Surveyor undervalued property

ConfusedFTBx

Hi, this is my first post on here but I'm hoping somebody will have advice on what I should do next!

I am a FTB in the north west. I have been very fortunate in that my parents have given me enough money for a house deposit, and my top budget was 140,000.

My partner and I found a house which we loved on the market for 125,000, and we had an offer of 124,000 accepted after minimal negotiation. We felt that this was a good deal for us as it was under budget and the other similar properties in the area were on the market for the same or more. Also the one we chose is unusual in that it has a large garden. We were told by the EA that it was priced competitively as the seller needs to move to Bristol for work, he is currently commuting.

The house is a 2bed Victorian terrace in a desirable area. Several similar properties have sold in adjacent streets for a similar amount.

The mortgage checks etc went through without any problems but the valuation surgery came back with a valuation of £110,000.
Clearly this was a shock to everybody.
I have a friend who is an EA in the same area and even she was surprised at the low valuation- in fact she immediately named the surveyor who carried it out and says he has a reputation for undervaluing homes.

I can't afford to magic up an extra £14k, and of course I wouldn't want to pay over the valuation and end up in negative equity.

I called the EA and they got in touch with the vendor who said he would be willing to negotiate but not down to the £110,000.

What do I do next?
Negotiate and run the risk of paying over the odds?
Get a survey done through a different lender and see if the valuation is the same?
Or just walk away?


Thanks

kingstreet

ConfusedFTBx wrote: »

other similar properties in the area were on the market for the same or more

What are the actual recent sold prices for similar properties in the vicinity?

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

Marketing prices are irrelevant. Surveyors use comparable, actual recent (last four months) sold prices in then vicinity (0.5 miles or less) in forming their opinion of value.

x_raphael_xx

Sorry I'm confused. I don't understand why you would need to find another £14k? You say you agreed to buy at £124,000 and now the house is £110,000.
Surely you are saving a bunch of cash?? If you were happy to pay up to £124,000, could you not find a middle ground with the buyer?

We've just had our house valued, and one of the estate agents sold the house next door. The price was agreed at £116,000, but when the surveyors had a look at it, they refused to allow the sale for any more than £110,000.

princeofpounds

Sorry I'm confused. I don't understand why you would need to find another £14k? You say you agreed to buy at £124,000 and now the house is £110,000.

No, the surveyor's downward valuation means that the lender will lend less, not that the property is being offered for less money.

princeofpounds

What do I do next?
Negotiate and run the risk of paying over the odds?
Get a survey done through a different lender and see if the valuation is the same?
Or just walk away?

A bit of everything is normally the best strategy here.

- Negotiate hard with the vendor. This is a pain as it's a problem for you, but that problem is also a strong tool.

- Double-check your assumptions on the valuation. Ignore what the EA says about it being cheap; they work for the vendor and will also say this. Focus on land registry sold prices in the area. You may also be able to speak to the surveyor to find out how he got to that figure. Don't be rude about it; he will be basing it on an official method.

- See if you can raise money from somewhere to bridge the gap. Obviously not formal loans, which you would have to declare. A 'gift' from relatives might help out.

- Trying a different mortgage lender and surveyor is also a valid approach.

jlf_85

Are you not paying a deposit? Surely 10% is 12,400 leaving you to find an extra £1,600

agrinnall

jlf_85 wrote: »

Are you not paying a deposit? Surely 10% is 12,400 leaving you to find an extra £1,600

What? Do you understand anything that's been written previously in this thread (ignoring raphael's slightly odd post)?

mrginge

jlf_85 wrote: »

Are you not paying a deposit? Surely 10% is 12,400 leaving you to find an extra £1,600

Oh dear oh dear.

:doh:

kingstreet

jlf_85 wrote: »

Are you not paying a deposit? Surely 10% is 12,400 leaving you to find an extra £1,600

Mortgage lenders offer a maximum percentage based on the purchase price, or value, whichever is the lower!

As the value is now lower than the purchase price, the lender will, for example, offer 90% of £110,000. This means to buy at the original agreed price, the OP needs his original deposit PLUS £14,000 on top!

bmunky7

Options seem to be pretty much as princeofpounds suggests. Trouble of getting another valuation is it could be same surveyor who does it / lender uses same valuation already done, or they value it even lower. In the end if the property really is overvalued the vendor will have to reduce price to sell as others will have same problem as you.

ConfusedFTBx

Thanks for the speedy replies everybody.

As has been mentioned, the problem is that the bank now only want to lend a percentage of the surveyors valuation and therefore I'd have to find the original deposit plus the excess.

My plan is to try a different lender and get another survey.
The original valuation was a drive by done by countrywide.
Presumably he used land registry figures but I still can't work out how he came to £110k as comparable properties in the area have been selling for around the 120k mark. I wonder if the recent buoyancy I the market has anything to do with it as properties in the postcode have gone up by approx 10% in the last year.

I'm going to try a lender who I know uses colliers instead and I won't have to pay the charges up front.
The way I see it is either the valuation will be more in which case I should be able to negotiate the seller down to a meet in the middle price , or if the valuation is the same or less he will have to realise that he won't be able to sell the property at the price he is asking for and drop down to the 110k.
Either way hopefully I'll save some money!

Fortunately the property is one that would appeal to a FTB rather than a developer so hopefully there's nobody out there who will snap it up for cash- either way the seller has agreed to keep it off the market until the repeat survey is done.

Anyone got any idea where I should reopen negotiations with the seller? Or should I wait for the second valuation before making my move?