Mortgage Company valuation less than purchase price - what can we do?

Shadowplay_2

Hi, we really need some advice.

I’ll give a brief outline of the situation:

We have found a new build two bedroom flat (persimmon homes) for sale at £168,000. Persimmons have offered the following deal on the property:

They pay - the 5% deposit, stamp duty, solicitor’s fees, fitted carpets, all appliances and a free upgraded kitchen. We pay just a £250 deposit.

Now we are aware that they have over valued the property to recoup some of the above but we love the flat and felt the deal was right for us.

I visited an independent mortgage adviser and secured a mortgage in principal from Nationwide (6.23% fixed for 2 years) dependant on valuation survey.

Today I received a call from Nationwide (our IMA is currently on holiday) basically saying that their independent valuation came to just £150,000 – and so they will not be offering us a mortgage.

So what do we do?

I visited Persimmon homes and told them the situation and they said ‘oh you are the first buyer that this has happened too’ and gave us the details for their mortgage adviser (who has secured the mortgages for the other 12 flats which have already been sold).

I feel that we should ask for at least £5,000 off the purchase price or pull out (based on acquiring a similar fixed rate as Nationwide offered from their IMAer).

Any advice would be greatly appreciated

S.

ixwood

I'd run for the hills.

Doozergirl

RUN! Don't do it. Just thank God for the get out of jail free card.

Go and look at older apartments instead. You will be paying a massive premium for nothing with Persimmon. People still buying flats sold for £150k brand new across the road from me. Second hand they are £130k. What's the point?

Prices are not falling here, it's just that you could buy a nice two bed terrace for the same price


Whatever you do, do not use their mortgage advisors. You are being fleeced. You either renegotiate down to £150k if you must, or you simply walk away.

There is a thread here by someone who ignored the valuation and a year or so later, now they want to sell, the EAs have valued it at even less that their surveyor did. It is happening everywhere.

cats!

Hi Shadowplay!

You are describing a common scenario here. My views on new-builds are well documented on MSE, but I speak out in the hope of saving people like yourself from being seduced by the sales people!

I really think the big clue is in the sales bods comment about "their own" mortgage advisor securing so many mortgages on the other flats. I but there's some trickery in the figures somewhere along the line!!

Why are you not listening to Nationwide?? Alarm bells should be ringing so loud. They have valued the flat at a significantly lower figure - take heed of this!

Have you had an independant survey commissioned in order to check the build quality and sort out any snagging items?? Are the other flats private occupations or BTL???? Chav scum tenants DO NOT make considerate neighbours!

Have you checked to see how the lease issue is managed if you want to become your own managing agents after x number of years? Many have clauses stating that all flat owners have to agree or an outside company has to be used for the blocks management. This can prove contenious and costly! Many BTL landlords don't give a stuff about maintaining common parts when they are also funding a proportion of the tenants rent towards their mortgage as well!

I would also suggest getting a longer fixed deal if you can. Two years is not long really and remortgaging fees are expensive now. Also, is that the best interest rate you could secure? A longer fixed rate deal might give you a better rate. Just a thought ....

My impartial advice - get a survey & independant financial/legal advice, do more research, and lower your price! Or walk away, you will be glad you did in the long run. Depreciation on new builds is high for flats.

Check out inspectorahome.co.uk for stats on developers customer service too!

Good Luck!

CYBERCIDERSAVER

I would walk away too.

From my friends experience, Nationwide are fairly straight down the line and more likely to give you fair advice than many Mortgage providers. Especially one linked to the developper.

I don't think i'd ever buy brand new... There were some "affordable housing built near to me and the "discount" seemed to be simply the developpers premium so weren't actually affordable at all!!

Same story with my computer that I bought through work....

homer_j_3

Nationwide will allow cashback/deposit paid by the builder up to 5% of the purchase price and other incentives. Therefore, where a builder pays, for example: stamp duty, a mortgage subsidy and legal fees, we will allow these incentives and the case may proceed using the sale price.

Where a builder offers a cashback/deposit paid in excess of 5% the amount of cashback/deposit paid in excess 5% will be taken into consideration. This amount will be deducted from the sale price to produce a reduced purchase price. We will base our lending on the new reduced purchase price. This does not mean we will not be able to assist with mortgage facilities. Any other incentives (stamp duty paid, mortgage subsidy, etc) are allowed and we do not deduct these from the purchase price even where the cashback or deposit paid is in excess of 5%.

Please note you must notify us of all incentives offered by the builder at the time of application.

Where a builder offers a white goods/furniture package at a price if the applicants wish to purchase it they must pay for this separately. The costs of the package must not be added to the purchase price. If the package is supplied free as an incentive it is allowed in the same way as described above, (see stamp duty paid, mortgage subsidy). However, you must advice us on application if a package is provided by the builder as an incentive.

franklee

Doozergirl wrote: »

There is a thread here by someone who ignored the valuation and a year or so later, now they want to sell, the EAs have valued it at even less that their surveyor did. It is happening everywhere.

Do you mean this thread:

New Build Disaster - help needed!
http://forums.moneysavingexpert.com/showthread.html?t=498427

haymans74 wrote: »

However, I did get some warning bells when the mortgage valuation came back at £230,000. I spoke to our financial advisor (one of Barratts agreed advisors) about my concern at paying £15,000 over the valuation and he said "it happens all the time with new builds, don't worry about it". So, we didn't worry and went ahead.

PS RUN!

Richard_Webster

RUN! Don't do it. Just thank God for the get out of jail free card.

Go and look at older apartments instead. You will be paying a massive premium for nothing with Persimmon. People still buying flats sold for £150k brand new across the road from me. Second hand they are £130k. What's the point?

Prices are not falling here, it's just that you could buy a nice two bed terrace for the same price


Whatever you do, do not use their mortgage advisors. You are being fleeced. You either renegotiate down to £150k if you must, or you simply walk away.

There is a thread here by someone who ignored the valuation and a year or so later, now they want to sell, the EAs have valued it at even less that their surveyor did. It is happening everywhere.

- Doozergirl.

I agree. In fact I'm surprised how often mortgage lender's valuers do value new flats at the builder's price.


As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients

telfordwhite

I agree, walk away. House prices are sky high atm and will very likely plateau out. A new build will almost certainly lose value over the next couple of years and more.

12 months/2 years down the line you will most likely want to move on (when you realise how tight the parking is and how much smaller the property is than you though it was etc) but you will be in thousands of quid negative equity and stuck.

DO NOT USE THEIR MORTGAGE PEOPLE IT IS A MUTUALLY BENEFICIAL ARRANGEMENT FOR THEM WHERE YOUR WELFARE IS NOT CONSIDERED IMPORTANT.

Debt_Free_Chick

The price the developer wants for the property includes the face value of brand new fixtures, fittings, carpets & appliances.

However, a lender will only ever place a nominal second-hand value on these items.

The difference, at approx 10% of the developer's price, is typical IMO i.e. the lender will often value a brand new house at approx 10% less than the price the developer wants.

Guy_Montag

Make them an offer of £150k for the place (inc. all the goodies already offered), if they turn it down walk away or just walk away now.