Buyers blocked by low valuations

penguine

From Radio 4's Moneybox programme:

... in a falling market estate agents claim surveyors are undervaluing to avoid being sued by lenders.

One buyer, Chris, wanted to purchase a one bedroom flat earlier this year in south east London, which was on the market for £175,000.

To secure his mortgage offer, his lender needed to make its own valuation.

When it came through, it scuppered his plans, as he told BBC Radio 4's Money Box: "The survey came back at £140,000, which we found astonishing."

The original radio programme went into a bit more detail. This guy decided £175k was the right price for this flat after viewing "another property nearby last year which was on the market at a higher price". He had a 20% deposit.

After the property was valued at £140k, he went back to the seller and they were willing to come down to £160k. He then went to a second lender whose valuation came up at ... £140k.

(Other flats on the same development are currently selling for £135k because the owners can't pay their mortgage.)

Now he's really miffed that he can't buy the property and says that if a willing seller and a willing buyer agree on the price then that's the right price for the property.

zcacmxi

A link to this article on the BBC website: http://news.bbc.co.uk/1/hi/programmes/moneybox/7983229.stm

As the majority of buyers require a mortgage, then the price of houses is closely linked to the availability of mortgages and the valuations that go with them.

The banks have decided (too late), that they can not afford to fund unsustainably high house prices. The major world banks that dealt with securitised mortgages (MBS) have all failed, and have had to be bailed out.

My local agent is saying he's very busy with viewings. Not suprising given that 5 of his 6 competitors have shut down, and he's got to do everything as he sacked all his staff a few months back.

ad9898_3

penguine wrote: »

Now he's really miffed that he can't buy the property and says that if a willing seller and a willing buyer agree on the price then that's the right price for the property.

Utter madness, imagine going to buy a car from a garage, the car is valued at 30k, you walk upto the salesman and say ' I will only buy the car if I can have it for 50k !!!':rotfl:.

The problem with the above quote from the buyer is it 'just isn't up to him and the seller', as he is asking the bank that have valued the property to stump up 80% of the purchase price.

How does this person even hold down a job with this level of stupidity is something I would be concerned about if I was his bank manager.

purch

if a willing seller and a willing buyer agree on the price then that's the right price for the property

Certainly...........if you have the money to pay, you can pay whatever price you like.

If you want to use someone else's money, then you have to get them to agree, and maybe....finally....the Banks are starting to value risk somewhere close to reality.

pizzagirl

penguine wrote: »

Buyers blocked by low valuations

Maybe the headline should read:

Buyers blocked by proper valuations.

Generali

pizzagirl wrote: »

Maybe the headline should read:

Buyers blocked by proper valuations.

'Buyers Saved from Themselves by Realistic Valuations'?

penguine

ad9898 wrote: »

The problem with the above quote from the buyer is it 'just isn't up to him and the seller', as he is asking the bank that have valued the property to stump up 80% of the purchase price.

How does this person even hold down a job with this level of stupidity is something I would be concerned about if I was his bank manager.

I loved the fact that he decided this was the right price to pay after viewing one other property on the market at a higher price last year. Yep, that makes him a property valuation expert.

ad9898_3

I wonder how many FTB'rs are going into the market now, with the enticement of 'the lowest interest rates in 400 years' ringing in their ears ? I wonder how many have considered that if they buy now, what is likely to happen to IR's over the typical time span of a 25 year mortgage ?, I wonder how many of them are factoring in the historical rate of 8% ?

I would suggest none or very few, hence when we get 'cost push' inflation over the next few years and IR's go up, the housing market will suffer more carnage.

Rochdale_Pioneers

I had this in 2006 - Nationwide's valuer came back with a price £30k below sale price. Even Nationwide believed this to be a stupid estimate but their rules didn't allow them to either ignore it or ask for a second opinion.

As it is Halifax valued it £30k higher and even with the market falling as much as it has sale prices haven't dropped below what we paid - and Halifax are now valuing it higher once again.

So in the example above, is the valuer being instructed to go very low so that the mortgage can't be issued?

lostinrates

There is, IIRC, a thread JUST like this in the buying and renting board.

I think this is it:

http://forums.moneysavingexpert.com/showthread.html?t=1604809

penguine

Rochdale_Pioneers wrote: »

I had this in 2006 - Nationwide's valuer came back with a price £30k below sale price. Even Nationwide believed this to be a stupid estimate but their rules didn't allow them to either ignore it or ask for a second opinion.

As it is Halifax valued it £30k higher and even with the market falling as much as it has sale prices haven't dropped below what we paid - and Halifax are now valuing it higher once again.

So in the example above, is the valuer being instructed to go very low so that the mortgage can't be issued?

He went to two different lenders and had two different valuations done. Both came in at the same amount (£140k). Given that other flats on the development are now going for £135k, I think the lenders probably don't want to take unnecessary risks.