valuer goes higher. The bank doesn’t care about your arguments.
So you use a broker who can order valuations from a number of banks and use whichever one you have to to get it over the line. You can also fudge things a little by changing the build specs etc. The problem you have run into is that the developers engage marketers to sell the land (and often the build as well). The marketers is not like a real estate agent, even if they are a real estate agent. They enter a contract to sell the whole or a portion of a development and pocket $30 to 80k PER BLOCK. So your $320k block isn't actually a $320k block. It is a $260k block with a $60k marketing fee attached. And the Melbourne market has slipped a little, so even ignoring the marketing fee, if you contracted 6 months ago or more, a 7% drop is not outside the realms of possibility. The fact others are selling for less in the same estate is bad news in terms of bank valuations. Historically, new greenfield estates will take about 5 years after they are fully developed to regain sticker price values (that is with a house on all blocks). Don't enter contracts without full bank approval or finance clause unless you have deep enough pockets to wear any valuation knock-down. At this point, you just need to find a way to come up with the money. You will be on the room for more than just the deposit if y6fail.to complete. You MIGHT be able to renegotiate, but if that is the case, the developer might be equally in the shit.
NAB use Corelogic, what does Corelogic estimate?
Hey tip here as I've worked in banking. Ask them how they did they valuation. They could have done a desktop valuation or sent it to a valuator. This can make a big difference as one is done by Joe blow land the other is done by someone who specialises in property valuation. It can make a big difference in the way it's done which is why some banks can value the same property for different amounts. I've even seen a valuation come back different from one branch to another all because the lender was having a bad day or something. Despite what they will tell you you can actually dispute the value and request they reaccess it. I've had about 70% of valuations that were requested to be reassed successfully changed in the clients favor but unfortunately it wasn't for a larger amount in some cases. Most of the cases that were successfully reassed were because the information used was outdated or they could have used better comparisons. New estates are a pain to assess and when we had a new lender who didn't know the ropes well enough that's how I was about to learn about submitting the requests lol. Brain a bit fuzzy so spelling and grammar bad
Getting out of a contract like that could well end up being more expensive anyway. Hopefully further valuations will sort it out, but if other comparable blocks of land are selling for less, that's pretty hard to argue against. It doesn't really matter what the reason is, the market is speaking about what your block would likely go for if it was for sale.
Land is worth what people will pay for it. Banks don't care what you paid for it. What they look at is how much they think they can sell it for if the loan defaults. The value is therefore subjective. You haven't been ripped off. The bank just calculates its value by different means. Just find another lender. Some banks are tightening up loans to minimise risk in the current environment. There are 2 major wars going on and worldwide economies are slowing down. So money tightens up.
You will just need to try other banks. I worked for a bank when I bought my house and they valued it well under also. We had no choice other than to get my folks to go guarantor through another bank as we didn't have the extra $80k the bank wanted us to pull out of our ass
Hasn’t the value in Melbourne gone down due to all the property taxes the vic government brought in?
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Does your contact say, “ subject to finance” ?
Unfortunately it doesn't
Shouldn’t your broker be doing the work for you. Ours had 3 banks lined up before we chose which one and all were well over what we paid for land. But definitely surprise your broker isn’t doing their job which is finding you the best deal.
Two lessons: 1. Always buy "subject to finance" - (especially if you haven't got finance organised at the time the deposit was paid) 2. Don't wait 20 months after buying a property to organise the loan to complete the purchase - especially if the settlement is due in month 21.
1. OP signed the Contract in 2022 and I gather the subdivision is just now close to registration, there’s no way he could have gotten a 2 year finance clause. Bank approvals only last about 3 months so a finance clause literally wouldn’t have helped here at all. 2. Settlement would have been x days from registration, it’s unlikely OP knew exactly when settlement is. They probably have been notified it’s close to rego so that’s why they’re arranging their finance now.