Bidding war has led to inflated. Worried about valuation in survey

ninjabiscuit

hi,

I'm trying to buy a property (ex local authority) in East London. Myself and another party put forward offers and at that stage, we were entered into a bidding war by the EA (purplebricks).

The other party offered 15000 over the asking price and we offered higher. This went back and forth and continued late into the night on Sunday until we told the EA that we would offer higher again but would like to pick up negotiations in the morning.

The EA took that to mean that we had offered our highest and told the other party that if they beat our offer then they would win the bidding.

In the morning I had an email to tell me that my offer had been rejected. Surprised and angry, I called the EA and V to explain that we had not made our best and final offer yet. It turns out the EA had gone on holiday that morning and we were left dealing with one of his colleagues who put the offer to the client. The previous accepted offer by the other party was 22000 over the asking price and our best and final was 25000 over the asking price.

The EA is now trying to talk me into withdrawing my offer as they think a survey will likely not value the property that highly. And we will be forced to find the shortfall ourselves or pull out. Ashy offer is only 3000 higher than the offer from the other party my feeling is that they are likely to be in the same situation if V goes ahead with their offer.

Does anyone have any experience in this matter? I understand that offering 25000 over the asking price is a lot, but compared to other properties that we've seen (mostly Victorian conversions), the final offer is not that different from the price that those properties start at.

Will a survey put us in a position where they won't allow us to take a out a mortgage for our full offer? How likely is that in London where property prices are insane?

silvercar

Will a survey put us in a position where they won't allow us to take a out a mortgage for our full offer? How likely is that in London where property prices are insane?

Whereas you could say that a property is worth whatever someone is prepared to pay, lenders are more cautious.

You need to research actual sold prices in your area as lenders look for comparisons.

Lenders also tend to be more nervous the higher your loan to value ratio.

Doozergirl

Do you think it's worth it? Victorian conversions are always worth more in London, I wouldn't be looking to those for comparisons, but other Ex-LA.

I wouldn't pull out just because someone said, after all, there is the option to renegotiate. I wouldn't start spending money with a solicitor on searches etc though and I'd like to know that I could have a second valuation for free if this one failed.

Spend some time doing homework on comparables. How many properties have you viewed? Enough to feel comfortable?

AdrianC

The other buyer may not require a mortgage, in which case the valuation is irrelevant.

If the mortgage lender doesn't like the valuation, then they'll lend based on that value. You make the shortfall up. You can, of course, do that by reducing your deposit and increasing the LTV.

So...
£500k valuation, £400k mortgage, £100k deposit giving 80% LTV
would become...
£500k valuation, £425k mortgage, £75k "deposit" giving 85% LTValuation, plus £25k "top-up" to £525k purchase.

dekoder

There's a good chance (unless this place was substantially under priced) that you're one of the people that make those prices insane.

The valuation might come lower and then you have to make the shortfall (if want to stay on the same LTV product) or re-negotiate with the vendor.
I was in this position a year ago: offer accepted at asking price, valuation came 18k short, vendor agreed 10k reduction, I had to find the extra 8k.

jjlandlord

If you are still angry that they are refusing to take all of your money, feel free to send some my way.

Happy to make you feel better

pinkteapot

Unless the other buyer doesn't need a mortgage, I wonder if the EA is trying to talk you into withdrawing your offer because they've c*cked up.

They've told the other buyer that their offer has been accepted, and the vendor too.

If you withdraw your offer, they don't even have to tell the vendor about it. If you don't, they have to pass it on to the vendor, the vendor will probably accept, and then they have to tell the other buyer that they can't have the house after all.

Sounds a bit like the EA is just trying to make life easier for themselves.

If the other buyer doesn't need a mortgage, that would be good enough reason for a vendor to accept a slightly lower offer from them anyway (some vendors prefer mortgage-free buyers).

To answer your question though, the mortgage valuation surveyor will look at comparable sales data - recent sale prices of similar properties. If you're confident that you're not paying much (if anything) more than anyone else, you may not have a problem.

How tight are your finances? If the valuation comes in a bit low and you still want to pay the full price you've offered, can you afford to put in more cash yourself?

Are you borrowing at the full LTV the bank offer, and amount they're prepared to lend you? Even if the valuation is lower than the agreed price, you'll still get the mortgage you want if you're not borrowing at the limits.

Suppose the property is £100k and you were applying for a mortgage product with a max 90% LTV. The most the bank will lend on that property is £90k. If the valuation came back and said it was only worth £80k, the bank would then only lend £72k (90% of the valuation price of £80k). If you had a 30% deposit and had only asked to borrow £70k in the first place, they'd still lend you that much anyway. You only have to find the shortfall if you're taking the maximum mortgage possible at the agreed purchase price.