Am i stupid to offer more than the valuation?

laidbacklou

Hi i know this is a commonly discussed topic and i've read through a lot of past threads about it, but i still don't know what to do for the best.

Basically our homebuyers was done and the valuation came back as about 14% less than our initial offer. The vendors didn't want to lower the asking price at first and put the house back on the market. Now they've come back to us saying they'll accept 9% less than the initial offer, but that is still quite a bit over the valuation. I do really like the house and would be disappointed to lose it but i'm not sure if that is a good enough reason to pay over the odds.

I keep getting conflicting information about the surveyor's opinion - is he actually objective or is he giving a low valuation as he is working for the bank?

I just don't know what to do! Please help!

BitterAndTwisted

The valuation is based on what the bank is willing to risk on this purchase. It has nothing to do with what the property may be "worth". If you have the funds to make up the shortfall between what they are willing to lend and the actual purchase-price I'd tell you to go ahead if you plan to be in the property in the medium to long-term.

laidbacklou

We can make up the difference as we have quite a large deposit, but i don't want to make a mistake! I'm indecisive at the best of times so this is a massive dilemma for me!
To be honest i would say we would plan to stay for 5 years or so, don't know if that is short or medium term!

Dan-Dan

5 years is short term I would say

Paully232000

We have been in a similar situation where we think that the house will be valued at less than the price that the vendor is willing to accept. We will try to offer less but don't hold out much hope.
It comes down to LTV for us as if the bank is only willing to lend a certain amount of money and we pay more out of our deposit the LTV will be greater than the 75% that we want for decent mortgage rate.

For example is bank says house worth £500,000, and we pay 25% (£125,000), but if vendor will only accept £525,000 we need mortgage of £400,000 then only have 20% of the value of the house or 80%LTV.
If you see what I mean?

gazter

laidbacklou wrote: »

Hi i know this is a commonly discussed topic and i've read through a lot of past threads about it, but i still don't know what to do for the best.

Basically our homebuyers was done and the valuation came back as about 14% less than our initial offer. The vendors didn't want to lower the asking price at first and put the house back on the market. Now they've come back to us saying they'll accept 9% less than the initial offer, but that is still quite a bit over the valuation. I do really like the house and would be disappointed to lose it but i'm not sure if that is a good enough reason to pay over the odds.

I keep getting conflicting information about the surveyor's opinion - is he actually objective or is he giving a low valuation as he is working for the bank?

I just don't know what to do! Please help!

That valuer has done you a massive service, he just helped you knock 9% off the asking price. If its worth that extra 5% to you, then go for it. The difficulty will be your mortgage company though, it will change your loan to value.

laidbacklou

That valuer has done you a massive service, he just helped you knock 9% off the asking price. If its worth that extra 5% to you, then go for it. The difficulty will be your mortgage company though, it will change your loan to value.

Thanks, this is a good way of looking at it. And i suppose 5% over isn't really that much in the grand scheme of things!

i'm also thinking it will actually lower our LTV as we won't need to borrow as much, or is that totally wrong?

tim123456789

laidbacklou wrote: »

Thanks, this is a good way of looking at it. And i suppose 5% over isn't really that much in the grand scheme of things!

i'm also thinking it will actually lower our LTV as we won't need to borrow as much, or is that totally wrong?

lets do some maths

The house is 400k and you have 100k cash so need 300k which is 75%.

reduce value by 14% to 344, but as paying 364 need to borrow 264 which is 76.7%

HTH

tim

Paully232000

laidbacklou wrote: »

Thanks, this is a good way of looking at it. And i suppose 5% over isn't really that much in the grand scheme of things!

i'm also thinking it will actually lower our LTV as we won't need to borrow as much, or is that totally wrong?

No it will increase your LTV, ie go from 75% to 85% or whatever. Unless you have more money to use as a 'deposit'.

highguyuk

They've come back to you, they clearly want to sell.

Get your negotiating hat on and go back with another offer. Maybe around 12%?

laidbacklou

Thanks for the example Tim, I worked it out the same way but with my numbers and it comes out as around the same LTV as we had before so it won't change our mortgage rate luckily.

Going to attempt negotiations tomorrow. :eek:

Thanks everyone.