Potential mortgage valuation problem

benson1980

Hi, just after a bit of advice on the following.

We've put an offer in on a house which has been accepted. The EA selling it told us that any survey on the property would come back at 15k less and that they didn't value it at what we offered! Its certainly the first time we've encountered an EA that has talked down the price of a house...

Moving on, we've encountered a potential problem in that our LTV ratio is just below the cusp of 60%, which allows us to get a decent rate through our current mortgage lender. Obviously if they value it at less, then we'd be in a bit of bother, and realistically would have to reconsider proceeding both on the basis of higher monthly payments and the fact that we don't want to pay over the odds if a valuation comes back at less.

To clarify, there's no way the sellers would budge and accept a lower offer. Secondly I did my research, viewed 50+ houses, researched every single sold property price in the area and I think its worth what we offered. Properties on that road, which are all very similar, have typically sold in the last 5yrs anywhere between 230 and 275k, probably averaging at 250k. This particular house benefits from being at the end of the cul-de-sac, benefiting from a much bigger garden, and own driveway and detached garage rather than shared access. Also by the side of the house is a field stretching for half a mile. This is why we offered higher.

My dilemma is therefore how to proceed. I think the best plan of action is to await the mortgage valuation, ideally before laying out for survey. I have instructed a solicitor but they want £300 up front. I'm already being chased a little bit by the EA (its been a couple of weeks since offer accepted).

Is it best to be open with the EA now and highlight this potential problem? Ideally if this does crop up I'd want a bit of negotiation rather than having to walk away, so is it almost better to forewarn them? To be honest I wouldn't have considered it to be an issue if the EA hadn't been so adamant that it will get valued at less...

Thanks

eddddy

Hi benson

The EA is just being a good salesman and trying to preempt any problems before they arise.

Or to put it another way, he's trying to hoodwink you by saying that all valuations come in at £15k under selling price. (Then if the valuation comes in at £10k under selling price, he'll tell you you should be celebrating because you have a bargain!)

In your position, I would play the EA at his own game and very gently and politely say something like:

"If the valuation is going to come in at £15k under selling price, we can't achieve the 60% LTV so we wont be able to proceed. So is it best to cancel the surveyor now and save the valuation fee?"

I'm pretty sure the EA will backtrack, and you will end up in a better bargaining position.

(The thing you need to be careful of is the EA saying "in that case you should talk to our mortgage advisor about finding a deal with a higher LTV ratio".)

benson1980

Thanks eddddy- our valuation is free, and there's no mortgage arrangement fee so as far as I'm aware its not going to cost anything. Potentially the problem is that I've been informed by our broker that valuations at the moment are taking anything up to five/six weeks to arrange. Therefore presumably they're going to want some other progress in this time, which will cost me money.

I still don't get how this is in the EAs interests- if they backtrack and say "actually the house is worth what you offered", how are they benefiting? Or am I missing something? I thought as you initially state- they were just pre-empting a potential issue.

chickaroonee

What did you offer?

Is it the stamp duty threshold causing the problem?

benson1980

Over the stamp duty- 265k...

chickaroonee

I can see why the surveyor will downvalue it then. I guess it's up to you if you want to pay it, but do remember if you do you might have the same problem selling it on and only get 250k.

benson1980

Its the kind of house that we'd stay in for a long time so not bothered about problems selling. The reason we went over the stamp duty threshold was for this exact reason. To get something bigger that we would want to stay in, and also we found a lot less competition when it came to offers, so we felt that if anything this was a price range where we might be able to get a better deal, albeit evened out by paying more stamp duty. I foresee that this is going to cause a major issue for us then as according to our broker this would have a significant effect on our repayments/interest rate.

eddddy

benson1980 wrote: »

I still don't get how this is in the EAs interests- if they backtrack and say "actually the house is worth what you offered", how are they benefiting? Or am I missing something? I thought as you initially state- they were just pre-empting a potential issue.

Hi benson

The EA is trying to make you believe that it's OK if the valuation is £15k under sale price.

If he succeeds, and you believe him, he has pre-empted a potential problem.

If you don't believe him, he has a potential problem. If the valuation comes in at £15k under, you might walk away, and he wont get his commission.

As for backtracking - if you threaten to cancel the valuation, I think the EA will say "if the valuation is low, maybe the seller will budge after all". Hence, you are in a stronger bargaining position.