I appreciate everyones opinions and feedback. The main questions i had were to do with:

• If the banks struggle to find comparable sales, but there is plenty of similar type new developments in construction selling around what i paid, would it be fair to say that they had a hard time getting a figure therefore they went very conservative &
• Is it worth negotiating with a developer after a poor valuation.

General consensus is that yes i should negotiate with the developer (seeing as i have leverage being in a position to rescind the contract with no financial consequence to me).

The other question hasn't really been addressed, check out the area Hughesdale VIC. There's nothing of the sort.

FYI, the project is http://www.lantanaapartments.com.au just to give you an idea as to where it's situated etc.

I would argue that in times when banks are being very conservative, on a 480k property, you would pay 10k over the valuation price. Especially if they admitted they had big issues finding comparable sales (seeing as though they are such statistically based this really makes it hard for them so they go very conservative).

The 3 figures they compared my 485 purchase to were 433 (far inferior old place), 495 (better location apparently), 505 (superior location/build).

In the middle of it is 460k which is the figure they got

Hi Qlds, 

            Hughesdale is 15km from CBD, surrounded by good suburbs in Carnegie, East Bentleigh, Murrumbeena, Oakleigh so position is good for future growth and rental appeal.

The valuation from the bank IMO is below market value, as they even admitted they don't have enough previous sales history in the area to compare. It's the first of it's kind in the suburb, but i can guarantee that in the next 5 years there will be at least 10 of these types of developments in the area as it's all been rezoned etc for higher density living.

I'm definately using the valuation to my advantage, i've submitted a letter with the valuation to the developer and demanded a reduction in the contract amount otherwise i will rescind.

In all honesty though, i need to move out of home (i'm 27 and at the point of cracking), plus i'm going to move out of Hughesdale within a year (due to claiming first home buyers), then rent it out and hold long term.

IMO the property is worth at least 470 – 475k, therefore i just need to wait that year and hopefully the growth is there. Melbourne had 1000 auctions last weekend at a clearance rate of 70%…….We struggled to crack 60% the previous year now we haven't dropped below it, and i believe the market is on the up in inner and inner south east suburbs.

I've got the money to cover the difference, plus i've got another 50k to work with for future investments (not to mentioned my south yarra apartment which i bought in Sep12 and already have gained some equity in CG).

Hi Derek,

               At a minimum, i believe the property to be worth around 470 – 475k as there are comparable sales (just not completed yet as they are still in construction).

On top of this i factor in that I'm getting 9k first home buyers grant which i wouldn't have if i walk away, so that justify my 485k purchase price IMO.

Agree with you that a 16k difference after taking into account the 9k of FHOG is minimal in the scheme of things, and I am willing to hold onto this property for a while (it should get at a minimum 4% rental yield ($370 per week) based on being close to public transport, chadstone etc).

I've spoken to the solicitor and both parties can rescind at this point in time, whilst it would be rare for the developer to do it when the market is lower than my contract price, there is every chance he could crack the shits with me asking for the 12500 reduction, and put it back on the market, even if financially it doesn't make sense.

I've since had my solicitor send a letter to theirs, stating that the 25k shortfall is going to make it hard to complete settlement, and i can raise half of this, of which the other half we have asked for in reduction from overall cost. The developer will either say yes, no (rescind if you want), or no (i'm rescinding and putting it back on the market – UNLIKELY).

I come on these forums just to get some unbiased opinions and they definately differ from each person but the general consensus is that if i went and got it valued by an independant valuer, after the completion of the other oakleigh units in 12 months time, the property would be valued at least 475k which is fine with me.

It was more the negotiation side with the developer that i was unsure of, but i figured i'm in a good enough position to ask the question. Especially considering i was lied to throughout the whole process with start dates etc, the purchase was meant to start within 6 months of when i bought, but we are just nearing completion 3 years later!!! Mind you it gave me time to save and purchase in South Yarra so it's not all bad.

The problem is there isn't any comparable sales in the area.

The development in Hughesdale is the first multilevel apartment of it's kind, with any before it being done 20 years ago out of brick and quite old/run down basic build.

The only ones i can find in the vicinity that are comparable are in Oakleigh and are off the plan (only slab and framing has gone up), therefore i can't use these due to the fact that it hasn't been completed/settled. Although these have sold for 485k, the same as what i paid.

I have the 25k, so from my point of view the only real option i have is to try and get a discount from the developer to bridge the gap, so that i'm only putting in 12.5k of my own money to settle.

I wasn't sure if negotiating a contract after a low valuation is something that occurs often.

Thanks Jamie, seems as though you're the resident go-to on the site! (which is much apprecaited).

The problem is, i can't find 3 comparable sales in the last 6 months as there isn't any, and the ones that have been sold are off the plan so not yet completed or settled. (Identical development around the corner being sold as the slab is being laid, they are going for $485k + but i was of the understanding that off the plan and not yet settled developments can't be used for comparable sales).

Due to being in my work for only 3 months (got a promotion of sorts to a new company), the only lender that would lend 10% interest only of the big banks with a reasonable rate was CBA.

I've sent a letter to the developers solicitor (via mine) to say that i'm 25k short of the contract price in valuation, i can raise half of this however they will need to meet me halfway in order to allow me to settle successfully in 5 weeks time.

I guess the costs of reselling, the fact theyve already paid agents commissions on my sale etc would mean that they would need to sell the place for at least $495k in order to break even on the unit, which is highly unlikely due to fact the building is near complete so no stamp duty savings for buyers, not to mention it was valued by a bank at 35k less than this figure.

What do you think? Worth a go?

Cheers QLDS, i agree with regards to NAB.

I only did a preapproval to "test the waters" on borrowing capacity, along with the fact that the lady i met with was a colleagues wife.

I'm leaning towards CBA but I'm meeting with my mortgage broker next week to discuss other lenders and products.

Thanks to you and Jamie's advice, im most definately going to put down 10% and keep the rest in the offset.

I know it seems selfish getting all this advice for free online but I really just want to learn all the available options so that I am armed with this info heading into discussions with brokers etc.

Thanks again.

Thanks guys, extremely helpful information.

I think the best way moving forward will be an I/O loan with linked offset for Hughesdale.

I'm also going to put down the minimum depost, cop the LMI and then put the remaining monies in the linked offset. That way my money isn't locked away for when it comes to buy a PPOR.

Ideally i want to have approx 150 – 200k in the offset to purchase the PPOR, based on when i settle at Hughesdale, i will have 85k to start with.

Jamie do you think it's worth doing a split say 340k I/O and 100k P&I, is there any benefits or disadvantages???

Thanks Jac.

Are any of them based in Vic, i understand these days with email and phone it's easy but i prefer to deal with someone local e.g. Victoria