Brokers find NRAS opportunities that accord with lender valuations
Many properties under the National Rental Affordability Scheme have had valuation concerns leading to borrowing hurdles but mortgage brokers suggest there are still opportunites.
There have been concerns that NRAS properties are overpriced because of the exorbitant commissions charged by property spruikers.
“But some of the NRAS properties are legitimate. There’s a mixture out there,” says Colin Rice, a Perth-based mortgage broker who’s dealt with several NRAS sales.
On many of the sales he’s dealt with the bank valuations accord with the asking price for the property.
He brokered finance on a Footscray property which was initially valued off-the-plan at the $499,000. The investor then paid $499,500 – the price it was valued at upon completion.
“The bank value and what the client actually paid was the same. That’s a good thing. It’s hard to say what the valuer went on. It’s possible the valuer didn’t know it was an NRAS property or maybe they just went on face value,” Rice says.
In September 2012 Rice brokered finance on an NRAS property in Petrie in Moreton, Bay Queensland. It was purchased at $331,000 but the bank valued the property at $310,000 – a significant shortfall but not enough to dissuade the buyer.
“I assume he proceeded because of the tax benefits of owning an NRAS property,” Rice says.
“The valuer did make note it was in a declining market at the time.”
And he brokered for an NRAS property in Manly West which was valued at $410,000 of-the-plan and $420,000 on completion. It was purchased for $430,000.
“There was an improvement in the valuation. I don’t know if there was a rise in the market or if it was undervalued in the first instance.”
“It’s is a common assumption the valuers assume there’s been a large commission which is automatically taken off the value.”
But in each instance the sale proceeded without too much of a set-back from financing issues.
Early teething issues with banks seem to have passed and any difference in valuation is made up in equity from another property.
“Initially I think the banks were a bit hesitant because they didn’t know quite how it all worked and the legalities but now they have their head around it most of the banks will do NRAS.
“They don’t have an issue with it, you just have to disclose to the banks it’s an NRAS property.
“They just look at the overall exposure of the clients. If it’s on the mark then the banks are happy. I haven’t had any that have been declined because it’s NRAS. Not at all.”
