House Valuation lower than we Offered – What to Offer

guy999

My partner and I fell in love with a house close by.
Property on at 325k, on market for a week, we offered 300k which got refused, offered 305k refused, settled at 310k including white goods.
As seller was looking for a quick sale, we decided to rent out our property.

Therefore decided to transfer current mortgage to new property, raise BTL on existing and then for the balance take out new mortgage with existing lender on new property.

Firstly for the BTL mortgage based on rental values, from the valuation report we found that we were £26k short from what we had expected… after much debate and taking into account our savings we decided to continue.

But today recd valuation report for new property, comes to £20k short…with a valuation at 290k
Totally confused what to do now! Even if we cashed all isa’s most we could raise would be 300k. Leaving us no savings.
How much do we re offer, more than valuation?

What would best way to do it speak to estate agent or go around and talk with owners?
Thanks

fishtastic

Hi Guy999,

I'm assuming from the very small discount from the asking price you believe that this house is in a very sought-after area and a house like this will never ever come up again?

A 310K offer on a house put on the market at 325K seem way too high in the current climate. I obviously understand that house price drops are not homogeneous across the country and there are areas and circumstances that can create micro markets, but this doesn't seem an appropriate discount from the asking price.

Even without the issue with the valuation of the new house, it seems you want to have not one but two houses mortgaged to the max in a falling market. This seem like financial suicide.

I know that you and your partner have fell in love with this house, but will you still feel that way if it becomes a millstone around your neck? Remember you will have no savings left....

The very least you should do is go back to the vendor and explain the situation and lower your offer. If you got a valuation for mortgage purposes of 290K then that's what the next prospective buyer would get less the price drops in the mean time. If house prices drop in the next year by 10% and it takes a year for them to sell then the valuation could be ~260K. It would seem the asking price was too high and so was your offer.

Also, do you really need to move if you live close by? I'm guessing your renting you're house because it won't sell (or sell for what you believe it's 'worth'). If it's the latter i.e. your house won't sell for what you think it's 'worth', and your offer has been for more than the valuation then maybe it's time for you to look at house prices in you area more dispassionately. Also check what prices house nearby have actually sold at, then knock off money based on how long ago they sold.

Good Luck

Fish

poppysarah

The house valuation says 290 so don't pay more than that.

Walk away if needs be.

guy999

Fish
Thanks for your detailed reply.
As you say 'mortgaged to the max' is not the best of situations in a falling market although we both have good jobs and could cover both mortgage payments but of course would not like falling market values.
Houses prices in the area have never gone above 300k that i can see, however the house is quite unique in the area, just a handful like it 5bed double garage etc.
We plan to live in this location for a few years and believe we wouldnt have afforded it a couple of years ago, or maybe in a couple of years time.
Hence reason I guess for falling for the house

When you say vendor, do you mean estate agent or actual seller
Thanks

fishtastic

guy999 wrote: »

we both have good jobs

Well you both have good jobs at the moment, I'm assuming since it's a 5 bed house you already have a family so I can discount starting a family as a circumstance that could reduce your income.

This leaves

Death (Life assurance policy could pay off the house for the surviving partner though)

Illness (this is the biggie since it can stop you earning for considerable amount of time, even longer than your employer or a policy will pay for, without killing you off and enabling the other partner from getting the money from my 1st happy thought)

Redundancy (do not underestimate this one since it can strike anyone). From your previous posts you earn a reasonable amount, I have a similar salary to you, and I've been losing many colleagues to redundancy most of whom didn't dream that they would have difficulty finding work (or be made redundant in the first place). They have found, despite being qualified professionals, that the job market is much harsher than they expected. There are fewer opportunities and it's taking longer to find roles (especially if they have higher pay expectations than the market will support).

As far as delivering the lower offer, unless you have a relationship with the house owners then use the estate agent. The estate agent will hopefully be honest about the market with them (The EA is getting X% of 290K rather than X% of 315K, they would rather get a sale through than waste a lot of effort hoping to get literally a few hundred quid more).

Be honest with the estate agent, layout the facts (i.e. the valuation and take it with you) and then put forward what your revised offer is and that you can not go higher than that.

I can see you really want this house. I personally wouldn't buy now and so am renting but this is a personally choice that isn't right for everyone and I accept that, so good luck which ever way you decide to go.

Fish

GDB2222

guy999 wrote: »

Houses prices in the area have never gone above 300k that i can see, however the house is quite unique in the area, just a handful like it 5bed double garage etc.
We plan to live in this location for a few years and believe we wouldnt have afforded it a couple of years ago, or maybe in a couple of years time.

House prices are still very very high by historical standards, so I think that you are worrying too much you if you are concerned that you would not be able to afford the house in a couple of years time. My own personal best estimate is that there is still a 20% drop in house prices to come, with no recovery for years. So, having two properties in the current market is a really bad idea, as you acknowledge above.

Also, this seems a really bad reason to become a landlord, particularly as you present house may not be particularly well suited as a rental property and you presumably have no experience as a landlord. You might be better to sell your existing house at a substantial discount to market price now, rather than getting into the messy business of being a landlord and seeing your property reduced in value over the next two or three years anyway -- with no guarantee at all that prices will recover for years to come. If you put your existing house on the market at a reasonable discount to market value, this crystallises the loss you are taking on your existing house, so there are no nasty surprises in the future. Also, you know how much your new house is actually costing you, including the loss on your existing property.

I think you are going far too far out on a limb to satisfy your vendors' wish for a quick sale. Of course, they want a quick sale, and if possible they want to railroad you into a deal before you have a chance to think about it.

Doozergirl

I agree with GDB's last two paragraphs. If you are happy to take a loss then it needs to be on your present home. Market it sensibly and you then know going forward what you have. The money you lose presumably comes from equity rather than savings so you aren't stretched going forward.

I'd not be keen to pay more than the valuation either and would take the opportunity to renegotiate - whether or not that is successful I don't know, but at least you would have tried.

Swipe

If it has been valued at £290k then it makes sense that no one else would more for it either once they also got a similar valuation. No way would I pay more than valuation.

guy999

Thank you for all your replies.
Will speak to estate agent on Monday and advise only wishing to offer £290k now following valuation.Have all mortgages sorted so can move straight away.If vendors dont agree then guess will have to walk away.. Difficult to do though when you want the house
As pointed out, as market is falling then guess other buyers carrying out survey will face same problem. And if valued at 290k now in a few months will be worth even less when next survey carried out.
Should we give them a deadline of when offer expires or leave it open?

Also toying now with the idea of selling our property outright since values are decreasing, other option is to rent out for 3 years and then sell.. decisions decisions

GDB2222

on the question of whether to leave the for open, I would not do so. In fact, the offer is not binding anyway, but just on general principles I would not leave an offer on the table indefinitely.

On the question of whether to rent for three years and then sell the property, bear in mind that it is quite difficult to sell a property with a tenant in it. There is no guarantee that the town will keep the property in good condition for viewing, and the fact that you have put on the market is going to make any tenant very uneasy. Consequently, on a practical basis, you are probably going to have to have the property empty in order to sell it. If prices are going to be lower in three years time, I cannot see how you benefit from waiting? Of course, you may not agree that prices are going to be lower in three years time.