Renegotiating sale price after mortgage valuation? Advice needed.

red_imps_2003

I could do with some advice because I have no experience of negotiating a purchase in light of homebuyer survey results. I am poor at playing hardball and I feel the vendor will be far more accustomed to the negotiation game than me.The context is as follows:

We had an offer accepted on a place we really like. We went straight in at full asking price because it ticks more boxes for us than others we have viewed/offered on in a similar price range, which all sold within days of coming to the market. The property was purchased by a local property developer last year and modernised with the usual stuff (replacing all external windows and doors, new kitchen, bathroom, central heating, considerable re-plastering, and new carpets throughout). The only obvious structural change was knocking through a partition wall to open the kitchen into the dining room. It was then returned to the market for £60k more than it was purchase for. We knew from the off that the updates won't have cost anything like that but the resulting home seems worth it for us. Following the valuation, the mortgage lender has issued our mortgage offer, so all is fine there.

My difficulty now is that the mortgage valuation was £10k less than what we are paying. I was probably being naive but I had anticipated it would be closer than that. We hope we will be living there for the next 20-30 years, so it might not matter, but I now worry about if we have to sell up again in the near future for any reason. We've already lost thousands on both of our previous two homes and I don't want it to happen again. The main reasons cited on the homebuyer's report were lack of garage and a handful of observations rated '2', which are largely the kind of external things we expected in a house the age of this one. The only number '3' raised was "the mains water feed is lead and should be renewed". I have been reading about this and know this isn't as big an issue as the report makes it sound, but we would like it replacing before we move in for peace of mind.

I now need to approach the vendor's estate agent and negotiate something, but don't really know what. I guess the two obvious options are to negotiate a lower sale price, based on the mortgage valuation and one red flag, or ask that the piping and perhaps a couple of the most significant '2' items be sorted and we proceed at the agreed price. I think our priority is to have the mains piping replaced. We would obviously prefer the vendor to do this, as he is already making tens of thousand in profit out of the place and he would suffer less inconvenience than we would because he doesn't live there.

We are anxious not to lose out on the place, but we are in a position where we can back out if it comes to it. Is it commonplace to renegotiate a price just because the valuation fee for mortgage purposes is a little lower than the fee agreed at the outset? I am conscious that a property is worth what somebody is willing to pay for it, not what a mortgage lender's surveyor advises, and he knows we were willing and able to pay more until receiving the report. Do you think a developer would be willing to reduce his [inflated] profit slightly and maybe fix a few things to conclude a quick sale with a demonstrably proceedable buyer (mortage offer is secured) or would they typically hold out for the price agreed at the outset? Digging up the drive to replace the mains inlet could hold things up for quite some time, as well as incurring him some expense. And would he rather have the bird in the hand, knowing that if we pull out then other buyers could get the same survey results and ask him to lower the sale price? Do we find out what it would cost to fix before proceeding then ask for that amount off the asking price, or do we try to renegotiate to what the surveyor valued it at and we pay for the alterations? Should they be done before we exchange, or would it be advisable to prepare things now and get the actual fixing done after completion?

I know most of the above is subjective and subject to a load of context we can't possibly fit in here. I'm just looking for some initial thoughts either from somebody with experience of property development or negotiating a fee in light of some hardly world-shattering survey results. I have no idea what would be the best approach to take.

davidmcn

When you say "a little lower", what is it in percentage terms? Valuation isn't an exact science, so I wouldn't say anything within 5% is particularly significant. But not unreasonable to say that you need a valuation which matches the agreed price, as for many people that would be all they can afford.

Does seem odd they didn't sort the lead pipe though.

vw100

You can meet half way at 5k if you want, sounds reasonable? The lead pipe is not really a issue, most properties in London still have a lead feeder pipe and are perfectly safe. The limescale also coats the pipe internally giving added protection. Most water companies offer free lead pipe testing for extra peace of mind. If the lead read is over a certain threshold they may replace the pipe FOC or at a reduced cost. Also from couple of previous valuations on properties of people I know the surveyor has been a little bit conservative to protect their backs somewhat it appears with the imminent interest rate rises predicted next year. See how you feel and 5k- 10k is not much if you place to stay there for the next 30 years and the house meets your expectations.

agrinnall

Good luck with your negotiation, I hope your sellers aren't as intransigent as mine have been. I had an offer of £165K accepted, the HBR valued it at £160K, further specialist surveys estimated work of nearly £11K needed, so I reduced my offer to £160K. Despite the sellers having said before I paid for the extra surveys that they would renegotiate, in fact they have simply refused to budge at all, so the house is back on the market and I'm looking again.

Annie1960

The only thing you really need to say is the figure the mortgage valuation has come back at.

I'm not sure I agree with your view that the refurbishment and structural work they have done will be less than £60,000. I'm having less than that done in the property I've just moved to, and it will be £60,000 plus contingency.

Hoploz

Share the report with the seller and ask them to come up with a solution!

They may well offer a 5k discount or something, to save the sale falling through, unless they are super -confident they can find another buyer who is not requiring a mortgage. As surely anyone else wanting to buy would come up against the same issue.

It will only be a bit off the top of their profit after all.

I would give them the first throw of the ball and see what they say. If they sound adamant they will not discount a penny then think a bit harder about your next step.

red_imps_2003

Thank you all for the responses. I'm slightly reassured to hear that some valuations for mortgage purposes are perhaps a little conservative. I was confident that the place would quickly go for at least the asking price at the time we offered but my confidence took a hit with the subsequent valuation.

The difference between what we are paying and what it is valued at is only 6.25%, which I guess is fairly negligible and we are reluctant to lose out on the place unnecessarily.

I was expecting there to be a few '2s' on the report, given the age of the property. The presence of a '3' was a bit of a downer. I am conscious that the lead piping is not as dramatic as the report makes it sound, but we are still anxious. Will try to get the levels tested before we commit more money and go from there.

What I don't want is to both pay over the odds for the place and then have a load of expensive work carried out on top. It seems fairer for the vendor to meet us halfway, given that he is already doing quite well out of us anyway.

The windows, doors and heating won't have come cheap, but the kitchen, bathroom and carpets are definitely not the 'I am' stuff and will have been installed at cost price by the vendor. The valuation report identifies some aspects as 'DIY' and specifically states the opinion that the developer has neglected some areas to maximise profits (which is fair enough; it's how he makes his living).

Mickygg

It's worth asking but don't be surprised if you get a no. I wouldn't renogtiate just becuase a mortgage valuation comes in lower. The sellers want a price and you agreed, so I doubt they will be happy about you going back asking for lower.

As for asking them to fix stuff, forget it. Why would they do that, when at any time you could back out up to exchange and they have had to pay to fix stuff. if they do anything they will agree to lower the price.

Also I wouldn't want them to fix anything, chances are it wouldn't be done right or cheaply. I'd want to do it myself when I move I'm.

lindsaygalaxy

I take it you have the extra £10k to cover the difference?

Arnovl

Thanks for this post/thread - I was just about to ask the same question.

My Homebuyer report also came back saying that the Purchase price was 6% too high. I seem to remember a similar scenario when I bought my previous house 5 years ago.

I guess Surveyors typically value the property at least 6% less then what you want you've offered...

stator

Arnovl wrote: »

I guess Surveyors typically value the property at least 6% less then what you want you've offered...

Not really. They often value it at exactly the purchase price. Depends on their honest opinion.