‘Pre-approval will give you peace of mind. And you will be in a better position to negotiate the price.’ When I was a home loan consultant, I always encouraged my clients to get a pre-approval before starting house hunting.
Well, I was thinking of buying the unit at South Brisbane from my brother Jeffrey who had told me he would give me a good price. Therefore there’s no need for negotiation. However, I still asked Cheryl at IMB Direct to organise a pre-approval for $500K since we hadn’t entirely made up our mind on any specific property at that time.
The unit at South Brisbane was only about two and half years old. It was tenanted at $550 a week. It has two secure underground parking spaces. One of them was included in the lease; while the other one was rented separately to a local business at $250 a month. Jeffrey and I agreed on the purchasing price at $580K. Not a good price between family members you might say. However Serina and I did not want to take advantage of Jeffrey, and the God at Taipei Longshan Temple also advised that fairness is the best policy in this transaction. (We are both Buddhists. We always go to this temple whenever we feel that we needs some guidance in our life). We thought the return was okay based on the figures above. As a result, I emailed Cheryl and asked her to go ahead to get the full approval.
Cheryl came back with a shocking news – our loan application was rejected. Why? The valuer had in his report stated that the unit was in the flood affected area (Remember? Yes, that FLOOD in 2011). Therefore, according to IMB’s lending policy, our home loan application for the unit was rejected. That’s it, no chance for a second opinion.
I rang Jeffrey right away. He said during the flood the unit was fine (it’s on the second level). Only the underground parking area got a bit of water in there, which was only about five centimetre high. Although it was in the area where flood damage was reported, there was actually no damage to any unit in that complex. I don’t know which valuer IMB used. Cheryl said she’s not allowed to pass on that information. I was not impressed with the rejection. As a result, I went on to ask “Joe” at HSBC to see if they will take the unit as collateral.
“Joe” said in his reply, ‘I am still waiting on confirmation if HSBC has an issue taking the property that had its basement flooded in the flood affected area of Brisbane with our Property Risk’. I haven’t received any answer from him to this date. (Wake up “Joe”!!)
We decided to put things on hold, although our $500K pre-approval was still valid.
In mid April, Serina and I went to have a look at Jeffrey’s other units in Moorooka Queensland when we went back to Australia for a short break. The local council has the shopping area revamped recently. It’s less than 10Km travel to CBD Brisbane. And Jeffrey’s units are brand new and are designed by himself. They seem to be fine investment, but I was not sure if they were the ones for us. I could not really explain it to Serina, but she trusted my guts feeling and we decided to give it a miss.
The search went on. It never stops anyway. No matter in boom or in doom, as long as we can afford to buy, we buy.
About a month later, I found three properties interest me. The first one was a four bed room house on a 970 square metre block of land adjacent to one of our properties which is also on a 970 square metre block of land in Canberra inner north area. Not RZ2 zoning though, which means no development allowed at the moment. A very unrealistic price at $1.025K when it was first listed (listed in January I think). Six months later it dropped to $990K, but the agent still could not find a buyer for it. It was vacant for months.
The second one was also a house on a big block of land in Canberra inner south area. It has three bed room plus a studio. It was leased to a business for about $3500 a month. It still has three years before the lease expired. Asking for $775K.
The third one was an older style two bed room unit in Belconnen area. Freshly painted not long ago and fairly new carpet too. It was on the top-level overlooking bush land. Current tenant has been living there for over a year. The lease will not expire unitl March 2013. The tenant is paying $340 a week. Priced at $280K .
Which one of them should we buy this time?