Valuation lower after contract exchanged.

moneysavingrock

Hi all.

Looking for some advice after getting some bad news on our mortgage.

Here's the timeline.

First Direct had valuation carried out which came in £20,000 below purchase price.

They then issued loan papers to my solicitor before informing us that valuation was below.

First Direct attempted to leave voicemails saying I had non-urgent message (I was unable to pick up these messages for 2 weeks as I work offshore). This message was to inform about the valuation, if that's non-urgent the I don't know what is.

Our solicitor send us an e-mail stating

" I have even better news – we have the loan papers – received in the post this morning! The valuation was carried out last week.



Are you happy now for me to lock the contract for your purchase into place?



Kind regards, "

The way we read this, naively, was that there were no hitches so confirmed we were happy to proceed.

Do you think our solicitor has been negligent in failing to advise that there was still no valuation, she is claiming that as she was not party to the application it is out fault. I still feel she has dropped the ball by not advising us correctly.

I also have a gripe with First Direct, I don't think they should have issued the loan papers before having spoken with us about the valuation.

As it stands were are due to move in on 19th of August and are trying to come up with the shortfall, thankfully some family have been able to offer some money.

Does anyone have any advice or are we at fault for being naive?

Thanks

MSR

holly_hobby

Hi there,

Well the valuation is generally non-negotiable, they have been advised of a value by their surveyor, and issued their mge offer (ie what they are prepared to loan) on that basis.

Your Sol, well striclty speaking I would have expected her to examine the survey/offer to check the figs, amount of deposit reqd remained unchanged - and if there was a difference (ie increased deposit reqd, as will clearly be the case if you can't negotiate on the pch price), to advise you accordingly, and ascertain if you wanted to proceed onto exchange and completion. She didn't.

Is there a mortgage adviser involved in all this ?

As you are uncontactable for 2 weeks whilst offshore, what arrangements were in place to deal with issues of an urgent nature ?

As it stands, you either cough up the extra reqd to meet your agreed pch price, or you negotiate with the vendor to reduce by 20k, so that you'll be thereabouts it the same position.

The probs will be if they refuse to reduce and you don't have the extra deposit .... if you've exchanged you'll prob incur costs from their side.

Holly

moneysavingrock

Thanks Holly.

First Direct also had my partners contact details and were given my e-mail address. Even a letter would have sufficed as valuation was carried out on 15th July.

The strange thing is they seem to have issued paperwork to solicitor after the valuation but with the original loan agreement on it, however they say that it still would have been subject to valuation, even though it had already been carried out.

Solicitor was not made aware of the valuation report, they were only told that it had been completed, so has a get out there. They would've seen that it was still subject to valuation though which they never intimated. Unfortunately there was no mortgage broker involved so I have to shoulder much of the responsibility.

Thrugelmir

moneysavingrock wrote: »

Are you happy now for me to lock the contract for your purchase into place?



Kind regards, "

The way we read this, naively, was that there were no hitches so confirmed we were happy to proceed.

Do you think our solicitor has been negligent in failing to advise that there was still no valuation, she is claiming that as she was not party to the application it is out fault. I still feel she has dropped the ball by not advising us correctly.

The solicitor was asking you a question. The presumption being that you were happy with the offer made. Not just the amount but the terms. So the onus is on you at this point to confirm that the offer is in line with your expectations in all regards.

moneysavingrock

Thrugelmir wrote: »

The solicitor was asking you a question. The presumption being that you were happy with the offer made. Not just the amount but the terms. So the onus is on you at this point to confirm that the offer is in line with your expectations in all regards.

True I agree with that but I was under the assumption that what she was referring to was the offer as we had agreed and that she was aware of the valuation. ie That the bank had agreed to mortgage with no outstanding clause regards valuation.

holly_hobby

Its the mge offer that determines the mge and deposit requirements - the solicitor should receive a copy of the offer as part of the conveyencing (especially if this was an execution only sale and there is no mge adviser in the loop).

Indeed, exchange of contracts should never take place until the official mge offer has been recieved - for this very reason.

If the sol hadn't recd a copy, but been told by FD, that it had gone to offer, with her then calling you to ask if you were happy to proceed on the issued mortgage offer, then I can't see if she's really at fault. (apart from assumption/mis-understanding playing a large part)

Didn't your partner open the mge offer when it arrived on your doormat, as we now know there are 2 of you purchasing, read through the details, and although no retentions, spot the downvaluation and realise it was a issue ?

That being said, crying over spilt milk at this point isn't going to solve your issues, so lets get proactive on this rather than looking for someone to blame ...

Can you proceed on the issued offer terms ?

If not, is the Vendor willing to revise the pch price to reflect the 20k downvalue ?

If the 20k downvalue is purely due to repairs/condition, will the vendor rectify these, have the property re-inspected and see if that solves the downvalue problem ?

Hope this helps

Holly

moneysavingrock

Thanks again Holly,

I know crying over spilt milk won't solve the issue right now but I feel completely let down by all parties myself included, I should have been more switched on.

Anyway to answer your points above:

We did get a mortgage offer pre-valuation which we read and signed. This included subject to valuation which we were happy with as it was due to be carried out. To clarify we have had no word of the valuation until today even though it was carried out on the 11th July.

Solicitor then advised that valuation had been carried out and that she had received loan papers. As these were issued after the valuation we assumed that these papers must be the final draft and that valuation was OK. I feel solicitor should have been clearer about what she received.

Anyway as it stands vendor will not move on price, lower valuation has been attributed to market slump, 10% since home report 19 months ago, so can't look at repairs.

We are currently trying to come up with the funds to cover the shortfall. Looks like we'll need a bridging loan plus help from family.

holly_hobby

But how can you agree to accept a mge offer until you have inspected and agreed to all its terms, which includes any change to the mge requested (due to retentions/downvaluation) ? I need to say, I have never had any experience of a formal mge offer (which is not at all the same as a AIP or DIP) being released and asked for signature, prior to satisfactory survey ... utter maddness ! Even so, the change to the LTV/available mge/deposit etc (as a result of survey), clearly warrants the issue of a REVISED mge offer in any event - as they are the actual terms you would be agreeing (if you didn't tinker the pch price with the vendor).

The solicitors role is to deal with the conveyencing side of things, so that would be having all searches conducted, and only proceeding to exchange upon reciept of an agreeable final mge offer - which typically occurs AFTER survey has been completed ... which is why I think all the confusion has arised,, they assume the offer they are looking at is POST survey, and therefore the full and final terms of the mge agreement - hence no shortfall on survey recognised.

IMHO the ball lies with FD on this.

Hope this helps

Holly

moneysavingrock

That's what I'm thinking. The offer we received was PRE-valuation. This I take it is the same document that solicitor got, albeit a week later after the valuation, but with no amended offer value.

From what I've found out so far I tend to agree with you and the ball lies with FD. I can't see us getting anywhere though as it is all there in black and white. A chance to get a second opinion on the valuation would sort it for me but they don't allow that.

Thanks again for your help

holly_hobby

moneysavingrock wrote: »

That's what I'm thinking. The offer we received was PRE-valuation. This I take it is the same document that solicitor got, albeit a week later after the valuation, but with no amended offer value.

Thats why the solicitor believed it to be the formal offer, its the timing that has led them to quite naturally believe, that the terms of offer they were looking at, was the formal basis of your mge agreement - hence their request to press on to exchange. IMHO you really can't lay the blame for this at their door ... its the utterly ridiculous administraton of FD thats caused this issue (if the timeline of how this happened, is accurate).

moneysavingrock wrote: »

From what I've found out so far I tend to agree with you and the ball lies with FD. I can't see us getting anywhere though as it is all there in black and white. A chance to get a second opinion on the valuation would sort it for me but they don't allow that.

Thanks again for your help

If you can not proceed because, despite being made aware of the issue, the vendor won't budge, and you can not come up with any extra funds reqd to meet the reduced mge offered - then I would push for FD to meet any costs incurred as a result of you (with the vendors consent) withdrawing from the sale - having exchanged contracts does significantly complicate your options here.

At the risk of grasping at straws, are you sure you've exchanged ?

Holly x

amnblog

Am I missing something here?

Did moneysavingrock give the solicitors the OK to exchange contracts before he/she as the borrower and purchaser had seen the valuation and the formal mortgage offer?