How often are houses undervalued by the survey?

JQ.

Either I'm completely misreading this post or everyone else is. But I think the OP has got a cracking deal and is missing an opportunity.

They were buying the house for £150,000 and get survey done. Survey shows £5k of works need to be done after which the house will be worth £152k. OP gets vendors to drop the price by the whole £5k and agree new sale price of £145k. Mortgage company will lend on that basis subject to OP getting £5k of works done upon completion which OP will have to pay for themselves and then be reimbursed by the mortgage company via the retention, after which the mortgage company will value the house at £152k, showing a £2k profit.

All the OP has to do is fund £5k of works for a matter of days, possibly a couple of weeks - between paying the builder and being re-imbursed by the mortgage company. Is that really a deal breaker?

Sounds like a cracking deal in that the vendors are effectively paying for all the works via the price reduction and then the OP is profiting from having those works done. Lots of vedors refuse to drop the price or will only make a contribution.

As said I could be totally mis-reading it, but that's my interpretation.

TMoose

JQ. wrote: »

Either I'm completely misreading this post or everyone else is. But I think the OP has got a cracking deal and is missing an opportunity.

They were buying the house for £150,000 and get survey done. Survey shows £5k of works need to be done after which the house will be worth £152k. OP gets vendors to drop the price by the whole £5k and agree new sale price of £145k. Mortgage company will lend on that basis subject to OP getting £5k of works done upon completion which OP will have to pay for themselves and then be reimbursed by the mortgage company via the retention, after which the mortgage company will value the house at £152k, showing a £2k profit.

All the OP has to do is fund £5k of works for a matter of days, possibly a couple of weeks - between paying the builder and being re-imbursed by the mortgage company. Is that really a deal breaker?

Sounds like a cracking deal in that the vendors are effectively paying for all the works via the price reduction and then the OP is profiting from having those works done. Lots of vedors refuse to drop the price or will only make a contribution.

As said I could be totally mis-reading it, but that's my interpretation.

I think you're spot on. The problem is that the OP cannot fund the £5K of works, since all her ££ are taken up in the deposit/moving-costs.

Unfortunately reducing the purchase price does not free up that amount of cash - merely the same % as your % of deposit. i.e. dropping by 5K will only free up £750 on an 85% LTV mortgage, thus still being £4250 short of capital for the works.#

Mallotum_X

Deal to be done with a builder then. Fixed quote work, deposit up front of whatever they can get together, works done asap, retention released to pay builder the balance.

You may have to sweeten the deal a little with the builder, so £5k of works may cost a little bit more, but has to be worth avoiding starting it all again.

poppysarah

pledgeX wrote: »

If your deposit was 70k, would they care that about the 20k difference as you're puttin in such a wodge of cash which covers the difference?

But should you then care about paying more for a house than it's value?

pledgeX

poppysarah wrote: »

But should you then care about paying more for a house than it's value?

Of course you should care, and if you're talking 20k difference then you must REALLY like the house to pay that much over the value. But that was just an example to illustrate my point.

I'm in a fairly similar position to my example but I believe we've maybe paid a few k over the real value, but we're happy to do that as we like the house and are looking to live in it, not make money from it.

Valuation should be done in the next couple of weeks so I'll guess we'lll find out!

JQ.

TMoose wrote: »

I think you're spot on. The problem is that the OP cannot fund the £5K of works, since all her ££ are taken up in the deposit/moving-costs.

Unfortunately reducing the purchase price does not free up that amount of cash - merely the same % as your % of deposit. i.e. dropping by 5K will only free up £750 on an 85% LTV mortgage, thus still being £4250 short of capital for the works.#

But they don't need the money long term, you could pay a builder with a credit card and still not incur any interest. You could agree to pay the builder 1 month after completion of the works. Money could be borrowed of friends and family. The OP could take a loan with no early redemption fees. A months interest on £5,000 will be about £50.

This was absolutely not a deal breaker and nobody has been hard done by. If the OP can resurrect the deal I would as it seems totally illogical not to do it for the sake of a loan for a couple of weeks - after all the mortgage have written a contract saying they will give them the £5,000 once the works are complete.

There are actually building firms out there who specialise in this kind of work and will no doubt accept delayed payment - that's certainly what happened when we had a retention on a property we bought many years ago.

AAS

The las few posts are prob right. It's not that we feel we'd be paying over the odds, more getting a good deal, it's just the short term cash flow. I know you are probably right about using credit cards etc.. it's just that it has been a difficult week with having to pay out £1.5k in emergencies and we do have 1 credit card but as we don't use it it's only got £3k limit. We'll probably regret it but at this moment in time walking away seems sensible even if crossing our fingers and going for it seems tempting. I just wondered how common this was?

JQ.

Speak to the Estate Agent about builders who specialise in this type of work, ie mortgage retention work. They allow you to delay payment until the mortgage company have released the funds. As I said above, this is exactly what we did on my first house purchase - I didn't have to borrow the money, all we did was instruct the builder, they did the work, the mortgage company then sent the surveyor round to check the work had been done, the mortgage co. then sent a cheque and we paid the builders.

Make enquiries, you could still own this house if you want to.