Low valuation - is it right?

Solibear

Hi there

We have made an offer of £300,000 for a property that was listed at £280,000 (got into a bidding war and was best property we had seen by miles and it went to closed bids so we went as high as we could).

I expected the valuation to come back less, probably £280-290k, but Nationwide/Countrywide have come back with a valuation of £250k and the comment on the first page was that we should renegotiate the price in line with the current market

Now, I strongly disagree with this valuation. I believe that this price (or thereabouts) IS in line with the current market. We have viewed many properties in this area and even at/around the same price none were comparable to this one. It is also in almost perfect condition and there is nothing in the home buyer's report that suggests we need to do anything to it. Other properties in this area that are selling for circa £250k are smaller and all need quite a lot of work doing to them - new kitchens, bathrooms, carpets, wiring etc

Zoopla estimates it to be worth £292k, and Nationwide's own website values it at £273k based on the last valuation price & date (which I have used as the price it sold for back in 2009)

The problem is, we will struggle to appeal, because there have been so few properties sold in this area over the last few years. And that's another thing - supply and demand. It's a nice area that people rarely move out of, so when a property does come up for sale, it goes quickly. This one was on the market for just a week, had 10 viewings and 4 offers...

Any advice..?

Thanks

ACG

Are you applying for a mortgage or cash buyers?
If your applying for a mortgage, how much are you applying for?

Solibear

We're applying for a mortgage. Based on a purchase price of £300k, we would have a 20% deposit and be looking to borrow £240k

holly_hobby

A market valuation/apprasil (ie what an estate agt believes it may sell for) is really quite different to a valuation for mortgage purposes, as your vendor/you have found.

The crux here is that the surveyor, acting on behalf of the lender, does not believe its worth what you have agreed to pay - and see it in the current market (for sale on possesson) at the 250k noted - and in your interest has suggested you may want to re-visit what you have offered.

You have 1 of 3 options ....

1. you renegotiate with the vendor on the 250k figure, or get them to challenge the survey, as its really only in their interest to get you to pay the 300k ... a whopping 50k more than what a professional RICS surveyor sees it at

2. you don't use this to renegoitate, accept the survey at 250k, and meet the difference in reqd deposit (max ltv now based on the 250k figure) yourself - you should note if you wish to do this, that essentially you may have put yourself into neg equity by circa 50k from outset.

3. you could choose an alternative lender, but there is not gte that they will use an alternative surveyor (althouhg this could be managed by your mge broker), or that the survey will come back higher ... could even come back lower.

Of course you can choose to pay over market value for the property, which is your perogative, unfortunately however where a mortgage is reqd, this is based on what the RICS surveyor comes back with - as part of which they would have obtained recent comparibles where possible.

Personally and for your benefit (esp considering the neg equity possibility, and any future short term re-sale requirements that it could effect) I wouldn't pay significantly more that what a surveyor valued the property.

Hope this helps .... others will be along with comment

Holly x

Solibear

Thanks... We definitely won't take option 2. We could potentially manage this by taking a 90% mortgage and using the difference in deposit plus a bit extra to make up the difference, but I don't feel comfortable about doing that, and obviously the rates will be a lot higher too...

We were OK with paying more if the valuation came back at around £280k, but £250k is a massive difference...

We will consider looking at another lender, just want to avoid that as the first option because we have already paid out some legal fees that we would prefer not to lose

I didn't know that the vendor was able to challenge the survey - how would they go about doing that?

I realise it's in our interests to pay less anyway but considering they had so many offers at/above asking price and in such a short space of time, I feel if we pull out then they would still easily sell it at the price they're looking for, and they would probably think that too and would be less willing to negotiate on price for that reason. And I really want this house :-( it's perfect... Haven't seen anything else that comes even close... :-(

holly_hobby

Please note that moving to an alternative lender and surveyor group, does not gte a higher valuation for mge purposes, and as I say could even be lower again.

The legal fees paid (which you shouldn't have incurred until you had recd and accepted the formal mge offer) which I presume are searches, will be transferrable if the Sol is on your new lenders panel ... but really changing lenders isn't really the way to manage this.

Go back and renegotiate with them ... if they want to present proof of recent comparibiles (ie within last 6 mths) of completed sales supporting the 300k or even 280k pch price, then thats their perogative ... get them to gather the evidence and then you/your broker can submit it (as the lender won't discuss the matter with them under DPA regs).

But really I wouldn't get involved in this too much, my stance would be the revised pch price based on survey is 250k thats it.

Holly xx

ACG

Who was the lender?
Which company did the valuation? eSurv tend to be a nightmare for me. They always seem to down value a property.

I also wouldnt bother appealing the decision, i've never had one overturned.

I would possibly look at lenders who use a different valuer, but i would potentially use the valuation to see if you can et the property for less.

Solibear

None of the searches have started yet. We paid an initial £355 downpayment when we first engaged the solicitor, and so far we have just received the contracts and a Deed of Trust. Hopefully transferable if we do switch... I don't want to switch though I just want this one to work :-(

Also, I just don't trust the estate agent to negotiate properly on our behalf... They will just tell the vendor to ditch us and put it back on the market... Won't they?

Is it completely out of order for us to contact the vendor directly and talk about it?

Sorry for all the newbie questions, we are first time buyers and have no clue about anything...

Solibear

The lender was Nationwide and surveyor was Countrywide

Going back to the post I just made though - I don't trust the estate agent to negotiate effectively on our behalf...

holly_hobby

No, go direct to the vendor - don't let your heart rule your head.

Solibear

Given that Nationwide won't now approve this mortgage until we sort the price issue out, is it possible to apply for another mortgage whilst this application is still outstanding, and go through their survey process and then see which one is more favourable and go from there?