Valuations and Gifted Deposits

Thomoli

Hi,
Currently in a bit of a quandry, made and had an offer accepted on a house (we are first time buyers). When the valuation came back it was 10k less than the amount we had offered. We went back to the vendor and said we were not happy to proceed on the offer as we would have to find extra cash to fund it plus of course the market said it wasnt worth the full amount.

After much negotiation the vendor is poised to offer a 5% gifted deposit to cover the gap (clearly wanting to inflate/maintain a price for future sales on the development). However our lender Alliance and Leicester wont accept a 5% gifted deposit on this basis. I was wondering whether there was a workaround on this? or would that be tantamount to some kind of fraud.

At the moment we are considering looking at another mortgage with Halifax (one of the only ones to accept gifted deposits), although this will cost another £300 or so and of course there is the opportunity that their valuation will come in under our original offer.

Many thanks for any ideas or help anyone can give
T

StuTheDon

Hi - is the vendor a house builder - i.e. is this a new build? I assume so from your comment about them needing to inflate the prices in the development?

If it is a house builder tell them your final offer is the amount the property surveyed at and, if they dont accept it by the end of next week, the deal is off. You will need to be prepared to walk away if needed otherwise you will be immediately in negative equity.

Thomoli

Thanks for the message
Yes, it is a new build development, we have been going backwards and forwards with the developer, other valuations have been done situating the property at the original 175 offer mark, however our lender A+L wont accept these valuations.

The first offer from the vendor was a 10k interest free loan, which we refused, as you say if we needed to move in 2years time I dont anticipate the market will have bounced to bring the property value up.

We played hardball about walking away and they came back with a 5% gifted deposit offer to cover the difference. A+L wont accept it this was where I was wondering if there was a workaround to get and use that money in the deposit.

nw_man

The developer is trying it on.

They always do.

My advice would be to stand your ground. They know they have a LOT of houses to shift and they also know they arent many buyers about.

Tough it out.

There's plenty more houses on the market.

On a side note, what deposit do you have ?

Thomoli

Thanks for the message NwMan

The developer is indeed trying it on, the issue for us is that we really want the property, the developer themselves are really in no particular pressure to sell them, they dont need the cash to move onto next development. They get a lot of grant and european money and are having no problems renting them out, in this way they can sit it out until the market returns or someone comes up with the full 175, they are listed at 190. They have sold flats on the development and the comparative £/ft are very good.

There are 11 of these units available, we have a 15% deposit on the 175k.

nw_man

OK, help me out here please

They have them on the market at £190k ? The lender valuation is £175k ?

You have a 15% deposit based on £175k ?

Am I correct ?

StuTheDon

Thomoli wrote: »

Thanks for the message NwMan

The developer is indeed trying it on, the issue for us is that we really want the property, the developer themselves are really in no particular pressure to sell them, they dont need the cash to move onto next development. They get a lot of grant and european money and are having no problems renting them out, in this way they can sit it out until the market returns or someone comes up with the full 175, they are listed at 190. They have sold flats on the development and the comparative £/ft are very good.

There are 11 of these units available, we have a 15% deposit on the 175k.

The facts are that a reputable company has valued them at less than the developer believes it is worth. And something is only "worth" waht someone is willing to pay for it. At this stage you really have to seperate your emotions from the business.

Offer them the amount the property valued at, and give them a deadline whilst making it clear this will be your only offer.

I'm not sure where you got your information about them not needing to sell because of grants etc - if it is from them then they are really trying it on! I can assure you there will be immense pressure to sell them - companies really need cash flow just now and they will need that money coming through - trust me.

Good luck!

Thomoli

Heres the info NWMan
They are listed at 190k, we offered 168k (refused) but finally had offer accepted at 175k. The valuer for A+L however valued the property at 165k. We have a 15% deposit on the 175.

We have a mortgage offer on 165 (15% deposit is 24750) then if we were (but we wont) to pay 175k we would need to find the extra 10k (£34750)

A 175k mortgage (15% deposit 26250) the 5% gifted deposit (8,750) offered takes it down to 166250.

Thomoli

Cheers again for the message Stu,

Have offered them the 165 with a deadline, to which they said no, I know what you mean about separating emotions from the business, which is even more difficult being a first time buyer etc etc.

The information on about them not needing to sell was from my mortgage broker.

nw_man

Thomoli wrote: »

Heres the info NWMan
They are listed at 190k, we offered 168k (refused) but finally had offer accepted at 175k. The valuer for A+L however valued the property at 165k. We have a 15% deposit on the 175.

We have a mortgage offer on 165 (15% deposit is 24750) then if we were (but we wont) to pay 175k we would need to find the extra 10k (£34750)

A 175k mortgage (15% deposit 26250) the 5% gifted deposit (8,750) offered takes it down to 166250.

OK.

So, the builder wants to sell it to you for 175K and give you a gifted deposit of £8750. Therefore you need to put the extra £1250 to make up the £10k, yes ?

But, Alliance and Leicester wont accept the gifted deposit ?

The builder is basically attempting to inflate the sale price so they can tell the next mug, sorry, the next client, that they just sold one next door for £175k. I am not inferring you to be a mug, just the next person who ambles by....

Its back to what we originally thought, they are trying it on. You know this.

However, you still want the property, so the decision is straightforward. Pay the overinflated asking price or stick to your guns.

I know what I would do.

nw_man

Thomoli wrote: »

Cheers again for the message Stu,

Have offered them the 165 with a deadline, to which they said no, I know what you mean about separating emotions from the business, which is even more difficult being a first time buyer etc etc.

The information on about them not needing to sell was from my mortgage broker.

Is he affliated to them in any way ?