Possible illegal estate agent practice

stephenberti

My partner and I recently made an offer on a flat. This offer was outbid, and we increased our offers a couple of times, competing with a cash buyer (according to the estate agent).

The property was originally on the market for £329,950. After several bids, we settled on an offer of £353,000.

We were about to pull out of the bidding process and informed the agent of our intention. He then asked that if a property surveyor looked at the property and decided that it was infact only worth the original price of £329,950, if we would be willing to pay the difference in cash in order to secure the flat!!!

We declined this and have now walked away from the property, but is this something that is legal and common practice? Are there regulations on this kind of selling?

At no point were final or sealed bids discussed, the price just kept increasing. The cash buyer then apparently offered £360,000 which we would not match or increase upon. We called his bluff and asked what would happen if we offered more, and he would have been very happy to put this offer to the vendor.

Even though we have walked away from the property, and will not use this agent again, this is something that could have happened to previous customers of theirs, and I wonder about its legitimacy.

jjlandlord

It is likely that the agent meant that the offer was very probably largely above what the property would be valued at and that as such you wouldn't get a mortgage based on the offer and would have to pay the difference in cash.
If so he was just pointing out the facts.

NVRAM

Really dont understand why anyone would p[ay so much over what the premises would be valued at

BillJones

NVRAM wrote: »

Really dont understand why anyone would p[ay so much over what the premises would be valued at

Because "value" is different to different people. If you need to pay X to buy a house, and it's not available for less, and you are happy to pay that, then why would you stop just because a surveyor says that it is only "worth" X-10%?

DRP

BillJones wrote: »

Because "value" is different to different people. If you need to pay X to buy a house, and it's not available for less, and you are happy to pay that, then why would you stop just because a surveyor says that it is only "worth" X-10%?

exactly.

'Value' is a massive grey area - there are plenty of posts on here where vendors/buyers have queried the logic of a mortgage surveyor's valuation - especially as a mortgage valuation is less an assessment of value and more an assessment of the risk the mortgage company wish to expose themselves to. i.e. a valuation likely to be more generous for lower LTV.

googler

BillJones wrote: »

Because "value" is different to different people. If you need to pay X to buy a house, and it's not available for less, and you are happy to pay that, then why would you stop just because a surveyor says that it is only "worth" X-10%?

Because their mortgage lender will only lend them X-10%, and they've already spent their ready cash on the mortgage deposit, moving fees and the like?

movilogo

In many other countries, price is quote like "currency per square foot" or similar. Then it becomes very easy to compare similar properties.

In UK, strangely enough, people simply say 3-bed house, 4-bed flat etc. without noting the fact how much floor space they are actually getting!

DRP

movilogo wrote: »

In many other countries, price is quote like "currency per square foot" or similar. Then it becomes very easy to compare similar properties.

In UK, strangely enough, people simply say 3-bed house, 4-bed flat etc. without noting the fact how much floor space they are actually getting!

personally i don't think it is strange - both types of information are very useful. I don;t think it makes it that much easier to compare , either.

A massive 1 bed flat is no good for a family of 4, so room information is just as important as the area of the property. A much smaller 3 bed house would be more suitable.

BillJones

googler wrote: »

Because their mortgage lender will only lend them X-10%, and they've already spent their ready cash on the mortgage deposit, moving fees and the like?

Well that describes why one person may be unable to pay more, but doesn't address the actual point raised, which was why would "anyone" pay more, implying that it was always an error to do so.

Jenniefour

stephenberti wrote: »

My partner and I recently made an offer on a flat. This offer was outbid, and we increased our offers a couple of times, competing with a cash buyer (according to the estate agent). If you're in London and others areas of south east then highly possible.

The property was originally on the market for £329,950. After several bids, we settled on an offer of £353,000.

We were about to pull out of the bidding process and informed the agent of our intention. He then asked that if a property surveyor looked at the property and decided that it was infact only worth the original price of £329,950, if we would be willing to pay the difference in cash in order to secure the flat!!! It is likely that agent was simply checking out you had enough cash to make up the difference were your mortgage valuation not to come in at agreed sale price, to try and prevent an aborted sale - which is exactly what they should be doing. I would be not be happy with an agent who did not check out that first.

We declined this and have now walked away from the property, but is this something that is legal and common practice? Are there regulations on this kind of selling?

At no point were final or sealed bids discussed, the price just kept increasing. That is not unusual, or untoward. The price didn't keep increasing - you kept increasing your offer, and other buyer increased theirsThe cash buyer then apparently offered £360,000 which we would not match or increase upon. We called his bluff and asked what would happen if we offered more, and he would have been very happy to put this offer to the vendor. That's what agents should be doing.

Even though we have walked away from the property, and will not use this agent again, this is something that could have happened to previous customers of theirs, and I wonder about its legitimacy. There is nothing untoward or illegal about this at all. e able to proceed to completion. The agent is simply trying to protect the vendors interests - by getting the best price and checking that any potential buyers are in a position to proceed to completion.

OP, if you are not in London or other hot area of south east then this was just the luck of the draw, win some, lose some. If you are in one of the hot areas then you might find yourself in above position again. It's very difficult in that market so better to be prepared and I wouldn't be too quick to walk away if there are still possibilities because you might find yourself priced out the level you're trying to buy in now. That's the reality of the market at present.

JimmyTheWig

stephenberti wrote: »

He then asked that if a property surveyor looked at the property and decided that it was infact only worth the original price of £329,950, if we would be willing to pay the difference in cash in order to secure the flat!!!

We declined this and have now walked away from the property, but is this something that is legal and common practice? Are there regulations on this kind of selling?

I don't think they mean pay cash as in "bung us a brown envelope full of used notes and we'll all save ourselves some tax", etc.
I think they mean pay cash as in not get a mortgage based on the full value.

E.g. you may have £40k deposit and the ability to get a mortgage for £360k at 90% LTV. So you could buy a place worth £400k for £400k.
But to buy a place worth £330k for £353k you would need a mortgage of £313k, if you used your £40k deposit. The Loan to Value is worked out on the lower of the purchase price and the valuation. Here the lower would be the valuation of £330k.
So your mortgage would be 313/330 = 94.8% and so you wouldn't be able to proceed with your 90% LTV mortgage offer.

But if you had a £56k deposit (i.e. more "cash") then you could buy the place valued at £330k for £353k (if you wanted to).