Valuation lower than cost of self build

Currently looking for mortgage approval and the valuation from the bank is way lower than the build cost. We have a QS, diligently tendered multiple builders and negotiated hard to get the costs.

We are building an A rated home which is more expensive spec wise. We are building in our homeplace to help in the care of our elderly family and of course it's off the beaten track. If it wasn't rural we wouldn't need to move as there would be support locally! Two houses in a neighbouring townsland were used for comparison for the valuation and both were smaller with lower energy rating and old central heating, old spec windows etc.

Financially we can borrow more than what we are asking for so it's not an issue of not having the resources to do tho.

Do we have any right to recourse? What next? Will this impact us at all financial institutions?

It is not possible to build less than an A rated home and meet regulations. I guess this is one of the reasons new houses have a premium.

RobFer said:

It is not possible to build less than an A rated home and meet regulations. I guess this is one of the reasons new houses have a premium.

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Is there any way to get a mortgage then? We are limited by location so the house is unlikely to command a premium if it were to be sold in the future (not that we will be doing that). I'm loath to reduce the spec of the house and compromise on the overall quality. This is to be our home forever and now we are stuck.

SelfieBuild said:

the house is unlikely to command a premium if it were to be sold in the future

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Unfortunately that's the problem trying to finance one-off self builds. The bank doesn't really care how much it costs you, but rather how much it would sell for if they had to.

Work out how much do you need the valuation to be. Then look at the property price register and see how far away you have to go to find a property close to that price.

There's a price ceiling to most areas, and it doesn't matter how nice the house is it just can't get above that ceiling.

Working with another valuer for the bank might help. Understand how they evaluate value from the plans, and have examples of higher prices in similar areas to show them if you find any. If you've reached the price ceiling, things like an 50k kitchen with granite worktops, and premium bathroom fittings won't affect the valuation. You might need to take the mortgage you can to get it to 'builders finish', and take a loan to finish it.

RedOnion said:

There's a price ceiling to most areas, and it doesn't matter how nice the house is it just can't get above that ceiling.

Working with another valuer for the bank might help. Understand how they evaluate value from the plans, and have examples of higher prices in similar areas to show them if you find any. If you've reached the price ceiling, things like an 50k kitchen with granite worktops, and premium bathroom fittings won't affect the valuation. You might need to take the mortgage you can to get it to 'builders finish', and take a loan to finish it.

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Currently working with another valuer based on bank reccomendation. The local branch was surprised with the valuer and spent long after their working hours this week trying to speak with the valuer and pull him back.

Your ceiling suggestion is a great idea. Legitimately how far from the proposed self build can I search for this?

SelfieBuild said:

Legitimately how far from the proposed self build can I search for this?

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It really depends on the area, and amenities. You need something comparable. If there are houses similar distance from a main town, with access to main road network and access to schools, etc. But there's no point comparing a house with sea views to something 20 miles away.
It's difficult to value a house in an area that there isn't much being sold.

There are some great builders out there and rather deal with them through your QS is it possible for you, yourself, to have a chat and see where you can get with a chat to explain where you're at. I live in Mayo, fairly rural and when I built aprox 12 years ago I did this and am very happy I did so. Now, I must say, i'm familiar with the building trade, etc, but wouldn't be able to build a house. Knowing what I was talking about, knowing some builders and understanding where they were coming from and they understanding me all helped and I placed full trust in them to deliver which they did. Any small and indeed biggish problems were talked about as they were spotted coming up, other avenues and solutions found, money saved and in the end both ourselves and our builder and his staff were friends and very proud of what was achieved. Most builders are great people, very intelligent and can really solve problems no engineer or QS could do and that's with respect to everyone. Experience and pride in what they do just might be your problem solver. Good luck.

Valuation in a rural area is very difficult - if you have a valuer that is not knowledgeable about the area your valuation will be on the very low side as there will not be a lot of examples to back it up with. If you have someone that knows the area well, the valuation will be more realistic.

I'm rural Kildare. Got revalued for a new LTV rate last year. Valuer 1 was from small agency office based about 20km away, gave valuation 380k and a couple of examples from miles away that were not veen close to size/style of our house. Valuer 2 was from a large agency with multiple offices and the valuer himself had about 30 years experience. Gave valuation of 460k and was able to find 2 examples of similar size homes in similar areas but again a few miles away.

Just recently a similar size house nearby sold for 475k, so valuer 1 valuation was miles out and valuer 2 was very accurate.

Update to this - we challenged the valuer using houses in the locality and that was ignored; instead they picked another guy who wouldn't go against the valuation given by the first guy. Went to another bank and asked for valuation to be done up front; they sent out a guy that we don't know but works within about 20kms of where we want to build and the valuation is where we need it to be without any interference by us. Because we asked for an up front valuation neither the valuer nor the bank knew the costings at that stage. We are now going through the full mortgage approval process with the new bank so I have everything crossed that we will get the mortgage. The other bank had described the valuation as a formality so we were suckered by them in ways.