How to agree a house valuation?

brionz

I currently live with a friend in a house which we bought together on a shared mortgage a few years ago. I am getting married shortly and will be moving out of my current house to live with my future spouse. We have agreed that my friend will buy out my share of the house and take on the full mortgage but we first need to agree a value for the house. We talked about getting a few estate agents round to value the house and using an average of their valuations as the agreed house value. We would then subtract the outstanding mortage from this agreed value to determine the equity and my friend would then pay me my half of that equity to take on full ownership of the property. Does that sound fair and reasonable?

The main reason I am asking this is that my friend has recently mentioned that an estate agent's valuation is inflated above the actual value of the property to cover the seller's legal costs and estage agents fees, and so my friend now wants to knock of £5k from the average of the valuations because we do not need an estate agent and I don't need a solicitor. I would have thought that any agents and legal fees are born by the seller and are not passed on to the buyer through an inflated sale price. Doesn't a buyer normally have to bear their own legal costs and stamp duty without having to pay for the seller's fees too?

Robert_Sterling_3

I think that after you arrive at an agreed value for the house your partner should consider the fact that the value of the house might go down, for example 10%, in the next year. This might justify the partner in offering 45% of the equity rather than 50%. I appreciate that this would be to your disadvantage.

On the other hand if your partner does buy you out then they do not have to have the house sold and then have all the costs associated with buying somewhere else. I think you could make a case for them paying you £5k rather than you paying them £5k if they buy you out.

david29dpo

This is ware all the arguing starts. The agents value is for the house, nothing else, no legal fees, stamp duty, etc. or white goods unless built in. Yes the agents could over value to get you to sign up with them but could also under value to sell quick or take in to the account it could fall in a few months time. The asking price could be more or less than if the house was actually sold. Bear in mind the lender may not let you take your name off the mortgage.

silvercar

Have you approached the lender and asked for your name to be removed from the mortgage? Without their agreement your plan falls apart.

Agreeing a price is secondary, but do look at recently sold prices from the house price websites rather than rely on estate agents.

Richard_Webster

Obviously you have to distinguish between what the agents says the asking price should be and what he thinks it would actually sell for. The latter is especially difficult at the moment because it will depend upon how desperate a person is to sell. Sometimes people make offers which are really too high and the sellers get away with a higher figure than others might offer. So it must be the likely selling price you go by.

Estate agents don't inflate prices to cover the costs of selling, but it is the other way round - the price that would actually be obtained would then have to be reduced by a reasonable figure to cover the costs of selling. If the property was sold the money would only be divided after such costs were taken out, so t is reasonable for those to come out as well the amount required to pay off any mortgage beofre you divide up what is left.

brionz

There's no problem with the mortgage side of things. The lender is quite happy to remove my name from the mortgage. It's just agreeing a value which is proving tricky.

Thanks for the replies so far. My view is that I am selling half a house without having to pay estate agents and legal fees, and my friend is buying half a house without having to pay stamp duty (that is correct isn't it?), arrange a new mortgage or get a survey done so we are both benefitting from not selling up. Therefore it seems reasonable to me to ignore all the extra fees and expenses usually involved in selling a house, simply calculate the equity as described in my original post, and ask for half of that equity. As an act of goodwill I might also offer to pay half of my friend's conveyancing costs. Am I being fair? I'm very keen to maintain our friendship through this process!

paulsin

Basically it comes down to the fact that she will be making an offer to purchase your half of the house. If the agents say 100k and she offers 90k you can either counter offer, accept or refuse. Is basically selling a normal house. To be fair, it would not be reasonable to expect her to pay the EA valuations as many more these days are over valuing to get more custom. use the EA valuation as a guide only, look at what houses in the area have gone for etc. It will basically come done to a the two of you agreeing on a price rather than someone else telling you how much.

Robert_Sterling_3

I think that you are being very fair. Your approach is very commendable and and should have an amicable conclusion. :T :j :T :j :T

MX5huggy

Get a http://www.rics.org/ valuation, you will have to pay for this but they have no vested intrest ie trying to get you to sign up with them. Before it is valued you could both agree to make this price binding.

sarah_elton

Richard_Webster wrote: »

Obviously you have to distinguish between what the agents says the asking price should be and what he thinks it would actually sell for.

Bang on - EAs will tell you what to market it at. Make sure you ask what price you'd actually achieve. When I sold recently, the three agents all suggested asking prices of £114,995. Two said I'd then be looking to achieve £100-105k, and one said £105-110k.

You should also look at what comparable properties nearby have sold for, but bear in mind that data is three months old and prices have fallen a little since then (depending on where in the country you are).

As others have said, it'll be a negotiation between you two as normal buyer-seller. Just a little awkward since you live under the same roof.

protractor

Ironically, it doesn't really matter what you go on the market for - a house will find it's own value.

i.e. if it's overvalued it will attract lower offers - if it's undervalued it will create such interest that bids will go over its asking price.

What asking price does have an influence on however is the speed in which it sells.

BEWARNED

This is only theory for the brave!!