All Topics / Finance / Land Valuations

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  • Profile photo of ETET
    Member
    @et
    Join Date: 2005
    Post Count: 12

    Firstly congrats on a great site and all those members who willingly volunteer their knowledge. For this novice it is excellent reading. Hopefully I’ve got the lingo down pat and you can understand my question.

    Background: We bought a block of land in surburban Perth for $193K + costs in late 2003, recently valued at $275K. Construction of residence estimated at $250K. Market data suggests once completed the property will be worth a very conservative $550K. The current ‘land’ loan is at $130K.

    Question: How do the banks value the property? I was advised by a valuer here in NSW that they assume the property is already completed and value it accordingly. Is this correct?

    Any help is greatly appreciated.

    Profile photo of Stuart WemyssStuart Wemyss
    Member
    @stuart-wemyss
    Join Date: 2003
    Post Count: 598

    ET come home… welcome to the forum ET.

    The bank will confirm (via valuation) that the value of the property will be equal to the current land value plus the construction cost ($275K + $250k = $525k).They will then lend up to 95% of this amount (i.e. 95% of $525k). They will not lend against actual value (say $550k) until the construction is complete.

    I hope that makes sense.

    Cheers

    Stu

    Profile photo of ETET
    Member
    @et
    Join Date: 2005
    Post Count: 12

    Thanks Stu,

    Makes perfect sense and was exactly what I was after.

    Cheers
    ET

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