Buying a new build flat for buy-to-let - lender valuation has come back really low

adusad

Hi,

I want to ask some advice, and also see if anyone else is in the same situation.

I put a deposit down on a new-build flat in a development in Woolwich in summer 2006, for 10% of the value.

The flats are due to complete next month, so I have been going through a buy-to-let mortgage application with Cheltenham & Gloucester.

They have just done the valuation, and come back stating that due to the current market and hence the likely re-sale value in the short term, and the fact that the development is not yet complete, their valuation is 42% less than the agreed price!

I had budgeted to put in 25% of the value as a deposit, and more recently increased that to 35% - but now with this valuation, they value it so much lower, and will only lend on 65% of that value - and I clearly don't have any money to make up the difference.

Is anyone else in the same situation? Or any advice what I can do?
I think the lenders valuation is ridiculously short-term - their valuation is just far too low, and whilst values have dropped, not by the amount they say. I have no intentions of selling the flat in the short term - I want to keep it for at least 10 years. It seems like they almost don't want to lend on the flat.

Also, their claim that the valuation is low because of the development not being complete - well it will be when I am able to complete next month - so I just don't understand that?!!??!



Its causing me a great amount of stress - so any thoughts / help, or if anyone else is in the same boat and has any ideas, would be really helpful.

Thanks!

Georgie4

Having bought several new builds I know that the odds are stacked against the buyer but taking nearly 3 years to complete is a ridiculous amount of time. At the end of the day they can insist that you pay the price that you agreed butyou need to go back to the company and try and re negotiate the price. I know new build flats all around the country have been the hardest hit but 42% drop seems mad

ILW

Georgie4 wrote: »

I know new build flats all around the country have been the hardest hit but 42% drop seems mad

Have you ever been to Woolwich?

Fire_Fox

adusad wrote: »

They have just done the valuation, and come back stating that due to the current market and hence the likely re-sale value in the short term, and the fact that the development is not yet complete, their valuation is 42% less than the agreed price!

Is anyone else in the same situation? Or any advice what I can do?
I think the lenders valuation is ridiculously short-term - their valuation is just far too low, and whilst values have dropped, not by the amount they say. I have no intentions of selling the flat in the short term - I want to keep it for at least 10 years. It seems like they almost don't want to lend on the flat.

Also, their claim that the valuation is low because of the development not being complete - well it will be when I am able to complete next month - so I just don't understand that?!!

That's exactly what a valution is, short term. It's the price a property is worth on the day that the valuer saw it. Not what it might be six months from now when the market has dropped, or six years from now when it has doubled.

If the development is incomplete, and especially if some units have not pre-sold or have had their purchaser pull out, the potential price of a second-hand flat coming back onto the market is lower. The developer could go bust tomorrow and never finish the complex. Snagging is notorious for causing extended disputes.

This is an opportunity for you to renegotiate with the developer, depending upon the terms of the original contract. Did they promise to complete by a certain date, and have they adhered to that promise?

Richard_Webster

Similar situation - see this thread: http://forums.moneysavingexpert.com/showthread.html?t=1655161

Trollfever

I think the lenders valuation is ridiculously short-term - their valuation is just far too low, and whilst values have dropped, not by the amount they say.

Check out the auction sale prices of recent build flats!

adusad

Thanks for the advice - I still can't believe that they have valued it 42% below what it was on at a couple of years ago.
I am going to check the paperwork as to when the actually said it would be ready then - though I think it was Q1 2009, so they are not too late.
The development is essentially complete, just a last few communal areas to finish off - though other buildings nearby are not complete.
Has anyone managed to renegotiate with developers in this way before - what's the best way of going about it? I have spoken to them once a few weeks ago, but that was before the valuation came back yesterday... any hints / tips appreciated...

bumpoowee

A new build i used to live in 3 years ago sold at the time for £180k, seen several on the complex now going for £80k.

42% seems pretty normal to me, I get the impression that everybody who was buying into them a few years ago at stupid prices has never spent any amount of time in them, the build quality is awful, the noise insulation is crap and there just isnt a demand for them - the place I lived at 3 years ago had 80 flats and I don't think more than a third were ever full, the place I live now has 9 (+1 owner occupied) flats and recently peaked at 6 occupants after 18 months of being built, and now people are moving out again.

AMILLIONDOLLARS

Let me guess, you were buying into Berekely Homes Woolwich Arsenal!!:rotfl::rotfl:did you buy the 2 beds for 345K, and now you might be getting a valuation of around £270k:rolleyes:, yes I went there last Sunday to have a look around, and I was offered a unit at the £270k price tag. You don't have my sympathy, for the past two week I have seen what buy-to-letters have done to the Woolwich, Thamesmead areas, walk around to Thamesmead West the area is full of you get rich quick types,now price have crash by 30-40% in these areas.

In 2006 new build luxury flats were selling at £315k today you can pick one up at £120k, buy-to-letters flooded the market and they didn't care what tenants they got in to pay their mortgages. Genuine Owner Occupiers saw the value of their homes fall dramatically because the tenants did not care enough to look after the property they were renting thereby down grading the area.

After reading about berekeley homes this week, it doesn't look like you'll be getting your money back if this was an investment. On the off-chance that these people might be able to help you here's the link the the action group that are taking Berekeley on, you'll have to register before you can get access to any information

http://groups.yahoo.com/group/berkeley-customers/

I won't wish you luck, because you've used up your quoter.
PS forgot to add rental has also dropped for the area!!!

SouthCoast

bumpoowee wrote: »

A new build i used to live in 3 years ago sold at the time for £180k, seen several on the complex now going for £80k.

42% seems pretty normal to me, I get the impression that everybody who was buying into them a few years ago at stupid prices has never spent any amount of time in them, the build quality is awful, the noise insulation is crap and there just isnt a demand for them - the place I lived at 3 years ago had 80 flats and I don't think more than a third were ever full, the place I live now has 9 (+1 owner occupied) flats and recently peaked at 6 occupants after 18 months of being built, and now people are moving out again.

:rotfl:

I am the only resident in my block of 9 [STRIKE]flats[/STRIKE] luxury, executive, designer apartments.

adusad

hmm... well thanks for the not so constructive comments 'amilliondollars'... that helps my stress no end...
:-(