Forum Replies Created
I'm not sure what you mean Scott. Are you referring to similar cases ?
Victoria rob.
I had a bit more of a search on this topic.
If I want to apply the margin scheme i dont do anything during the purchase of the property, other than retain a copy of the contract to prove the purchase price.
The margin scheme is brought about by being included in the contract of sale when I sell.
So i just purchase the property "normally", with no reference to the margin scheme.
Sound correct?
AALLII wrote:Would you know the very rough range for both garage and balcony? I understand they would vary however just a basic modern garage as you would see in many places around the country.Thanks
It is important to have reliable figures when working out feasability of a project. But it is equally important to have a decent buffer for when things dont go as planned. Working out the possible costs in too much detail is often dangerous as you become convinced you have done a very accurate job of your estimate, which is still just that, an estimate. This can result in you thinking the project can suceed on a lesser than average margin.
Christians advice appears to be very realistic.
Work out your costs on sqm basis on a high / low range and then factor in the other unknowns. You can then make a call on how much risk you want to take.
You will rarely get an exact figure on any costs or returns, thats why development is risky and thats why you can get high returns.
But you are on the right track by getting as much info as you can, Good luck.
Thanks V8ghia,
Brief summary below:
The mortgagee is commonwealth bank.
The debt is 760k + agent fees on sale.
The previous owner believes it was worth 900k a few years ago (I dont know if this was the banks valuation or his own guess, knowing the area it was possible this was true back then)
Based on those figures 760k/900k = 84%, This would make me think LMI may have been necessary.
Previous owner is bankrupt.An independant agent who is very familiar with the area has advised me the property is very unlikely to go past low to mid $700k at best, in the current market, which is less than the mortgage but is a fair market price at the moment.
If the LMI is going to cover the banks loss, is the banks main concern to show they have tried to get a fair market price to prevent any repurcussions from the previous owner?
Once they have established that they have made attempts to get a fair price , they will then get their money anyway from the LMI. This would lead me to think that if the auction is passed in and it becomes clear negotiations have stalled on a figure, will they just sell and then go to the LMI for their balance?
Am I missing something.
Christian,
Those margin rates seem realistic to me from my experience.
I have often wondered though what do you say constitutes the "margin" in the building industry.
I have some associates who regard supervicion as a seperate expense that has is combined with all other costs and then has a margin added to the total. Then we have some clients who say that they cant see why we charge supervision and a margin.
OR
All costs are calculated without any supervision then a margin is added (obviously a larger one) to the total.
Basically is the margin what you would say is your total profit after EVERY expense.
There are many ways to work it out but just wondering if you have any ideas on what constitutes the rates you have.
If you dont have a builders licence you will have to go owner builder.
You cant do multi unit work as an owner builder anymore.Thanks everyone.
I hadn't even thought of the whole LMI side of the equation.
So in summary:
Attempts to get a fair market value has been satisfied as the bank went to auction.
The bank has final say on the price and the LMI makes up the difference.So would it be fair to say the LMI aspect would make the bank more likely to negotiate below reserve? As its the Insurer that has to make up the differance.
I received this today from a friend in the real estate industry.
=========================================================Yes, the bank will generally have sworn valuations done to ascertain a fair reserve price normally conservative and will just write off the loss. if the bids on the day do not hit the reserve which is normally reasonable there will be a representative there on the day to make an executive decision if it is close.
If it is not close, the will re-order new valuations and adjust asking price.
=========================================================My bank is doing its own valuation on the property. Would it be a good idea to take this valuation to the auction to use when negotiating? Would it be taken as being independant?
christianb wrote:Yes, the budget of $1,500 needs to include all elements.The reason it seems expensive is that people tend to compare "project" houses with "custom" houses.
If what you are proposing has not been built before – and this is generally the case with property development, whereby the dwellings must be designed to suit the land available – then it will be more expensive than something that has been done before.
If a builder builds the same dwelling 30 times, they know every bit that goes into that building. They know (exactly) the materials and labour costs and they have their supply rates at the lowest point. Hit the button and all the suppliers and contractors know what they need to do. Everyone involved accepts a lower margin in return for certainty and continuity.
Project homes can be built for $1,000/m2 or less on a tight margin, because the builder is more or less certain of that margin.
One-off buildings, on the other hand, are not so certain. The supply rates for labour and materials will be greater, and the builder will have a fatter margin to cover contingencies.Are there ways you can save money?
1. Design carefully and consult with your builder before final documents are issued. They are generally happy to make some cost saving suggestions.
2. Don't waste m2. Every m2 built will incur a cost.
3. As the owner, supply all fittings and fixtures. The owner will have a greater motivation than the builder to scrap and bargain for savings on these items.
4. Some builders will happily build to "lock-up" stage only. On paper this sounds great, but there is still a lot to be done, and expertise required to get it done.
5. Do your research and specify according to the market in which you are developing. Timber floors and stone bench tops are lovely, but your prospective tenant may not be willing to pay for them.
This is excellent advice!
I met with a client last night who wants a custom built home but is stuck on the $10,000 per square ($1100sqm) figure . I politely told him that we would both be wasting our time if that is your budget. He took this on board and discussion continued.
Be very carefull thinking you can save money by doing things yourself, sure it can be done. But dont forget though your time is worth something also.
Catalyst wrote:Correct ygue. But at some stage the bank has to sell it. If you are interested, let your bid be known. Revisit them and see how it's going, letting them know your offer still stands. Doesn't sound like you'll get a bargain though if value is close to the reserve. You never know though.
They may get desperate. And they will chase the previous owner for the difference (unlike in America).I agree, at some point it must be sold, the longer it takes the more it costs them, and this property is bound to attract vandalism due to its location.
The previous owner in this case is bankrupt.
What I would like to know is what to expect if its passed in on my bid of say 730k, I am fairly certain the reserve is $780k. Will they most likely stick to their guns and put it to private sale if i dont go to $780k exactly. Or is there some sort of magic system they use to calculate their potential lose if they sit on it any longer? Therefore my max offer should be $780k less the magic figure.
Make sense?
Come on people !
Someone must have some experience in this situation……….
What happens if the money owed by the previous owner is more than current market value? LVR of over 100%
Eg:
Mortgage of $780,000
Property currently valued $730,000 to $750,000
Reserve most likely set at $800,000 ($780,000 + $20,000 agents fees)
Property passed in at $740,000.The bank could then put it up for private sale at $800,000 which is highly unlikely to sell.
At what point, and how, will a bank decide to take a hit on this transaction rather than wait indefinately for $800,000 at private sale?
Is some method used to work out how far they will negotiate???itsandrew wrote:jazz77 wrote:Yes, i know its buyer beware, not much good to me when i'm outbid by someone who doesnt do their homework though.
Perhaps you, or someone you know, can raise it with the auctioneer when the auction starts. Make sure it's clarified publicly before bids are taken.
Yes, that is pretty much my plan.
There are a few issues with the site that I would like made public prior to the auction. These include : Build over boundary, partial flooding overlay, aboriginal heritage issue.
scha9799 wrote:Just call local council to verify the exact lock sizeI know the exact size if the land.
I have done the research and measured it on site, the existing carport actualy sits 2m over the boundary.
It is in my best interest for others to know the block is not what it seems, or i risk having to bid against someone who thinks they are getting a large block with good access for the price of a mid size block.
REIV has said that if the image was created by information provided by the vendor, then the agent does not have to disclose the error, even if he now knows about it. Surely this is false advertising?
Yes, i know its buyer beware, not much good to me when i'm outbid by someone who doesnt do their homework though.
I may be able to help.
I am a registered, multi award winning builder, operating in Melbournes west.
Reading your last post I think you may have a chance to get things sorted out.
Let me know if you want to have a chat.
If you get immediate access and use of the property, arent you really just a tenant up until settlement? Or is it not that simple?
You would then need your own contents insurance and the current owner would have building insurance. The owner should have the building insured with or without you in it anyway.
You may need additional cover for the renovation work though.
You may be a bit stuck.
Even though work may be behind, the builder is not necessarily in breach of the contract, the builder must be given time to complete the work. If the work takes more than 1.5 times the original period in the contract then you can terminate the contract. Problem is by the time this happens you will be in serious trouble.Contact the Builders Practitioners Board in Melbourne to find out your options. Maybe if it is very obvious he cant finish the job in the contract period you may be able to get an independent judgement to let you cancel the contract early, would be diffficult though.
What area of Melbourne are you in?
Derek wrote:Hi Jazz,All advertising needs to be accurate. In saying this some people make genuine mistakes.
In your case the paperwork is accurate (it states 700 sqm) but the photo needs some work.
Rather than trying to catch the agent out ring and ask the question and then politely point out you found the photo misleading.
I find working with people rather than trying to catch them out is more beneficial. The mentality that seems to pervade society of catching people out and 'smacking' them is a little strange to me.
My intention is not to catch someone out and smack them, it is to use the agents lack of due diligence in their campaign to my advantage. I have done my due diligence and know where the boundaries are, i dont need to ask the question to the agent.
I feel that if others are mislead and dont check the details of the property, thats their problem and its not my place to protect the competing purchasers. Nor would I expect the agent to point things out to help me get a better deal, they work for the vendor.
I assume the bank would have a valuer set a reserve price. By market price I mean an offer that is as close to the reserve as possible. I wouldn't expect the bank to accept anything less prior to aucton.
I would prefer not to go to auction as it is a potential development site with some complicated issues, but if resolved would make it a very good development. One of which is a disused laneway next to the block. I have spent a bit of time with the local council and think i can make it work. I would like to get in before other buyers have the chance to work through the issues.
