When you’re building another property onto an existing property (ie: a unit on the back of a house) or when you’re building multiple properties on one title (3 units for example at once) you might find that the lender needs the valuer to value the properties “all in one line” – ie: as though they’re all on one title.
Now this can sometimes be confusing to people as for the most part – individual titles or a strata title will be put through after the build is done.
BUT – what the bank is worried about is risk. And the risk to them is that during the build – if all the properties are on one title that’s how it needs to be valued – so it’s called an all in one line valuation.
Where this can be frustrating is that values often fall lower this way.
Let’s look at an example:
Say we had a client building one townhouse on the back of their existing house. They have an agent out who tells them that once the build is done their house will be worth $350k (even with the smaller yard) and the new townhouse at the rear will be worth $400k.
That’s all well and good and may very well be true – BUT – the build sees them both on one title during the build and as such the bank needs to have the valuer look at them through this lens.
So things that can lower the valuation are:
- Lack of comparable sales of a house and a townhouse on one block (I know, I know it won’t be that way forever but that’s the way they need to look at it now)
- Lack of potential buyers for a house and townhouse on one block (or 3 units or whatever it is you’re building) – again we know it won’t be that way when you go to sell but that’s how the valuer needs to look at the deal.
Where possible given the above potential issues we like to get a valuation one up front where possible so we can see what we’re working with.