Property Development

Shopping around for valuation can help dodge land value loss pain

Written by The ReReport
As seen in the Source link, written by on 2019-07-12 12:37:18

Villawood house and land development sites in Victoria - for herald sun real estate (1)

House and land buyers are beating short valuations — by getting another valuation.

Buyers facing a shortfall at settlement amid falling property prices have been urged to shop around for valuations.

One of the nation’s biggest loan brokers has revealed it routinely sees tens of thousands of dollars difference in valuations from one lender to another.

Loan Market broker Mark De Martino’s office handles hundreds of house and land packages a year, and has already helped a number of people whose valuation at settlement has fallen short after they bought at the peak of the market two years ago.

RELATED: Lots of losses not all bad news, giving buyers big chance without speculators

Melbourne homebuyers win as land sales in new estates slow

Auction hack backed by science could demotivate other bidders

“We get valuations done with a number of banks and often we get a better one from another lender,” Mr De Martino said.

“It might be 5 per cent of our customers that have that issue, and only a small number of them are having to put more money in.”

Empty Lot Number Three Sign - Real Estate

New housing estate land values soared for two years, but we have now started to see them fall.

With many land estates selling blocks with an almost two-year wait until settlement, a growing number of land valuations are now coming in below the agreed purchase price.

Some buyers are being forced to turn to family for big cash gifts to make up the shortfall and keep their home dream alive — and to avoid losing thousands of dollars in deposits.

Mr De Martino said Melbourne’s southeastern corridor had more cases than the north and west.

And those who had bought into later stages of a development were at the greatest risk.

Naishad and Bindiya Dalal are among buyers to get a surprise low valuation, finding the Clyde North block they bought for $365,000 more than a year ago had been valued at just $330,000 by their bank at settlement in June this year.

Naishad and Bindiya Dalal

Naishad and Bindiya Dalal were saved from a short valuation on their block of land — by trying their luck at a different bank.

A separate valuation by another bank came in at $350,000, allowing them to proceed with their first home.

“It’s a massive difference,” Mr Dalal said.

“The $20,000 difference made it achievable.

“But I’m pretty sure a lot of people wouldn’t be as savvy and would just go with the first valuation.”

Villawood Properties boss Rory Costelloe described the current situation as a “perfect storm” blowing in off the back of land prices soaring 65 per cent across 2016 and 2017, in part due to speculative buyers who had bought blocks expecting to sell them at a profit before settlement.

The speculative investors were now trying to sell the blocks at discount rates to minimise their losses.

Villawood house and land development sites in Victoria - for herald sun real estate (1)

Just eight buyers have needed extra assistance from family at Villawood developments.

Mr Costelloe said these discount sales were behind the worst of the low valuations.

Villawood has had eight instances of buyers’ blocks being short-changed, forcing them to ask family for help.

Next month Mr Costelloe will head a series of roadshows aimed at Melbourne’s valuers, urging them to take a “broad and long-term view” to valuing land, with expectations the soft valuations will peak during September before a lack of new supply coming in forces prices back up.

“We should be near the bottom, maybe another 1 or 2 per cent drop, then we are stable,” Mr Costelloe said.

“It will take nine to 10 months to build the house, and by then the market will have bounced back a lot.

“We just need to help people settle.”

New home construction framing

Once buyers have settled on their land they can get started with building their home.

The Australian Property Institute represents valuers, and chief executive Amelia Hodge said “shopping” for valuations was not common.

“The valuation is the valuer’s opinion as to what the most likely sale price would be if the property was offered to the market for sale as at the date of inspection or valuation,” Ms Hodge said.

Mr De Martino said those worried about their purchase shouldn’t wait for settlement to act.

They should research if prices had fallen in their estate, particularly if they had bought a more expensive block of land.

MORE: The Castle house: restoration begins at new Beechworth site

Roll up, roll up: Fitzroy warehouse home to circus company for sale

St Georges Rd, Toorak: controversial vacant block of land for sale at $40 million

This would give them more time to save, to find family able to assist, or speak with a broker.

Reducing the cost of your home build could also help avert the bank coming back with a short valuation, and allow you to upgrade later on.