Is my estate agent right about this?

Ciske

We had an offer on our house but the mortgage company of the buyers just came back to say there will be a retention. They say the house in current state is worth X, and after repairs, it will be X+retention. Buyers now want to reduce their offer by the value of the retention.

We cannot afford to reduce the price so have just spoken to the EA and said we are rejecting the reduced offer, and want to go back on the market.

She now tells me that, because of this valuation being on file, no bank will ever lend more than X to have this done. E.g. it is now 'officially' worth X and subsequent valuations will just look at the previous valuation and go with that.

I find this a bit odd. Say if another buyer were to show and offer more, they may still be faced with the retention, but over a higher offer. It seems highly coincidental that the offer we received is the exact market value and that now nobody else can ever get a mortgage for more.

Is she telling me porkies? Or have we sealed our fate by accepting the original offer and forever capped our max price to that value, unless we get a cash buyer?

brit1234

Ciske wrote: »

We had an offer on our house but the mortgage company of the buyers just came back to say there will be a retention. They say the house in current state is worth X, and after repairs, it will be X+retention. Buyers now want to reduce their offer by the value of the retention.

We cannot afford to reduce the price so have just spoken to the EA and said we are rejecting the reduced offer, and want to go back on the market.

She now tells me that, because of this valuation being on file, no bank will ever lend more than X to have this done. E.g. it is now 'officially' worth X and subsequent valuations will just look at the previous valuation and go with that.

I find this a bit odd. Say if another buyer were to show and offer more, they may still be faced with the retention, but over a higher offer. It seems highly coincidental that the offer we received is the exact market value and that now nobody else can ever get a mortgage for more.

Is she telling me porkies? Or have we sealed our fate by accepting the original offer and forever capped our max price to that value, unless we get a cash buyer?

Partial Porkies.

The original bank will record the price on file, however I really can't see or understand why they would share that with other banks. That bank may have say 40% of the local mortgages after the banking consolidations. However if the bank hired private surveyors who did the valuation then they would record the valuation and would likely refer to it if a rival bank asked to do the survey.

To be blunt house prices will continue to fall over the next few years back to normal levels. You wanting a minimum price won't stop this, your pool of potential buyers will get smaller till near zero at current price.

You best hope is to concentrate on presentation, getting thing fixed quickly and hope for a cash buyer if you need a minimum value. The longer the wait the harder it will be.

On a positive not as your property devalues so does the ones you want to buy.

kingstreet

Ciske wrote: »

We had an offer on our house but the mortgage company of the buyers just came back to say there will be a retention. They say the house in current state is worth X, and after repairs, it will be X+retention. Buyers now want to reduce their offer by the value of the retention.

We cannot afford to reduce the price so have just spoken to the EA and said we are rejecting the reduced offer, and want to go back on the market.

She now tells me that, because of this valuation being on file, no bank will ever lend more than X to have this done. E.g. it is now 'officially' worth X and subsequent valuations will just look at the previous valuation and go with that.

I find this a bit odd. Say if another buyer were to show and offer more, they may still be faced with the retention, but over a higher offer. It seems highly coincidental that the offer we received is the exact market value and that now nobody else can ever get a mortgage for more.

Is she telling me porkies? Or have we sealed our fate by accepting the original offer and forever capped our max price to that value, unless we get a cash buyer?

Could you get the work done then provide evidence to the buyer so he could get the retention lifted and you could complete at the agreed price?

If you try to duck this, there's a good chance it will happen again and again, particularly if it's an obvious issue.

It's worth bearing in mind the retention may be well above the cost of remedial work. Here's an example. I once had a retention of £2,000 for damp course work. I got an independent damp surveyor in for £50. He reported the soil in the back garden was against the rear wall and as a result moisture was bridging the damp course.

It cost nothing to put right. The vendor dug the offending soil out and moved it elsewhere, leaving the wall open to the air as it should have been.

Investigate the possible cost before you take your ball home.

Ciske

Thanks guys!

We accepted an offer which is 20% less than what we originally paid, so we're definitely not unrealistic about the market and I know it's still heading downwards, especially in our area. I'm ok with that loss as we earned it back on the purchase of the new house.

However, like all vendors, we're not an endless pit of money and the current offer would leave us financially crippled, so it's not really an option.

We are lucky in the sense that us and our First Time Buyers are the bottom of a pretty large chain which our EA has a strong interest in, as it contains a lot of their properties. EA has gone off to renegotiate the prices across the chain with the eventual aim to reduce our prospective new house in price. Obviously they are keen to stop the chain from collapsing and we might as well get them to work for their fee.

@ kingstreet: I do think the retention is excessive and I am considering to get an independent quote myself for the work to see if it's more cost effective to fund it ourselves. Also, a fair bit of the work would be shared cost with neighbours, but the retention does not take that into account.