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Over valued house undervalued by Lender
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beckfordinho
Posts: 12 Forumite
Hi there,
I am currently in the process of buying a new build property. I thought everything was going smoothly however I was wrong! The builders valued the new build at £175k, we have to pay 10% deposit and the builder would pay 5%. However Nationwide the mortgage lender only value the house at £166k and are therefore not willing to lend the 85% we require to buy the house! The situation was that the builders would only pay 5% of the lower value £166k and we would have to make up the shortfall! However we cannot afford to pay the shortfall!
Consequently we have asked the builders if it is possible to sell us the house at the lower value of £166k?? However I am unsure whether they will be willing to do this, as they have initially said no, as they will probably be able to sell it at the higher value to somebody else!
Has anybody experienced similar problems, and what are my options going forward? I am really worried now as already paid initial fees and I don't have much money to waste! Please help. Thanks!
I am currently in the process of buying a new build property. I thought everything was going smoothly however I was wrong! The builders valued the new build at £175k, we have to pay 10% deposit and the builder would pay 5%. However Nationwide the mortgage lender only value the house at £166k and are therefore not willing to lend the 85% we require to buy the house! The situation was that the builders would only pay 5% of the lower value £166k and we would have to make up the shortfall! However we cannot afford to pay the shortfall!
Consequently we have asked the builders if it is possible to sell us the house at the lower value of £166k?? However I am unsure whether they will be willing to do this, as they have initially said no, as they will probably be able to sell it at the higher value to somebody else!
Has anybody experienced similar problems, and what are my options going forward? I am really worried now as already paid initial fees and I don't have much money to waste! Please help. Thanks!
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Comments
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I would just lay the cards on the table and tell them it was valued at 166 and I cant afford to make up for the shortfall. And say their won't be any negotiationg etc, you just want it for 166...0
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Don't offer to pay more for the house than they've valued it at.
If the builders won't budge then leave them to it.0 -
just by way of explanation, if you buy for £175,000 and the builder gives you 5% deposit, you handover £166,250. Hence the valuation is correct - it is 100% of what you are effectively paying.. If everything goes belly up for you [& I hope it does not], the lender is paid off by selling the house. There is nothing special about you which means that you get the house cheaper than anyone else is willing to pay, so the value is quite correctly £166,250. The lender has only knocked you back £250, which is not bad at all. Effectively, if you cannot afford this house on an 85% mortgage.Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0
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With the builder 'paying' 5% deposit, the house is effectively being sold for £166,250. So there is nothing left to negotiate forI would just lay the cards on the table and tell them it was valued at 166 and I cant afford to make up for the shortfall. And say their won't be any negotiationg etc, you just want it for 166...Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0 -
I do wish developers wouldn't insist on confusing the situation by calling it a deposit, it should be a discount. Trouble is they try to hide the true values from the next unsuspecting punter.
Would a 90% mortgage cure the problem? - you still only have to find 10%, of £166k. As its a smaller amount than 10% of £175k, you set the £900 difference aside to pay for the difference in monthly payments, as the deal you will get on a 90% mortgage will not be so good...depends how much worse the deal is, if that's affordable etc.
Then tell the developer to knock the price down by 5% discount instead of calling it a deposit.
As DVS says the maths ends up the same.
Have you got carpets and so on included? Haggle on those and get the £250 thrown in.0 -
Yeh exactly...:rolleyes:DVardysShadow wrote: »With the builder 'paying' 5% deposit, the house is effectively being sold for £166,250. So there is nothing left to negotiate for0 -
DVardysShadow wrote: »just by way of explanation, if you buy for £175,000 and the builder gives you 5% deposit, you handover £166,250. Hence the valuation is correct - it is 100% of what you are effectively paying.. If everything goes belly up for you [& I hope it does not], the lender is paid off by selling the house. There is nothing special about you which means that you get the house cheaper than anyone else is willing to pay, so the value is quite correctly £166,250. The lender has only knocked you back £250, which is not bad at all. Effectively, if you cannot afford this house on an 85% mortgage.
I don't think thats the case. The valuer is not valuing 95% of the property he is valuing 100%. It is irrelevant what the builder is contributing towards the deposit as the OP will be owning 100%. This sounds like shared equity deal not shared ownership.
In this situation where the house has been valued lower the purchaser either has to find the money, negotiate a lower price or give away more equity. I've just been through this entire process myself.
There was another thread very similar to this recently..i'll try and find it..
here, take a look:
http://forums.moneysavingexpert.com/showthread.html?t=1977635&highlight=0 -
eh?I don't think thats the case.
Absolutely.The valuer is not valuing 95% of the property he is valuing 100%.
I am assuming this is 100% ownership. It is very relevant what the builder contributes to the deposit, because £ for £ it is a distortion of the true value. The builder is happy to accept £166250 in truth, but he wants £175000 recorded on the Land Reg.It is irrelevant what the builder is contributing towards the deposit as the OP will be owning 100%. This sounds like shared equity deal not shared ownership.
As this is 100% ownership, there is no equity given away. Unless the OP comes forward and says it is Shared Ownership, the only option is to find the money. If the OP has 10% deposit on £175000 and requires to mortgage at 85% without putting in more money, the builder has to discount to below £117000 to make this work. The only way this will work is if the OP puts in more money - or goes shared ownershipIn this situation where the house has been valued lower the purchaser either has to find the money, negotiate a lower price or give away more equity. I've just been through this entire process myself.
Thank you.There was another thread very similar to this recently..i'll try and find it..
here, take a look:
http://forums.moneysavingexpert.com/showthread.html?t=1977635&highlight=Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0 -
DVardysShadow wrote: »With the builder 'paying' 5% deposit, the house is effectively being sold for £166,250. So there is nothing left to negotiate for
The house isn't being sold for £166,250, its being sold for 175k. As the OP said the builder is lending them 5% of the purchase price which will need to be paid back.
I'd be interested in hearing from the OP whether this is a shared equity arrangement where the OP owns 100% of the property but has to pay back the 5% when he/she comes to sell the property.
If thats the case the OP will need to plug the difference between the valuation and what the builder wants to sell it for.DVardysShadow wrote: »As this is 100% ownership, there is no equity given away. Unless the OP comes forward and says it is Shared Ownership, the only option is to find the money.
Shared equity is exactly that - where you own 100% but you give away a certain % of the equity. I have this arrangement on a flat I have just bought.DVardysShadow wrote: »If the OP has 10% deposit on £175000 and requires to mortgage at 85% without putting in more money, the builder has to discount to below £117000 to make this work. The only way this will work is if the OP puts in more money - or goes shared ownership
I'm not quite clear where you have got the figure of £117000 from. The OP could get a mortgage based on the 166k valuation. Putting in 15% deposit for an 85% LTV would mean a an actual mortgage of £141,100. In addition to the OPs 10% of £16.6k he/she would need to scrape up an extra £9k to meet the purchase price of £175k.
OP, correct me if i'm wrong but I think you're asking how/where you're going to get the extra 9k from?0 -
OP said builder is PAYING 5% not LENDING. Hence, as I said, the house is EFFECTIVELY being sold for £166250The house isn't being sold for £166,250, its being sold for 175k. As the OP said the builder is lending them 5% of the purchase price which will need to be paid back.
I would be interested too, but everything so far says it is straight 100% ownership.I'd be interested in hearing from the OP whether this is a shared equity arrangement where the OP owns 100% of the property but has to pay back the 5% when he/she comes to sell the property.Hi, we’ve had to remove your signature. If you’re not sure why please read the forum rules or email the forum team if you’re still unsure - MSE ForumTeam0
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