Valuation Nightmare! It's falling through and it's not our fault

Lance

The Estate Agent wants to sell the house and get the commision. The bank is the one lending the money. If the buyer goes bankrupt / flees etc then the bank needs to cover the remaining loan plus all the costs of repossessing and then selling the house in a falling / static market. They didn't use to do this, see Northern Rock, and needed a massive bailout.

Milliewilly

Lance wrote: »

The Estate Agent wants to sell the house and get the commision. The bank is the one lending the money. If the buyer goes bankrupt / flees etc then the bank needs to cover the remaining loan plus all the costs of repossessing and then selling the house in a falling / static market. They didn't use to do this, see Northern Rock, and needed a massive bailout.

But its not right for the bank to value as a potential distressed sale otherwise they shouldn't agree the loan and take the valuation fee in the first place.........oh wait I see what they've done there.

Remember - on moneysavingexpert Surveyors have God-like status and are never ever wrong and are the only people who can accurately value a house when they drive from another city to value your house and look at comparables set by estate agents. It is common practice for them to go into the local agents and ask what the value should be.

But they're saving you money come the cries..... no they're stopping the transaction and taking your survey fee. Someone with a lower LTV will get the house valued at the estate agent asking price because the bank are confident their loan is safe.

If they think prices will fall in the very near future they will value lower - the fact you are paying for a valuation on that day not in 6 months, 12 months or 5 years in the future with a loan spanning generally over many years where fluctuations will level out is irrelevant.

sonastin

Worst case scenario for the bank is they lend you the money and you never start paying it back. So they have to make sure that if they repossessed it on day 1 (or effectively day 1 - as soon as they can start proceedings based on you never making the first payment), they'll be able to get their money back. So if you have a good deposit, there is little risk for them and the "valuation" isn't particularly important. The higher the LTV, the more risk for the bank so the more important the valuation becomes and therefore the more cautious the surveyor has to be to protect his a$$.

Its basic economics of protecting their investment. 100% and self-certified mortgages were the result of accepting that things will level out over the period of the mortgage. Now we are back to making sure the banks don't lose money.

kmmr

Milliewilly wrote: »

Remember - on moneysavingexpert Surveyors have God-like status and are never ever wrong and are the only people who can accurately value a house when they drive from another city to value your house and look at comparables set by estate agents. It is common practice for them to go into the local agents and ask what the value should be.

I agree. Surveyors are not gods, and there is far too much assumption on this site that the buyers are wrong, and not the surveyor.

There is no absolute 'right' price. Having said that, surveyors sometimes agree that they are gods, and will refuse to budge on valuation. Best to give them a good way to gracefully change their mind if possible.

Like - 'oh silly me, I forgot to tell you that this house comes with the 7 acres behind, did you consider that?' Or more likely... show recent extension, or bathroom they missed or something. Which surveyors are quite likely to do!

Good luck. Hope it wasn't e-serv!

Eric1

Milliewilly wrote: »

But its not right for the bank to value as a potential distressed sale otherwise they shouldn't agree the loan and take the valuation fee in the first place.....

Why not? It is their money they are risking, so they can take any precautions they feel necessary.
There are only two ways to lower their risk: increase your deposit or reduce the agreed price.

Orpheo

Eric1 wrote: »

Why not? It is their money they are risking, so they can take any precautions they feel necessary.
There are only two ways to lower their risk: increase your deposit or reduce the agreed price.

Absolutely. Why is it that people seem to think that borrowing money is an entitlement? The lender insists on a realistic valuation in order to protect their investment in the property. This protection is considerably more important in a falling market which is why they are asking for large deposits.

poppysarah

kmmr wrote: »

I agree. Surveyors are not gods, and there is far too much assumption on this site that the buyers are wrong, and not the surveyor.

What?

You sound like someone wanting to overpay.

This is moneysavingexpert.com not moneyspendmorethanineed.com

SonjaLiK

He most likely doesn't have a clue about the area but instead will have to talk to local EA's and see what they have on the books, look at comparables and look at what sold recently.
While doing that, he doesn't know if the house that sold 4 days ago is identical to yours or a repo in need of total gutting. He goes by tha mathematical average.

The vendor, to me, sounds like someone who still hasn't realised that houses have a few different realistic values - one of them being emotional value which he appears to be stuck on, another being current market value which in simple terms is what someone else is willing to pay for it. Then for mere mortals in need of bank's money there is also bottom line practical value that basically equals how much the bank can sell it for to cover their asses should you decide not to pay the mortgage.

To simplify things beyond recognition - you can't go higher, they won't go lower. Unless someone explains the laws of physics to them, all you can do is inform the EA that the offer still stands as is and look for another house.

Milliewilly

Eric1 wrote: »

Why not? It is their money they are risking, so they can take any precautions they feel necessary.
There are only two ways to lower their risk: increase your deposit or reduce the agreed price.

Because if the bank thinks the borrower will default they shouldn't be approving the loan in the first place and taking the valuation fee!! Its sub prime loans that got the economy into this mess in the first place.

Eric1

Milliewilly wrote: »

Because if the bank thinks the borrower will default they shouldn't be approving the loan in the first place and taking the valuation fee!! Its sub prime loans that got the economy into this mess in the first place.

Apparently the bank thinks that in this case lending £203K-deposit would be a subprime loan, while lending £190K-deposit would not. The difference, about 6%, is not big enough to suspect that the bank only wanted to get the valuation fee.