Mortgage valuation - can they base it on future improvements??

Thrugelmir

Have you a solicitor at the ready?

Conrad

Samtobuk wrote: »

Thanks for the blunt feedback guys, I would rather you offered untempered opinions based on your experience. That is why I am on here asking the questions, as there is no way I am going to risk £30k+ if there is a risk that it could all fall through.

The reason i am asking what may seem naive questions, is because the lander (Santander) have clearly stated that they can get me an offer letter before the auction! I have had an initial consultation, gone through the affordability bits, given them the property details (which they know is at auction), and am going back in tomorrow to complete the application ready for the valuation to take place this week (within 48hrs they claim, but lets see!). The legal pack, being completed by the vendors solicitors, I have been told will contain all the searches that would be done had I commissioned my own solicitor to do it. It remains to be seen if that throws up any more issues, but once that is in hand, I'm just not sure what else is needed for the lender to issue the letter?

I will make damn sure at tomorrow's meeting that I re-iterate this point, and check that they genuinely believe they can get me an offer on an auction property, before the actual auction. If not, you are all correct that it is bordering on foolish to continue!

Cheers

The sales person at Abbey may not have experience of auction transactions. Remember they have a monthly sales target and need to get you 'hooked in' but you should be very very wary about any verbal statements they give you.

Auction legal packs offer a basic snapshot only, there are many many items a lender may want addressing that will not be contained in the auction pack. These packs are designed for experienced cash based investors.

Again I'm not saying don't go for it, but I am saying I personaly would'nt do it as the risk / reward balance is tipped too far in the risk direction - otherwise everyone would be doing it.

I even used Abbey earlier today. They issued an agreement in priciple a few weeks back for a client borrowing £300 on £700 property, but now she's 'properly' proceeding they've declined her as the HUMAN underwriter thought overall the case too risky.

kmmr

I think your solicitor could advise you best. Buying at an auction is basically the same as exchanging. And no solicitor would/should allow you to exchange without knowing you have the formal offer (not approval in principle), all searches done, etc.

So, it sounds like you have done that. If you are confident that you are ready to exchange, then it comes down to the value. I can't really understand how you have a proper offer without having the valuer come and see the place yet though.

But, back to your basic question. Santander (via A&L) have recently approved a mortgage extension to me, based on the value after I do the planned improvements. I had to prove to them that I was serious, with architects plans, council planning permission etc. AND even then they will only advance the money after the work is done!

Clearly some fingers have been burnt in the past. So, I think you are very optimistic hoping for a mortgage based on potential future changes. However, as you are buying at Auction, you only hope is that you are just paying a nice cheap price, and perhaps they will value over what you pay.

Good luck

Thrugelmir

kmmr wrote: »

I think your solicitor could advise you best. Buying at an auction is basically the same as exchanging. And no solicitor would/should allow you to exchange without knowing you have the formal offer (not approval in principle), all searches done, etc.

So, it sounds like you have done that. If you are confident that you are ready to exchange, then it comes down to the value. I can't really understand how you have a proper offer without having the valuer come and see the place yet though.

But, back to your basic question. Santander (via A&L) have recently approved a mortgage extension to me, based on the value after I do the planned improvements. I had to prove to them that I was serious, with architects plans, council planning permission etc. AND even then they will only advance the money after the work is done!

Clearly some fingers have been burnt in the past. So, I think you are very optimistic hoping for a mortgage based on potential future changes. However, as you are buying at Auction, you only hope is that you are just paying a nice cheap price, and perhaps they will value over what you pay.

Good luck

I think you are ahead of the OP on several counts.

As the mortgage will be based on the purchase price at auction. The valuation prior to auction will only be indicative it won't constitute an offer for mortgage purposes.

Samtobuk

Thrugelmir wrote: »

I think you are ahead of the OP on several counts.

As the mortgage will be based on the purchase price at auction. The valuation prior to auction will only be indicative it won't constitute an offer for mortgage purposes.

The valuation prior to the auction (which hasn't happened yet, so I don't have any offer in place) will set my upper limit, so any borrowing will be equal to or less than that amount, so if they are happy to lend up to that value prior to the auction, nothing should change after.

I do have a solicitor lined up, so think I may be invoking his services next week!! :A

I will do some significant probing tomorrow of the advisor to find out exactly what legal information is necessary for the underwriters, and check that the legal pack can deliver that (or try to turn it around in time for the auction if not).

Just to clarify then ........ if I can get an offer letter in my hand before the auction, then I can be safe in the knowledge that (up to that total amount), I can bid with no fear of the lender backing out??

Thrugelmir

Samtobuk wrote: »

The valuation prior to the auction (which hasn't happened yet, so I don't have any offer in place) will set my upper limit, so any borrowing will be equal to or less than that amount, so if they are happy to lend up to that value prior to the auction, nothing should change after.

I do have a solicitor lined up, so think I may be invoking his services next week!! :A

I will do some significant probing tomorrow of the advisor to find out exactly what legal information is necessary for the underwriters, and check that the legal pack can deliver that (or try to turn it around in time for the auction if not).

Just to clarify then ........ if I can get an offer letter in my hand before the auction, then I can be safe in the knowledge that (up to that total amount), I can bid with no fear of the lender backing out??

So you have made a full mortgage application ? So that a formal valuation is carried out.

Not merely requested a mortgage in principle.

You have a 10% deposit ready to pay on the day of the auction.

Your solicitor has read the legal pack.

In that case your are ready to go.

Just hope that the fees you've outlayed come to nothing if you get outbid at the auction

Samtobuk

Thrugelmir wrote: »

So you have made a full mortgage application ? So that a formal valuation is carried out.

Not merely requested a mortgage in principle.

You have a 10% deposit ready to pay on the day of the auction.

Your solicitor has read the legal pack.

In that case your are ready to go.

Just hope that the fees you've outlayed come to nothing if you get outbid at the auction

Full mortgage application will be finished tomorrow, most of it is in place from my meeting earlier this week (enough for them to run their full affordability check, which went some way beyond what they did to give me the agreement in principle the day before).

10% deposit ready in the bank (to be turned into a bankers draft if this all works out)

Legal pack is not quite ready from vendors solicitor (Supposed to be today). Once it is it will go under the eyes of my solicitor.

Valuation will be done for the mortgage offer this week (so they promise), and is free with this particular product. So only outlay will be solicitors fees which should be minimal for what is needed (as the vendors have taken care of most of the searches that they would normally be charging me for).

I'm happy enough to take the risk on those kind of upfront expenses coming to nothing if we don't get it, but no way in the world I'll be putting tens of thousands on the line if a mortgage offer is not totally binding for the lender to follow through on!

Thrugelmir

Samtobuk wrote: »

Full mortgage application will be finished tomorrow, most of it is in place from my meeting earlier this week (enough for them to run their full affordability check, which went some way beyond what they did to give me the agreement in principle the day before).

10% deposit ready in the bank (to be turned into a bankers draft if this all works out)

Legal pack is not quite ready from vendors solicitor (Supposed to be today). Once it is it will go under the eyes of my solicitor.

Valuation will be done for the mortgage offer this week (so they promise), and is free with this particular product. So only outlay will be solicitors fees which should be minimal for what is needed (as the vendors have taken care of most of the searches that they would normally be charging me for).

I'm happy enough to take the risk on those kind of upfront expenses coming to nothing if we don't get it, but no way in the world I'll be putting tens of thousands on the line if a mortgage offer is not totally binding for the lender to follow through on!

Once the valuation is done you will need to sign the offer acceptance.

Though do not expect the mortgage offer to be based on any what if scenarios. It will be on the property as it stands.

jill2002

kmmr wrote: »

Santander (via A&L) have recently approved a mortgage extension to me, based on the value after I do the planned improvements. I had to prove to them that I was serious, with architects plans, council planning permission etc. AND even then they will only advance the money after the work is done!

This has happened because you do not have the equity to be allowed to borrow the funds without the work being done - therefore your loan is being done on a 'when finished' basis.

Conrad wrote: »

The sales person at Abbey may not have experience of auction transactions. Remember they have a monthly sales target and need to get you 'hooked in' but you should be very very wary about any verbal statements they give you.

Auction legal packs offer a basic snapshot only, there are many many items a lender may want addressing that will not be contained in the auction pack. These packs are designed for experienced cash based investors.

Again I'm not saying don't go for it, but I am saying I personaly would'nt do it as the risk / reward balance is tipped too far in the risk direction - otherwise everyone would be doing it.

I even used Abbey earlier today. They issued an agreement in priciple a few weeks back for a client borrowing £300 on £700 property, but now she's 'properly' proceeding they've declined her as the HUMAN underwriter thought overall the case too risky.

Santander have a system of doing a 'first stage decision' - which is the decision in principle - and usually gives an accurate indication of the final decision - like any other Bank or Building Society. The second stage decision is made when the property details are input - and is the final decision.

Samtobuk - this is what you will be doing tomorrow and the only thing that could go against you then (providing the decision is approved) is the valuation. Once the valuation has been done - That's it - Formal offer and you can go to auction.

Conrad - I think you are out of order trying to put the op off by saying - The sales person at Abbey may not have experience of auction transactions. Does this mean that EVERY broker is experienced in auction transactions? Also, I will resist getting into an arguement about monthly sales targets and the benefits of being a broker relying on commision for salary.

Samtobuk

Jill - thanks for popping back in with some advice from the horses mouth

That is really helpful to have confirmation of the process. Hopefully the valuation will be able to be conducted within the 48hr prediction, as that will get that sorted by midweek then. The valuation probably will be under the maximum lending that we are putting on the initial application, in which case our advisor said that we will then just have to quickly amend the form to the correct value and that is that. Beyond that, we will have about 10 days to get the formal offer out to make it in time for March 2nd.

Jill - can you confirm just to make it 100% for me that once you have a formal offer, that is a done deal and there is no risk at all of Santander backing out the next week when I come to draw on the funds? Likewise, are they likely to want to see anything from the legal pack/searches, or is that all just on your own shoulders to check as the buyer??

Thanks all for your help, really appreciate advice from people in the know (from both sides of the broker/advisor fence! :rotfl:)