hey everyone!we're in BIG trouble at the moment, as we cant get finance for our ip. we have agreed to pay a certain price to a friend of ours to purchase that property after they renovate it. trouble is, the banks valued it at about $20k lower than the price we agreed to purchase, one of the bank actually valued it at 40K lower. it is in a regional area, and our mortgage broker has warned us that it's abit harder to get finance for regional areas. we have done our research, and the houses around the area has sold for around the same price as we agreed. we can't get out of the contract, as we didnt put a finance clause in it. i believe the fact that the house is still being renovated, is really affecting the valuation. any suggestion on what we can do? we're really scratching our heads as it's almost settlement date, and we still havent work out the finance….thanks in advance everyone!
Valuation will be based on what the valuer sees at the time and unless he is aware of the work being done on the property it is unlikely he will value the property accordingly.
Presumably when you agreed to purchase the property you had a reason for paying the purchase price. Why not ask you mate if he has ever had a valuer put this agreed purchase price figure on the property and if Yes contact the valuer and see whos panel he is on and get you broker to use them.
Alternatively commission your own valuation and see what that comes in at.
Richard Taylor | Australia's leading private lender
hi richardwe have asked our broker, if it's worth it to get an independent valuation done.he said that the bank has used a local valuer, and because it's in a regional area, there's probably only a few valuers out there, and therefore it's probably not worth it to get an independent valuation.our friend didnt get a valuer before he purchase the property. after alot of research and talking with the agents, we agreed that the purchase price , both before and after renovations, is fair.i wonder if other people have had the same experience, and how they manage to solve this problem….
Ring a couple of independant valuers and ask them who Bank panel they are on.
Then work backwards. Everything can overcome.
Richard Taylor | Australia's leading private lender
If no luck with Valuations, why not negotiate with your Friend to pay what the property is worth and see if the bank will loan you that amount? You'll pay too much for it otherwise. My opinion only
Is it too late to get your friend to carry back a second mortgage on the property. That way you can get a loan for a reduced amount through the bank and you can pay your friend back in a certain specified time.
Or could you partner with someone to use their money for a specified period (get another individual to be "the bank"for $20 000 of the purchase price).
Obviously with these two options you would be paying the person interest that would usually be higher than what you would pay to a bank, but at least you could meet the bank.
Kelly
Some banks do not require a valuation to be done at all. They will go on a contract of sale if you have purchased through a real estate agent.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Unfortunately you have made one of the stupidist mistakes when buying a house. Next time you sign a contract you may want to be a bit more careful. Would you care to provide a reason why you did NOT put a finance clause in the contract?
You can delay settlement by a few weeks, maybe a month. In that time you have to raise the missing $20,000 plus the vendor can charge penalty interest (normally around 12%pa).
The vendor will eventually get sick of your delays and excuses. They are entitled to put the property up for auction. If the auction price is lower than your price you will be sued for the difference (plus costs). This could easily be $30,000 – $50,000. I am guessing that equals bankruptcy.
You will be declared bankrupt and lose all your assets. That isn't the worst thing on the planet. Remember it could be worse – if you were in 19th Century Italy and screwed over the local mafia boss he would probably settle this issue with a bullet or two.
Goood luck!
Ouch! I am sure Suff is aware of his error in judgement and I am sure if we all look back on life, we could find enough of our own mistakes.
It suffices to say seeking legal opinion in such matters can save a lot of trauma and cost
hey allterry, i didnt purchase throu a real estate agent, it was a private sale. i did learn alot from this, it is only my first ip….well, lucky our friend is pretty reasonable, we have discussed a few more options , including a wrap. i'm sure there's a way to solve this problem, and if anything, it makes me wanna learn more and get more into investing!thanks everyone for posting ur comments!
Hi Suffragette,
Can you explain to your friend that the loan from the bank is 20 K short and you want to pay him the difference over X amount of time at X $ with X%. I'm sure he would rather do that than have the hassles of trying to resell .
C2
Sorry Suffragette, but unless it is a pretty special property, this simply means you are paying too much. If you feel the incomplete renevation is the problem, is it possible to extend the contract date, and then get another val done when all the work is finished? Will your friend sell 'as is' now without finsihing the work at the price the val came in at? A few options – if a friend, you would hope they would understand eh? All the best. Incidently, how much deposit did you pay? Might be cheaper to walk away if you cannot either of these ideas or any of the others to work out. Hey, all the best though……
Valuations (read valuers) can be a real problem at times. Most are ok.
We had one valuation done on an IP. At the time the valuer came through we actually had a plumber ON SITE installing a dishwasher. The valuer informed me that even though the installation would be completed that day, he WOULD NOT take into account the dishwasher in the valuation as it had not been completed!!! How's that for harsh!
Another option which I have used before successfully is to contact the valuer yourself & put your case forward. Maybe their comparable sales are not telling the whole story. Do you know anything about any of the recent sales that you could shed light on? Did one have termites? Or water damage? etc, etc.
Good luck.
Cheers,
E.
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