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.
“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.”
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.
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.
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.”
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.
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.