Mortgage valuation report much higher than estate agents estimate!

valleyslad_2

Approximately 5 years ago a good friend and I bought a house together to simply get on the property ladder. We got a 100% mortgage for £116,000 and the outsatanding balance on this is approx. £107,000 today. As I am now engaged my friend offered to buy me out of the property, so we got three valuations from different estate agents in our area and the average of these three valuations was approximately the same as what we still owe on the mortgage i.e. no equity in the house at all. Reluctantly I agreed to the change of equity for no money at all, simply because my fiancee and I want a place of our own. However, due to a clerical error I have now found out that the the lender my friend is using to buy me out has valued the house at £120,000. At first I couldnt believe it especially with how stringent valuations are at the moment but it has been confirmed. So do I now use this to try and get some money from my friend or is it more trouble than its worth. I wouldnt be thinking of asking for a lot, approx. £2500 which would simply help with our house purchase. Any thoughts would be much appreciated.

Comyface

Looks like your friend is getting a 90% mortgage (borrowing £107k on £120k). So, unless he/she's got a spare £2500 in the bank, then you won't be able to get any money, because that'll be the maximum mortgage available.

For the mortgage valuation, surveyors have a 'bandwidth' (can't remember the exact term!) on acceptable valuations, so ~£110k - ~£120k may have been an acceptable amount and he/she's gone top end otherwise the mortgage would have been declined.

Really, what is something worth? It's worth what someone else is willing to pay for it. So, the fairest way to determine this would be to sell the house on the open market and split the profit (if any, I suspect there wouldn't be any with sols fees and estate agents fees etc). You may find you get offers 10-20% below asking price in this market as well.

If I were you, I'd stay friends with your friend and not say anything.

jimjames

What the bank valuer says its worth and what estate agents say its worth are completely different - as you have found out.

The estate agents may undervalue to get the sale, they may also over value to get your business. As said above the only way to find out who is right is to put it on the market. Just because the bank gave that valuation doesn't mean the house would sell for that much.