Valuation question

nkkingston

We're waiting for our valuation to come back on the house we want to buy. We won't be surprised if it comes back lower than our offer, and I don't think the sellers will be either (we offered over the asking price to beat two other potential purchasers). I know the valuation doesn't care that this place has a lovely new kitchen and bathroom - after all, from their perspective if we default on the mortgage in ten years time neither's going to be adding much value any more. They're worth it to us, since it saves us spending the same money on installing it ourselves, and it's one of the only places we've seen which even had a decent sized kitchen.

Unfortunately, a lot of the nearby houses that have sold recently have gone for £10k or so less than the asking price of ours. A lot of the others are poorly maintained HMOs being bought and sold by investors, who paint over the mould and bung a gas inspection sticker on the 1970s boiler and put out it to rent. Obviously there's a lot of business going on right now, getting everything done before the 3% comes in. Do valuations take that sort of thing into account - that the other buildings are being sold cheaply because they need work, or need to be in or out of someone's portfolio before April 1?

Actually, my main question is how it works in terms of LTV: if our deposit is £55k and they're loaning us £90k, and the house values at £135k instead of £145k, does that matter to them? They can still be confident they'll get at least their portion back. Or will they drop their loan offer to £80k regardless?

MrJB

The valuer must use his expertise to consider all the things which will materially alter the value of the property relative to the comparable evidence. The assumption is that he is looking at the property as though he were an average purchaser and what would the average buyer pay for the property in a standard open market transaction. The fact that it has new kitchens and bathrooms will mean that the value is adjusted, what adjustment is made really depends upon the extent of knowledge the valuer has of the other comparables.

ThePants999

They might not necessarily drop their loan offer at all, but they might offer you a different rate, since a 90K loan on a 145K house qualifies for 65% LTV products, while the same loan on a 135K house doesn't.

kinger101

The valuer isn't likely to spend hours going through the individual state of every property that's sold nearby recently. The stuff you describe doesn't alter their valuations much anyway, as you already alluded to.

Currently, you're asking for 90K on a property that you offered £145K on. That's a LTV of 62%....so perhaps you're going for a product with a max of 65% LTV.

Assuming the valuation comes back at £135K, the maximum advance of that product would be £87,750. If the vendor still wants £145K, you'd need to find another £2,250. Or go for a 70% LTV mortgage product (if they offer one) which would advance £94,500.

You might be able to negoitate the price down if the valuation is short, but the seller might refuse.

nkkingston

I think we can live with a different rate. We'd strung up by the fact the OH is a funded PhD, which only 12 lenders will even consider counting as income, so we've accepted that we're not going to get the best rate out there. Thanks for all the responses