New Build Valuation Problems

Mike84_2

Hi everyone,

I am trying to purchase a new build property with my girlfriend, the sale price is £167,500, firts time buyers.

I am using the developers equity scheme to purchase it. (only need 5% deposit, 80% mortgage and 15% interest free loan from developer).

Only two mortgage companies offer mortgages with this scheme, Nationwide and Halifax.

Nationwide have valued the property at £155k, because they value on a 2nd hand basis.

Can someone explain to me why they do this?

The developer has said that they cannot drop to that price and have said they want us to try the Halifax (these by the way don't value at 2nd hand so their valuation is more than likely going to be higher).

This will mean the developer will say go with them, but their 2 year fixed interest rate is 1.5% higher than nationwide, about £130 per month more!

Does anyone know why I stand?

Any help would be appreciated as this is my first time buy.

Thanks,

molerat

You want to take on £12.5K negative equity from day 1:eek: . Tell the builder to go take a hike.

Mike84_2

This is what I am going to say to the developer. It's a joke!

Molerat, do you know why they are valued at second hand basis?

It'll be interesting to see what the halifax valuation ends up at.

VIGILANT22

New builds are like new cars....they lose their value as soon as you step into them....!..steer clear of new builds

ILW

The reason that they value on a SH basis, is that if they need to reposses they will not be able to sell on at new value.

Mike84_2

Thanks ILW, I understand now.

If the Halifax valuation comes in at, say £167,500, do I have a leg to stand on with the developer for getting them to reduce the price of the house, because the Nationwide valuation was only £155,000???

Ideally I don't want to have the halifax mortgage because of the extra monthly cost!

speedbird1973

It's not a case of "having a leg to stand on" - you have a realistic valuation from Nationwide. You need to make a decision on whether you're prepared to pay over that for the house. It's easy for people to puff up, wring their hands and say "why on earth would you want to", but if it's a HOME you love then it may be worth that extra money to you (it wouldn't to me! but you're different). If you're happy to pay the extra, try the Halifax.

From a business perspective, it's easy. Nationwide have valued it, pay that value or walk away. Your personal "feelings" make the decision trickier. If you're prepared to pay more then give the Halifax a go. Just remember the builder will have a "bottom" price, but they're not going to give up on a higher price straight away.

Mike84_2

Thanks Speedbird.

We do love the house but at the same time we want the purchase to make commercial sense and don't want to be paying over the odds for it.

We have already instructed halifax to carry out a valuation so we're going to see what that comes back with and then challenge the developer.

Fingers crossed!

dunstonh

Its a bit of scam that lenders have now decided to act on. In a fast rising market they tended to ignore the builder incentives but with houses prices stagnent and still at risk of further falls as well as morality having to come into play now, most lenders will treat lender deposits as they truly are. A scam where the price is increased by 15% and you are given back 15% to act as a deposit. Whereas in reality you are trying to get a 100% mortgage (or near enough).

If you want to be in negative equity from day one then you go with what the builder says. If you want to borrow responsibly you either get the builder to drop the price or you walk away.

Remember that the builder is likely to get exactly the same from others unless a real buyer with a real deposit comes along.

I wouldnt be too confident of Halifax coming in with a value that is that much higher. Its possible as no house price has a price tag on it and its an estimate. But its a big margin for difference.

Mike84_2

Thanks all,

I've been told that the valuation should take place either tomorrow or Friday so hopefully will find out what the second valuation is this week.

Conrad

Halifax valuer will surely value about the same as Nationwide? In the end the lender wants to know what security they have.

If I give you a brand new car worth £10k as security, and you lend me £10k, but I want to use the car, adding wear and mileage, it means if you have to repo the car you will only be able to sell for £8500 and you will thus be out of pocket.

Valueing houses follows exactly this principle. Remember the second hand buyer does'nt have control over choices of fittings and kitchens, meaning to him the house does'nt offer as much value as would be the case for you.