Valuation Report 8k deficit

ginger_lion

Hi
I'm a long time lurker - here goes with my first post...

We're FTBs buying a property for 101k (Asking price was 100k). Valuation has just come back saying property only worth 93k - we are getting copy of report posted today so will receive tomorrow with details. Sorry if some of these questions are a bit dense - I've gone into major panic mode now! Is this sort of thing normal? I know the vendor wants a quick sale - is it likely that they will negotiate price? Does the solicitor handle all that for us anyway? Surely if they got another buyer the same thing would happen again and they would lose the money already spent on solicitors? I can't stand the thought that we might lose the house :eek: Incidentally, the property was on the market before Christmas for 109k - I don't understand how it can have been so overvalued by the EA??

Any advice gratefully appreciated - should I be panicking or am I fussing over nothing?

Thanks

exil

Well, it MAY be a problem - depending on the answer to this question -

how large a mortgage are you getting? What %age of the price was it to be (90%? 95%)?

ginger_lion

it's 95%
...got to make this longer...

rsykes2000

This sort of thing is normal sadly - estate agents routinely over-value properties. Conversely, some surveyors can be over-cautious.
The only real thing that you should be concerned with is that the bank now thinks the property is worth 8K that you are paying for it, so they will only advance eg 95% of the 93K rather than the 101K. EG if you were expecting to only pay a 5% deposit on the 101K, then you would be looking at a bit over 5000 pounds. Now, you will have to pay 5% deposit on the 93K the bank value it at, + the 8K difference. Confusing myself here...
This means that the 8K difference will have to be ponied up by yourselves if you go ahead. If you have an extra 8K (or can reduce the size of the deposit accordingly) then you should be OK.

ladywood

It basically means the bank will only lend on that amount - so if you need say a 90% mortgage - they will give you 90% of 93K. According to my partner's brother who is an IFA this is happening quite frequently. Valuation is not an exact science and estate agents and mortgage valuers are looking at different things. The EA wants to maximise price to make most profit (and also wants the contract so may slightly overvalue). The mortgage valuer is looking at risk to the bank's money - so are more likely to be cautious.

We had a discrepancy of 40K on a property - and with hindsight (we didn't buy it!) the mortgage valuation was closer to the mark than the EA.

Use it as a negotiating strength. Basically you are right - anyone else needing a mortgage could well have the same problem (though no guarantee a different day and a different valuer...) so make sure the vendor is aware of that. The chances are that there will be some specifics in the valuation report that you can also use to negotiate.

You may be able to appeal the valuation but there would have to be some grounds I guess. We did and they upped the valuation by 20K but only because the valuer worked for the same estate agent that had valued it 40K higher and they were embarrassed!

Good luck.

ginger_lion

we haven't got a spare £800 let alone a spare 8K
Can't we negotiate with the vendor?
It is a FTB house - like I said above, surely if they got another buyer the same thing would happen again...
I can't believe this is happening... I knew buying a house would be stressful but I just wasn't prepared for all the uncertainties.
Anybody know how likely it is that the solicitors could come to an acceptable compromise?
Thanks again

Thefunkygibbons

You need to see the report, but unless there is a major problem, then two outcomes
1. The seller accepts the full drop in value
2. He does not any waits for a new buyer, and perhaps a new valuer who comes up with a higher valuation

This is something that you have to deal with, the solicitors will only be of limited help

Have you checked to see what identical propoerties have sold for?

mystic_trev

The Vendor wants a quick sale and you want the House. Show them the valuation report and negotiate some middle ground.If it was me I wouldn't offer more than £95k

ginger_lion

Thank you all.
Other houses on the street have varied between 75k and 110k over the last two years, presumably as all in different states of repair. The one we want is newly refurbed - new kitchen, bathroom, flooring and has an extension which others do not. We were happy that 101k was a fair price in the context of everything else we had looked at. I spose it must have some significant hidden problems - we will find out tomorrow when the report arrives I guess. Don't think I'll be sleeping tonight!

oscar67

Read the report and any highlighted defects can be used as a means of negotiating the price down. The vendor and their estate agent should hopefully be sympathetic to your position (and your good position as FTBs).

exil

Lots of good advice here! Remember if the vendor refuses to play he has to start from square 1 - and the next buyer might well face the same problem.