Valuation less than offer price (repossession property)

Mods

Hello,

I'd be grateful for some advice about a situation.

In a nutshell, I have a decision in principle for mortgage representing 90% of the property value (max. loan £116k).

Found our ideal home that provides everything my family and I need for the medium-long term: a repossession property that originally went on the market for £114k but was reduced a few weeks later to £110k.

My partner and I looked at it and decided to offer £114k despite the reduction in order to eliminate competition. This would means we borrow around £102,600 and put in £11,400 deposit.

Might seem crazy to some that we're offering more than asking price but we feel very strongly that the house is worth what we're offering as the majority of properties in the area are much smaller and would set us back at least £130k.

Needless to say, the vendor accepted our offer and everything was going ahead quickly and smoothly but we've hit a stumbling block since our survey was carried out.

The surveyor has valued the property at £110k which is £4k less than our offer. My mortgage broker/advisor states that whilst the lender is still happy to lend, this will be limited to around £99k (90% of 110k). This isn't technically a huge problem as I could probably scrape together the extra cash but this is far from ideal.

Mortgage broker believes we can convince the valuer to reconsider their valuation provided we get quotes for some repairs. We've started doing this and have all but one quote in writing but we should get this soon.

My question is what is the best option out of the three below:

1) Continue to attempt to convince the valuer to reconsider their assessment. How likely is it that they will do this?

2) Renegotiate price. Problem is that the vendor's T&Cs forbid this and we're worried we could end up losing house altogether if bank just thinks we'll go with another offer from another party.

3) Bridge the gap between the mortgage and the offer price with deposit and rest of my savings. This would still leave £2,748 short. I could possibly borrow from a family member or my partner could put this up once some property of hers (and her ex) sells in a matter of weeks. We need to complete quickly though and time is running out.

It's important to note that we don't want to lose out on this house because it seriously is ideal for us and is a bargain.

All advice much appreciated. Cheers.

marlot

DOn't forget you'll need money to pay the builders too.

Mods

Of course. What I didn't mention in my OP is that my partner joint owns a house with her ex which is in the final stages of a sale. We're planning to use the equity from her house to repair and improve the new house.

Mods

Can anyone help me out here?

silvercar

Renegotiate the price. Tell the vendor that the survey down valued and ask them to accept 110k. You'll certainly flush out if there is another offer on the table. Remember and emphasise that you are far nearer to completion than a new buyer would be.

Thrugelmir

Mods wrote: »

1) Continue to attempt to convince the valuer to reconsider their assessment. How likely is it that they will do this?

2) Renegotiate price. Problem is that the vendor's T&Cs forbid this and we're worried we could end up losing house altogether if bank just thinks we'll go with another offer from another party.

3) Bridge the gap between the mortgage and the offer price with deposit and rest of my savings. This would still leave £2,748 short. I could possibly borrow from a family member or my partner could put this up once some property of hers (and her ex) sells in a matter of weeks. We need to complete quickly though and time is running out.

1. Valuer works on behalf of the lender. If the property requires work. Then a £4k reduction from the offer price seems appropriate.

2. Reduce your offer.

3. Why would you want to overpay for a property that you know requires further expenditure on.

Mods

Thrugelmir wrote: »

1. Valuer works on behalf of the lender. If the property requires work. Then a £4k reduction from the offer price seems appropriate.

2. Reduce your offer.

3. Why would you want to overpay for a property that you know requires further expenditure on.

r

1. Of course. Stands to reason but I feel the home buyers report is very harsh as tradesman who have visited to give us quotes have played down the extent of the work that needs to be carried out. Is central heating considered to be an essential work because that's the biggie? Everything else is relatively minor.

2. I certainly want to reduce our offer. how likely is the vendor (a bank) to agree? We have written quotes to back us up. Could we risk losing the property if the vendor decides we're a hassle and goes back to the party with the next highest offer?

3. Quite simply because there are no other houses in the area of this size at this price. Smaller properties in area will cost us in excess of 130k. We're getting a good deal here even if we pay above what our home buyers report says it's worth. Besides, in the grand scheme of things, is 4 grand really that much when we could throw away more than that renting? We want this house as a family home for years to come - not a short term investment.

Thanks everyone for your input. keep it coming!

joepubli

I suspect if you tell the bank (and send them the survey) they will take the reduced offer. Tell them that the bank won't lend you more than this. They might say no at first but should eventually take it.

can't imagine they will want to start the whole sale process again for the sake of £4k - and the delay will cost them that anyway. They will just want to be rid of it.

Its not as if you are renegotiating - the survey has found issues with the house - central heating is easily £4k.

However, if you absolutely don't want to lose the property then you will overpay by £4k. I think its at least worth testing the waters

kingstreet

The valuation in current condition is £110k?

What is the value after essential repairs?

Thrugelmir

Mods wrote: »

2. I certainly want to reduce our offer. how likely is the vendor (a bank) to agree? We have written quotes to back us up. Could we risk losing the property if the vendor decides we're a hassle and goes back to the party with the next highest offer?

As a repossession the lender has a legal duty to obtain the best possible price on behalf of the debtor. So even if you offer is accepted. The offer will be advertised and potentially higher bids will be accepted. Which may result in you ending up in a contract race.

Mods

Thanks again for your responses, everyone.

kingstreet wrote: »

The valuation in current condition is £110k?

What is the value after essential repairs?

Yeah, the surveyor looked at it and said it's current value is £110k.

My mortgage broker/advisor has said we need to establish what the value is after repairs hence why we have started obtaining quotes in writing from tradesmen.

Thrugelmir wrote: »

As a repossession the lender has a legal duty to obtain the best possible price on behalf of the debtor. So even if you offer is accepted. The offer will be advertised and potentially higher bids will be accepted. Which may result in you ending up in a contract race.

Thing is, somebody else offered an amount to initiate the public notice and we then came in with our offer. No changes were made to the public notice following our offer so I wonder if we revised our offer, would it be advertised? Don't really want to get involved in a contract race even though we've had searches and surveys carried out already. Only thing holding us back now is this discrepancy between the surveyor's valuation and our offer. A meagre £4k which I do feel in the scheme of things matters very little.