How to play this one?

Moneycat

Hi, I would be interested in obtaining views from the fellow forum members. We have had an offer accepted on a house for £525k. We are lucky in the we only need a realtively low LTV as we are selling our current house and have a sizable deposit. Mortgage offer has now come through for what we need BUT the mortgage valuation placed the property value as £500k - meaning that we are effectively overpaying by £25k not to mention the reduced stamp duty. We really like the house and don't mind paying a premium but £25k is somewhat hard to swallow. If this were you, how would you play it? Contracts have not been exchanged so there is room for a potential renegotiation.

dimbo61

Inform the estate agents and Vendor that the valuation has come back at £500K
This is only 5% less than the offer price! and Vendor should be well aware of the higher stamp duty over £500K.
How much was the property on for ? How long on the market?
Condition and Location count?
Check on the web what the Vendor paid for the property?
Not London is it ?
How much do you want the property?
Does the estate agents or vendor know you have a LARGE DEPOSIT so low LTV and can therefore afford to pay more?

Supply a copy of the Valuation if you want too!

jjlandlord

If the lender does not value the property at the price you are willing to pay despite the low LTV, I'd say you must have been trigger-happy with your offer.
Presumably you did your research before offering, so you knew your were offering a very good price based on what the property was worth to you.

Now, of course you can get back to the seller to tell him that your lender only values the property at 500k, and see what can be done.

movilogo

If it is in London then forget it. By now its price has gone up like £550k

Otherwise, I bet sellers didn't really think anyone would offer over £500k.

ReadingTim

I don't know what the asking price was, but I'd suggest that anything on at up to £550k would struggle to achieve more than £500k due to stamp duty, and even up to £575k might struggle. Therefore, news of this proposed price drop shouldn't be a complete surprise to the vendor.

Furthermore, if your mortgage valuation only came back at £500k, others might do too, and the vendor might face this problem with whatever buyer they choose.

However, it's not as if a survey has revealed hidden and expensive problems which warrant a price drop - the mortgage company (which will have its own agenda, possibly including very risk averse lending criteria) simply doesn't think it's worth £525k of their money, but will have no issue with you making up the difference.

Furthermore, the vendor is within reason to assume you'd done your homework on what you felt the property was worth, and what you could afford - why should they foot the bill for you being unable to do your sums?!? Moreover, why should they trust you to complete on the purchase for the price agreed if you've already tried to drop the price once?

I'd therefore raise the issue with the vendor but be prepared to raise the extra cash yourself, or find somewhere else.

N1AK

Moneycat wrote: »

We really like the house and don't mind paying a premium but £25k is somewhat hard to swallow. If this were you, how would you play it?

A premium is relative. You evidently thought the property was worth that amount for before. I can't speak for the vendor but I'd be very dubious about negotiating down on the basis of a bank valuation in there situation, but then I'd have done considerable work to have a confident opinion on it's value before agreeing the sale.

You may as well highlight the issue because the worst case is they tell you it's none of their business, but you might get lucky and find them willing to negotiate.

jjlandlord

Good point re. stamp duty.
It might also explain the lender's valuation, and certainly puts OP in a stronger negotiating position.

thequant

Moneycat wrote: »

If this were you, how would you play it?

Depends on the following


1) Asking price
2) How long it was on for
3) Area of the country


e.g.


If you offered asking price on a property oop norf that had been languishing on the market for over a year, I wouldn't ask the vendor to reduce the price, I would demand it!


If you got a lot off asking price for a property just put on the market in London, you will need to get on your knees and start begging.


For advice on "playing the game" we need more facts to establish how strong your negotiating position is.

Moneycat

Thank you all for your views so far. The offer we made was very close to the asking price. The property had not been in the market for long, in fact we made the offer after an open day. The property is in good structural condition and items highlighted by the independent building survey all come under 'maintenance' and I would not be renegotiating on these basis.

[Deleted User]

Moneycat wrote: »

Thank you all for your views so far. The offer we made was very close to the asking price. The property had not been in the market for long, in fact we made the offer after an open day. The property is in good structural condition and items highlighted by the independent building survey all come under 'maintenance' and I would not be renegotiating on these basis.

Guessing your South then...

thequant

Moneycat wrote: »

Thank you all for your views so far. The offer we made was very close to the asking price. The property had not been in the market for long, in fact we made the offer after an open day. The property is in good structural condition and items highlighted by the independent building survey all come under 'maintenance' and I would not be renegotiating on these basis.

An unwritten rule I found when previously looking at properties near the £250k stamp duty level was that anyone advertising between £250-£265K were aiming for to £250k, I suspect a similar gap probably exists upto £525k for the £500k Level.


I think you have may have over offered and should have tested the waters at sub £500k


Quick anecdote from my recent house purchase, valuation came back good, survey not so good, but could have been worse.


My property had only just came on the market and I offered close to asking price, I renegotiated on the basis that I had over-offered and was truthful about this rather than find excuses to force the price down.


The vendor pretty much accepted a new price without much of a fight despite being in "red-hot" London.


Funnily enough the new price was my opening offer which to me tells me that either the vendor or the EA were happy with my opening offer and they had squeezed me for a few extra quid (Well 10K off in the end) and knew it so were happy to settle for the target they originally wanted.


I suspect this is case with you, they were aiming for £500k and will probably settle for it if you go back to them.


Although this all depends on the other interest they have had, but my gut instinct no one else will have gone over £500k.