buying share of property through housing association, property undervalued! HELP!

pippac123

Hoping someone can help. My partner and I are purchasing a 35% share of a property through London & Quadrant. We fit in with their requirements, we viewed the property and left a £250 deposit to secure it, went for the finiacial interview and passed, then applied for a mortgage through them. There was only one provider who would offer a 90% mortgage so this was the only route we could take.

Having kept going backwards and forwards and the providers continually asking for more documents we recieved a valuation report for the property.

We are hoping to buy a new build 2 bedroom ground floor flat. All the rooms are good sizes and it has been finished to a very good standard. ther property is valued by the housing association at £132,500 and we are hoping to buy a 35% share.

However when we recieved the valuation report it has been valued at £120,000. the wording in the report says: The property is newly constructed. In accordance with the lenders policy the valuation is based on the special assumption that this is a second hand value with no incentives, discounts or builder gifts payable before or after completion. The valuation is supported by evidence of comparable properties in the resale market.

I am confused by the wording of this as it is a brand new property therefore how can it be second hand, i get the impression that it is being valued at resale value should it be reposessed. Plus I have to wonder what the comparable evidence the person who carried out the report has provided as there is an estate only a few minute down the road which would be described as less than desirable.

Our mortgage offer has been based on this valuation and therefore if approximately £4000 short. The housing association are not willing to lower the price of the property as they have already sold 5 in the same block, and are looking at it as a £12,500 loss, when I see it as a £4000 loss as they still own the majority share.

We are now waiting around for someone to come to a conclusion. Evidence has been provided of comparable properties, but we have not heard anything from either the housing association or the financial advisors.

GRRRR the annoying thing is, had the offer been correct we would have exchanged contracts by now rather than sitting twiddling our thumbs and still living with the parentals!!

Sorry for the essay, but I hape someone has the patience to read this and can maybe give some advice

Cannon_Fodder

pippac123 wrote: »

There was only one provider who would offer a 90% mortgage so this was the only route we could take.

I am confused by the wording of this as it is a brand new property therefore how can it be second hand, i get the impression that it is being valued at resale value should it be reposessed.

Presumably the 5 other sales were with another lender - otherwise they would be likely to have the same valuation criteria. So, they also had higher deposits.

Having only a 10% deposit, on what is viewed a high risk loan, is the problem here. Flats have fallen sharply during the crash. Oversupply means re-sale is problematic.

You are totally correct to say the lender is pricing it as a resale - what else would it be, when either you or they need to sell ?

You can potentially increase your deposit (Bank of Mum and Dad?), which might enable you to go to another lender who has different valuation criteria.

Or sit tight for a week or two, see if the HA have a change of heart.

VIGILANT22

They are pricing it in a market for quick sale at a time when house prices have fallen and could be set to fall again..... so it would be 2nd hand (like a car)
You wouldn't want to pay more than a property is worth would you?

pippac123

Thanks for your replies. We could push ourselves to put forward a 15% deposit, however, it would leave us with very little as standby money and we also have solicitors fees and stuff to pay. Luckily we have most of the furniture we need from renting properties before hand but since july have been living with my parents to try and raise some funds.

Even if we do go for a 15% deposit and fork out another couple of hundred pounds application fee, I can't see that we won't find ourselves in the same situation a couple of weeks down the line when the property is valued again.

I have no idea the circumstances of the other properties sold and not sure whther they would be prepared to disclose this information. The properties have been available since July last year and only 5 have been sold out of 12, the last being in January, however the prices of the properties have not changed during this time. It's difficult to know whether to push the Housing Association further and see if they would reconsider reducing the price or not. When I approached them before about it it was a flat out NO. but this was only in conversation with the girl who showed us round the property and is dealing with us.

At the moment we are leaving them to it, as it's their fight with the mortgage provider over the price to prove that it is worth waht they are ssaying it's worth. however it seems to be taking ages and we're not being told anything about what's going on.

Personally the way I see it, is that it would be better for them to have people living in there and getting some rent from us being in the property rather than it sitting there empty.

dunstonh

New properties are typically valued at 10-15% higher than their second hand value. i..e if you buy a new house, you typically lose 10-15% straight away as its no longer new.

So, the valuation has been done on pricing it not as new but as second hand (which is what it would be if they had to sell it). This is quite normal

he properties have been available since July last year and only 5 have been sold out of 12, the last being in January

So, this points to the properties being overpriced and supports the valuation by the lender more.

Normally in these cases you go back to the builder to tell them that the valuation has come in a lot lower and try to negotiate a new price.

pippac123

thanks, we did approach the Housing Association about meeting the price of the valuation and the reply was:

There is no way we could accept a down valuation of £12,500 as we have already sold 5 other properties in the block at higher prices, this would suggest that your surveyor has under valued the property

We did send comparable evidence on to the lenders before I went on holiday and I have asked *** to chase the lender and give me an update.

Once I have the update I will advise you, however if they will not budge you will have to apply to another lender.

i just feel that we could find ourselves in the same position if we apply for a mortgage through a different provider with a 15% deposit as surely they would also come in a carry out a valuation and it could be valued at a lower price than the selling price.

my partner and I are both getting to the point where we're struggling to see the light at the end of the tunnell and thinking that although renting is horrible, it is easier.

Cannon_Fodder

pippac123 wrote: »

At the moment we are leaving them to it, as it's their fight with the mortgage provider over the price to prove that it is worth waht they are ssaying it's worth. however it seems to be taking ages and we're not being told anything about what's going on.

Personally the way I see it, is that it would be better for them to have people living in there and getting some rent from us being in the property rather than it sitting there empty.

If the Lender is their main source of funding - after all the whole point of 'Shared Ownership' is affordability, so a 10% deposit *should* be common - and being the only Lender offering 90% LTV, the HA will want to keep them on board...

So, hopefully the Lender explains the realities of the situation to them, and you get it for the the lower price.

Totally mad to let it sit empty for 9 months.

Have you checked sold prices using www.houseprices.co.uk or similar, i.e. have they definitely sold for what they say they sold for...?

pippac123

Yes I did check the land registry site and the properties that have been sold have sold for what they are advertised for on the price list, however there are only 4 listed and we are being told that they have sold 5.

The first was sold in november, 2 in mid december and the 4th in early january.

all of these properties (including the one we are applying for) are on the rear of the block, all of those on the front of the building remain empty, due to the road noise. As an incentive to the front properties they are fully furnishing them to the value on £6000 + giving £600 worth of comet vouchers.

When we looked around the property we negotiated that we would only be interested in the property if they would be prepared to throw in some furniture. She was more than willing to throw in a living room and dining room pack consisting on a table and 4 chairs, sofa armchair, coffee table, lamp table and side board. (nice stuff that you would go out and buy yourself, not cheap and nasty), we are also getting the comet vouchers according the the valuation report.

Now if they weren't having any problems shifting them then why was she so willing to chuck that stuff in?

Sorry to keep posting on here but it is extremely frustrating when your financial advisor doesn't bother replying to your e-mails...just hoping to get answers from somewhere else.

Cannon_Fodder

Wait for the update. Try to put it out of your mind for a few days. Getting stressed/emotional over something is likely to result in a sudden, poor decision, that you regret later.

One other thought. When she says "however if they will not budge you will have to apply to another lender"


You don't have to do any such thing. You can walk away. Maybe, if the answer is not to your liking, end that conversation with "can you explain how I can get my deposit back, please?"

See where that leads her...

pippac123

just a quick update, after a week of waiting I finally got a reply to one of my emails to the financial advisor who has said that some more comparable properties were sent to the lenders yesterday and they are awaiting the answer from them.