HSBC undervalued home by £50-60k!

bexterswell

My partner and I brought a 3 bedroom Victorian semi a yearago that needed to be substantially renovated as it hadn't been decorated for30years and everything had to go. We brought it for £334k, when like houses onthe street sold at the time for between £390-450k depending on the condition and whetherthey'd been extended.

So, we renovated it top to bottom, only the walls and roofremained, added ‘original features (high skirtings, cornices, stripped pinedoors, cast iron fireplaces), installed wooden double glazed sash windows...allthe kinds of things that make the houses sell quickly and towards the higherend on this particular street. We did our research, RightMove thankfully keepseveral years worth of sales data and pics on their website.

Rather than selling straight away as we’d originally plannedwe thought we’d stay a bit longer and switch to an interest only mortgage. Wefigured we only needed a valuation of £400k to reach the LTV threshold and getan interest only and it's clear that we'd realistically sell for 420k-ishin the Spring (marketed at £450k accdording to estate agents). Over a 6 month period it worked out more cost effective to switcheven after paying a 3k redemption fee to get out of the current mortgage.

HSBC told us the computer said our house had only increasedin value by 15k to £350k and advised we'd have to pay for a valuation. 3 monthslater and £350 down we finally get a valuation which came back at £350k. We complained in branch and over the phone only to get a standard customer service response - admitting no fault, and saying that DirectValuations are a ‘professional valuation company’, blah blah blah, and that we were essentiallywrong. Clearly not evening checking to see in there had been an error.

We complied a dossierof like houses that have sold in the past 2 years, with photos , floor plans and sold for prices which all rangefrom £334k (ours the lowest) to £475k (upper end with a extension or conservatory and a high finish), we found houses with identical floor plans that sold for 402-420. We are now seeking legal advice should they notrevise their valuation – these has caused them to ‘escalate’ it to their ServiceQuality Team.

Has this happened to anyone else? What did you do? What wasthe outcome?
There is a chance it's a genuine error, but it's strange that an error never works in the customers favor, always the banks. In a weirdway, I hope HSBC don’t revise the valuation so that we can go to the press and publically demonstrate how corruptbanking system is. We’re fortunate in that we’re OK financially, just being savvy by switching to interest only,but there are others who are losing their houses because the banks are undervaluing their homes....makes me so angry at the injustice of it all!

kingstreet

A surveyor visited the property, carried out an internal inspection and you are challenging the valuation?

What did you put on the application as your estimate of value? What mortgage amount did you apply for?

Are you applying for an interest-only mortgage with no repayment vehicle other than the sale of the subject property?

Thrugelmir

Valuation for lending purposes is not necessarily the resale value as given by an estate agent for marketing purposes.

Why do you consider yourselves "savvy" by requesting a switch to an interest only mortgage? As you may be requested to provide evidence of a suitable repayment plan.

How did you fund the renovation works?

eddddy

Hi bexterswell

I can understand your frustration, but you also need to take a step back:

bexterswell wrote: »

...There is a chance it's a genuine error, but it's strange that an error never works in the customers favor, always the banks. In a weirdway, I hope HSBC don’t revise the valuation so that we can go to the press and publically demonstrate how corruptbanking system is. ...

How does this work in in bank's favour? They make money by lending money - but they have refused to increase your mortgage to £400k. So they have lost potential profit.

£350 does seem high for a valuation fee, but I really doubt that HSBC instruct their valuers to undervalue just to earn a few extra pounds in fees.

On a more pragmatic level, a valuer from a national firm like DirectValuations probably doesn't know your area well. He/she probably relied very heavily on the fact that the house recently sold for £334k - maybe not knowing what type of work had been done to the house since.

I was in a similar situation to you, I took the following steps to try to avoid the problem that you describe:

Before the bank's valuer visited, I got three market valuations from local EAs, confirmed in letters. I also gathered up invoices showing work done on the house.

I showed all these to the bank's valuer when he visited - and gave him copies of the EAs letters to take away.

My perception was that the valuer was very pleased that I had done this, as it helped him. (Obviously, he didn't openly admit this!) He still valued the property lower than the EAs suggested - but it was far more realistic than a previous valuation I had in similar circumstances, without the benefit of EAs letters.

Thrugelmir

eddddy wrote: »

On a more pragmatic level, a valuer from a national firm like DirectValuations probably doesn't know your area well. He/she probably relied very heavily on the fact that the house recently sold for £334k - maybe not knowing what type of work had been done to the house since.

Common misconception is that the value of improvements adds the same value to a property. Such as changing the doors.

1StepDebt

bexterswell wrote: »

We are now seeking legal advice should they notrevise their valuation – these has caused them to ‘escalate’ it to their ServiceQuality Team.

I don't think the bank will be too worried about the outcome of your 'legal advice'.

At the end of the day, what have the bank done wrong - they used a professional valuation company which absolves them of any responsibility for the valuation.

Even the valuation company will be covered - how can you prove that it's worth more. A valuation is nothing more than an opinion.

bexterswell wrote: »

it's clear that we'd realistically sell for 420k-ishin the Spring

Nothing is clear in todays market. In Northern Ireland, prices have fallen 55% from peak. You'll probably come back and say that "my area is different" - just like people in Northern Ireland were saying in 2007.

Brock_and_Roll

I think perhaps the OP has been watching too much Homes Under The Hammer!

They bought the property a year ago, presumably on the open market, £334k. A year later the bank FOR MORTGAGE PURPOSES gets a vakuation back for £350k - a 5% increase on the purchase price at a time when prices are falling or static in most places.

The OP states that the house had not been decorated in 30 years but presumably it could have had a new kitchen, decoration and general bringing up to date for £16k - the extra amount of the valuation. "Restoring" original features might make the place more for buyers and ultimately the OP's sales price might reflect this, but I dount it would be relevant for a mortgage valuation.

The OP's comments about the banking system are frankly laughable in this scenario.

latecomer

Prove them wrong - put it on the market for £420,000 and see if it sells.

dunstonh

Estate agent valuations are typically around 15% higher than the realistic value.

There is a chance it's a genuine error, but it's strange that an error never works in the customers favor, always the banks.

That is flawed thinking on your part. The banks make money by lending it. A valuation coming up short means the bank cant lend the money and therefore cannot profit from it and instead incurs cost for an aborted application process.

We are now seeking legal advice should they notrevise their valuation – these has caused them to ‘escalate’ it to their ServiceQuality Team.

Any expression of dissatisfaction does require an escalation and review. They may decide there is scope for increase or they may decide they were right. They wont give two hoots about any threat of legal advice being sought because you don't have any legal basis to argue the decision.

makes me so angry at the injustice of it all!

What injustice?

ILW

OP could always threaten to thqweem and thqweem until HSBC increase their valuation.

Goldiegirl

This situation would sometimes arise when I worked for a big lender.

The valuer is providing a valuation for mortgage purposes, not a market valuation. The bank is taking a risk lending people money - they want to make sure the property is suitable security so they won't lose their money in the event of default. Therefore the mortgage valuation can be sometimes less than people were hoping for

If the customer queried the valuation, we sometimes would ask them to provide evidence for their reasons to believe that the valuers opinion was incorrect. We'd then refer the evidence on the the valuer for comment. From time to time the valuer would revise his opinion, but most of the time he would stick to his original opinion. As far as the lender is concerned, the valuer is a professional whose opinion they rely on.

Any threat of legal action or Watchdog would not make the valuer or the lender change the figure