Inflated prices means banks won't lend on their valuations

underthesea

I'm hoping someone tell me this isn't a catch 22 situation...

Houses are being inflated by the market and are priced/go for much more than their valuations. The problem is, you can't get a mortgage as the bank values the place much lower than the offer price so won't lend the money

How do you get out of this situation? It's hard enough to buy without this over inflated complication!

Thrugelmir

Property sells for what people can afford to pay. This has nothing to do with what a bank is willing to lend you as a borrower.

jayson043

yes its a catch 22, either the seller reduces the price, or the buyer finds the money elsewhere.

property prices are mainly dependant upon availability of finance and how much banks will lend you..

So do you treat the mortgage company with contempt and blame them? Or maybe take it as a sign that the house isn't worth that much?

kingstreet

Prices are being inflated by demand. In some areas there simply isn't enough housing. We are not seeing any systematic downvaluing

If your idea of a valuation is an estate agent's marketing appraisal, there isn't a great deal of scientific research which goes into that.

When a chartered surveyor values, he obtains evidence of comparables, the recent actual sold prices of similar property in the vicinity and uses the RICS Red Book for his guidance.

Can you tell us about your purchase and the downvaluation?

underthesea

I'm in London and I've gone through to the valuation stage on a property which I wanted to buy which came back at 35k less than my offer.

I've done some zoopla research on another property that I want to buy and the starting price for this property we want to buy is 20k more than the average price on that road! This is walking into another can of worms...but what can we do about it.

So we've saved a big deposit which we've worked dam hard for and we can't even use it as banks won't lend. Yes, 'property sells for what people are willing to pay' but we ARE willing to pay! It has everything to do with what a bank will lend you.

CLAPTON

in a rising market it is common for banks to 'undervalue' the property,
just have to live with it as another way of rationing mortgage lending.

john-306

2 estate agents have valued a house we are interested in at 315k and 325k, the surveyor valued it at 280k, nothing comparable has been sold in the immediate area for 12 years. Looking on Rightmove and Zoopla at houses around the same prices in this area puts the estate agents as the more likely true figure, but would the lenders agree?

kingstreet

underthesea wrote: »

I'm in London and I've gone through to the valuation stage on a property which I wanted to buy which came back at 35k less than my offer.

I've done some zoopla research on another property that I want to buy and the starting price for this property we want to buy is 20k more than the average price on that road! This is walking into another can of worms...but what can we do about it.

So we've saved a big deposit which we've worked dam hard for and we can't even use it as banks won't lend. Yes, 'property sells for what people are willing to pay' but we ARE willing to pay! It has everything to do with what a bank will lend you.

Ignore Zoopla estimates. They are about as reliable as estate agency valuations. Use the recent (last 120 days) sold prices of similar property in the vicinity (less than 0.5 miles using something like this;-

http://www.rightmove.co.uk/house-prices.html

Did you get reasons for the surveyor's valuation, or an opportunity to speak to the surveyor to understand his methodology? Were there any essential repairs or defects?

Butti

The lender wouldn't agree because the surveyor is professionally qualified and a member of a professional body. He/she can be in effect struck off if they get it badly wrong.
In London we could be going into a bubble with negative equity at the other end.

CLAPTON

Butti wrote: »

The lender wouldn't agree because the surveyor is professionally qualified and a member of a professional body. He/she can be in effect struck off if they get it badly wrong.
In London we could be going into a bubble with negative equity at the other end.

are you serious?

Butti

I am not saying this is set in stone...but Estate Agents can say anything and they tend to talk prices up so they get the business.
The Coulson ruling means valuers should be within 10% of the 'value' or open to being sued. If banks suspect we are on the edge of a bubble thay will try to push prices down.