Gloom, mortgage fell through due to surveyors report, retention

Cody

Good Morning,

Although Despite the sun shinning through the window, have woken up v.depressed.....:(

My partner and I were until yesterday close to buying our new home, after 20 years of dreaming. Its a thirty year old property, easily affordable for us and as novice first timers, we have falling in love with it. It's a country property for our family, was going to be a complete change in our lives.

It has been rented for eight years and has not been looked after, a variety of things were highlighted in the surveyors report, including big tres near property need removing, possible amateurish electrics, damaged frontage of roof,misuse with septic tank. Now, we knew about all this, and the valuation reflects this work and the price we offered (and had accepted). We have been keeping 20k back to fix all of these things once purchased, it was our dream to,buy a house needing fixing up (although it is habitable). We would do a lot of work ourselves or family members who are plumbers, builders, electricians.

But!, our mortgage lender has risen lots of points of concern, and has more or less now said no. ...or to ask to get expensive reports on these items and then hold money in retention and so on....we have time issues due to,schools and so looks unlikely to happen.

What's my question....hmmm? Well, how can we make this purchase happen without lengthy and costly retention. I thought if we offered a bigger deposit (say 30% instead of 10%), then the mortgage company might have less concern? ....has anyone war stories on this, positive experiences?, we speak with mortgage people on Monday and I'd like to have some knowledge of examples where retention was avoided, to persuade them not to insist on this.

Thanks for reading

Cody

anselld

I am slightly confused, if you can afford to finance a 20% larger deposit why can't you finance the retention? How much are they proposing?

Retention isn't costly if you are planning to do the work anyway, it just creates a cash flow problem.

Cody

Hi Anselid,

The cost of the reports could add several thousands.
We were going to do a lot of the work ourselves, with low cost but skilled labour from friends and family, retention I believe may require more established firms and reports of work.
And yes, will be a cash flow problem, may need to find an extra 20k on top of what we have.

We haven't got to stage of amounts yet, but mortgage broker thinks could be Tens of thousands.

Speed is also a major issue, time to get surveys, reports and then have them approved by the mortgage lender.


Cody

kingstreet

First of all, was this in a survey, or in the mortgage report & valuation?

Items requiring attention are part and parcel of the home buying process. Feeling that the world has caved in because you are being asked to obtain a few "expensive" reports is not sensible.This is a business transaction and you need to approach it from that perspective.

What is the value of the property in its present condition, what is the agreed purchase price and what is the projected value after essential repairs?

Establish a list of the items requiring inspection and investigation. Find specialist inspectors and surveyors for those issues. Use independents and pay for their time, expertise and advice. Try to avoid getting "free" reports prepared by firms who may have an interest in doing any remedial work.

Once the reports and estimates for required essential repairs are back, submit them to the surveyor who did the valuation. Any retention will be based on the true cost, not on the surveyor's estimate. Indeed, it is possible the items highlighted as essential repairs aren't actually needed at all. Read the recent threads on damp and wall ties on here to see what I mean. Use the search function.

For example;-

http://forums.moneysavingexpert.com/showpost.php?p=61722413&postcount=36

Once the retention has been set, provided it falls within the amount you've set aside, all you do is buy the property using money you set aside for the work to increase your deposit to bridge the retention. You get the work done and supply the evidence to the lender. The retention is then lifted and the retained funds released and you can then pay the contractors you have chosen to do the work.

What you currently have is a possible retention and a suggested amount. Until you have established what is actually needed, you have no clear idea of what the implications will be.

daleksec

Just on the point of whether a bigger deposit will make the mortgage company less concerned. Not in my experience. We are buying with a 40% deposit and the mortgage company are still insisting on reports on what have turned out to be fairly minor problems. I know another buyer who is at present trying to borrow less than a third of the value of the house (less than £50,000) and is being asked to produce reports/quotes for again, relatively minor faults. I'm not quite sure of what the mortgage companies logic is here - you would think if they are only lending a smaller proportion of the property's value, they would be less strict, but it doesn't seem to work that way.

Good luck!

kingstreet

Regardless of the loan to value, the property is suitable security in its present condition, or it isn't.

The lender will want to get it into that condition before it takes it on as lenders don't want to limit their chances of achieving the highest possible price in the event of repossession.

That's to the borrower's benefit, as well as the lender's.

Cody

Thanks Everyone;

So, seems retention is unavoidable.

We commissioned the more expensive surveyors report, which was quite comprehensive...maybe too much so, and valued the property at £120,000. Our offer was made before this which was £122,500. This slightly higher cost has up to now been justified since the vendor (which is a bank, house has been repossessed from a property developer) is required by law to fix the septic tank/sewage system before sale.

Question: If we get quotes / reports made on work required by firm A, can we then use a different firm or do the work ourselves, assuming we do the work to a professional standard?

Cody

Ivana_Tinkle

If the surveyor has downvalued the property, it's usual to renegotiate the selling price (ie drop your offer to the new valuation). If you show the vendor the report, so they can see you're not trying to gazunder them without reason, they'd be mad not to agree (although some people are mad, so be prepared to argue a bit...)

Cody

Well, it's been downgraded just £2,500 from our accepted offer price, and then the vendor has to fix the issue with the septic tank before sale, so not sure can negotiate on this, if worth it.

I believe the surveyors valuation takes into account these issues I've mentioned. Seems odd (or rather unfair) to me then that the bank then wants these issues fixed before providing the full sum, since in effect the value of the house will then be more.

i.e. value now = 122500

with work done, value would be 145000 (esT).

but the mortgage value remainsa at 122500 (-12500 our deposit)

Suppose bank these days have to be ultra careful.

We have now resigned ourselves to retention (or finding a different house to buy).

Cody

I_have_spoken

This slightly higher cost has up to now been justified since the vendor (which is a bank, house has been repossessed

Can you approach that bank for your mortgage, they may be more sympathetic if it means getting £ in the door and a repo off their hands?