New Build - Valuation lower than purchase price

MaebyJade

My OH and I are buying a new build home (due for completion in June). The application process (using the HTB scheme) and mortgage has gone very smoothly so far, and the lender carried out it's valuation last week. Today we were told they had valued the property at £10k below the purchase price. So mortgage on hold for the time being!:(

Now having read various other threads on here with people who have had similar experience, it seems like a blessing in disguise. Go back to the developer and ask them to lower the price. My worry is that it's a highly sought after development and in particular the plot we are after. All the properties were reserved with days of release. For over a year me and my partner would ring the developer asking for a release date so we can reserve this particular plot, so as you can imagine we don't want to lose it.

Tomorrow my first port of call will be to ring the developer and ask if the price be lowered to meet the valuation, fingers crossed they agree. My question is, if they don't what other options do we have? Will we still be able to borrow the amount we need if we somehow manger to increase our deposit by £10k?

Also with regards to the Help to Buy, how would this work now? Will they give us 20% of the purchase price or 20% of the valuation price?

Thanks

pete-20-11

Will the developer throw away all the previous work to get an extra £10k from someone else? I guess if they are stupid!

Same thing happened to me. £8k less. I said I haven't got any spare cash, so if the lender will only lend based on the valuation, I can only pay that price not the asking price.

gsmmad

Valuations and the purchase price
28.To ensure properties are sold at market value, the selling price must
match the main mortgage lender’s independent valuation. It is a
requirement of the Help to Buy product that purchasers take out and
maintain a first charge loan with a qualifying lender.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/360720/participation_guidance_v2_july_2015.pdf

dgtazzman

You can make up the shortfall yourself, even with HTB, BUT everything will be based on the valuation price, so the HTB equity loan will be 20% of the valuation price, not 20% of the price you end up paying.

I had this issue recently, because they sent out a surveyor to do the valuation that was completely unfamiliar with the area and we also suspect he actually valued a smaller plot, so I ended up with a shortfall of 12k. Talked with the developer, they knocked 3k off the price and gave me upgrades worth around 4k, I would have paid the remaining 9k of the shortfall.

Luckily for me there were severe delays in the build and I have had to get a new mortgage offer as a result. This time they sent a surveyor that does know the area and the valuation came in at the full 189k, meaning I am getting my house cheaper, with extra upgrades and no longer have a shortfall to bridge out of my own back pocket ^^

I am using HTB and they are happy to offer an equity loan, as long as it's 20% of the home value the mortgage is based on.

MaebyJade

Not good news I’m afraid. Developer not will to budge on the asking price as they claim they’ve sold other plot for the same price, Halifax will also not budge on their valuation price!

I’ve offered to make up the £8k difference between the asking price and valuation but according to my mortgage broker that’s not an option as HCA insist that all Help to Buy applications proceed at the asking price. Anyone here with experience of HTB know if that’s correct?

My broker said he will go try and see if there’s another lender but it might be difficult given my credit history, I have two defaults (5+ years old, settled in 2011). Even with a new application it doesn’t guarantee the new lender won’t also under value the property and we end up back here!

Any suggestions would be much appreciated.

Thanks

dgtazzman

MaebyJade wrote: »

my mortgage broker that’s not an option as HCA insist that all Help to Buy applications proceed at the asking price. Anyone here with experience of HTB know if that’s correct?

As stated before, it wasn't an issue for me, though I am using HTB Wales, but I doubt the rules are different. The HTB agent just asked my solicitor to confirm the equity loan would be based on the lower valuation price and that I understood the consequences (i.e. that I would have to pay the shortfall out of my own funds).

MaebyJade

dgtazzman wrote: »

As stated before, it wasn't an issue for me, though I am using HTB Wales, but I doubt the rules are different. The HTB agent just asked my solicitor to confirm the equity loan would be based on the lower valuation price and that I understood the consequences (i.e. that I would have to pay the shortfall out of my own funds).

Thanks dgtazzman. I rang my local Help to Buy office (North West), explained the situation and they repeated what the broker said; if the valuation is less than the purchase price then we will not be able to proceed with our HTB application.

Out of curiously, I rang the Midlands HTB office and they said the complete opposite; it’s fine if a valuation is below purchase price the equity loan will be on the valuation! Confused!

On both calls I did ask if the rules/regulations were different between different offices but both said no; the rules are set by the HCA and therefore the same.

dgtazzman

Any chance the developer will drop the price if you agree to spend an X-amount on their optional extra's at their standard inflated upgrade pricing? Worth a gamble, they usually have huge margins on the extra's and the sales agents usually get a commission on them, so might be somewhat more motivated to sell the arrangement to their superiors.

EDIT: I'd also ask them which lender was used on the properties that had no problems with full asking price (in case you consider changing lenders) and why these sales weren't submitted to the surveyor doing the valuation as comparables.

MaebyJade

dgtazzman wrote: »

EDIT: I'd also ask them which lender was used on the properties that had no problems with full asking price (in case you consider changing lenders) and why these sales weren't submitted to the surveyor doing the valuation as comparables.

Very good suggestion, thanks. The office is closed now but will definitely get them on the blower first thing tomorrow morning.

MaebyJade

Very frustrating day. Rang the site and spoke to one of the sales people dealing with our purchase. They wouldn’t specify the lenders of the plots which sold at asking price; just kept saying all the big lenders. When queried about why the these sales were not submitted to the surveyor as comparables she said they would have been but not all properties are the same value. To be honest it sounded like BS! Anyway she seemed to think there isn’t any issues as the price would be dropped, I just need to speak to someone from their group head office. She said she couldn’t give me the number of the person I need to speak but would get them to call me today, still haven’t heard from them!

I’m slowly losing hope that we will have a successful outcome, even more so after speak to our broker today; he said that he’s struggling to find an alternate lender. Even if he did find another lender, there’s no guarantee that the same issues won’t happen with them. We’re putting the search for another lender on hold for now.

even more depressing is the fact that we receive the mortgage offer from Halifax through the post!

MaebyJade

Hi,

A little stuck and can do with a little advice as to what I can do?

Since being promised I will get a call back to discuss moving forward after the valuation came back lower than asking price, I’ve not been able to get hold of the developers. Called a few times and left messages but no response or call back. I tried the mobile of some of the sales people we’ve been dealing with and the best I got was a text message saying “In a meeting will call you back shortly”, however I’ve not heard back from them! Funny because when the sorting out the application for the mortgage, they were calling me nearly everyday seeing where we were up to! Now they’re ignoring me!

My broker and solicitors keeping phoning me asking for updates.

It seems like the only option left is to physically go into their office, they work awkward hours (10am-4pm) so it would mean booking time off work but if that’s the only option then so be it. Anything else I can do before this?

Any advice will be much appreciated?

Thanks