muditha

Hi,

I paid 0.25% for a property on the weekend and today the bank valuation has come 35k lower than the agreed price. I don't have 35k to cover the short fall. So my mortgage broker is going to arrange another valuation from another bank to see if they value the property more.

Any advice/guidance from anyone who experienced this ???

cresta57

Do you mean a 0.25% deposit?

Beoz

Did you buy at an auction? If so then that's market rate. What the market is prepared to pay.

Have you checked out recent comparable sales in the area? Did you over pay?

I am hearing this happening quite a bit, especially with the Sydney property frenzy. People get desperate and pay too much. Not sure what you can really do about it except present comparable cases to the bank. I'm sure they have already done their checks though.

muditha

Yes. It's 0.25% deposit. The price i agreed is a reasonable price comparing past sales.

Beoz

I wonder if the new interest rate increases that aren't aligning with the RBA are extending to property valuations. There seems to be an increased sense of nervousness buy the banks or the OS banks providing them with the lending power.

Yep. Stick with what your mortgage broker advises.

spouse of scouse

Sorry to hear this, very stressful for you.

I agree that you should follow the advice of your mortgage broker. He/she will do everything they can to secure a mortgage for you.

Bank valuations for mortgages are notoriously conservative. They want to be able to recover all their money quickly in the event of foreclosure and they take possibilities such as downward movement of the property market into consideration. The loan to value ratio is important too, if you're borrowing 95% of the purchase price that's going to be a higher risk to the bank than if you were borrowing 70%.

Whether or not you purchased at auction is important. If you purchased in the 'normal' way (I think it's called private treaty) then you get a cooling off period. There is no such period with auction purchases, so if you withdrew you would lose your deposit plus probably be charged fees and ongoing selling costs.

Best of luck, I hope it gets sorted out for you.

GarryP

The banks are factoring in that they expect prices to fall, at some point, eventually. They don't want to get stuck with a negative equity situation, so they value in light of where they think the market might get to. They have been doing that for at least 6 months now, in addition to looking poorly on overseas investor sales. Many people have thought they could get a mortgage, only to find the banks and other finance sources wouldn't play ball.

In short, not a time to buy.

Beoz

He/she has the mortgage, just not at that price.

I wonder if this is an apartment or house and if an apartment, it is in one of those areas tipped to have an over supply.

I doubt the bank would see risk in a house in Sydney unless of course the agreed price was $200-$300 above comparable.

Swerv-o

It's been happening for a lot longer than 6 months - friends ended up in this situation well over 18 months ago an had to take a personal loan to cover the shortfall, else end up losing the balance of the deposit they paid at auction.


S

Beoz

House or apartment? Which area?

Swerv-o

House in Erskineville - Which is a premium location.


S

Beoz

Wow ...... and I bet its now worth a lot more than they over paid for it at the time.

Swerv-o

No doubt - Erskineville doesn't ever seem to slow down - hence my surprise the bank were arses about it...


S

Beoz

Did the pay well in excess of comparables at the time?

GarryP

Oh, very probably. I just know that it's been the norm for at least 6 months.

I wouldn't be putting my money down on the promise of a mortgage at the moment.