Offer for those with a 90% mortgate and no extra cash

brazillondon

Hello,

I'm trying to get my head around the concept of making offers on a property, up to the amount of your AIP, despite ultimately being limited to what the bank will value the property at - and thus what they will lend out. Let's take this scenario:

House price £480k
House offer £520k
Banks valuation £500k

In this scenario, from my understanding, the bank may only agree to lend £500k - in which case, as a buyer with no extra cash to make up the difference, I'd have no option but to withdraw my offer, or offer a lower amount. I expect either of these two options would come as bad news to the EA, and may affect how seriously we are seen as buyers - but it seems that there's little we can do as buyers - where there is the conflict of wanting to offer high to secure a property, while not knowing what the bank will value the property at.

It seems every offer from someone in such a position comes with the caveat of "this is my offer, but in truth I'll only be able to offer what the bank think it's worth".

Is this the case? Or am I overlooking something?
If this is the case, what is recommended I do as a buyer?

(I'm assuming I can do little more than be transparent that my offer is pending on the bank's valuation). Hope that's clear - and thanks for the help thus far on this forum - really appreciate it.

davidmcn

brazillondon wrote: »

If this is the case, what is recommended I do as a buyer?

Buy something cheaper, rather than pushing your budget to its limits.

rtho782

Eh even without going to the limit, if the bank values under your offer you may well be stretched.

Even if I had the extra I'd withdraw or reduce my offer in this case, Bank valuations seem to be pretty forgiving so if they value under the offer they must be on to something.

Still, OP has suggested going up by 40k over the asking price, which is insanity imho.

Nobbie1967

I think you need to save so you have a buffer against undervaluation. Many of those you're competing against will have substantial equity from a previous property. If you are upfront about being limited to the mortgage offer, then if I was the seller I would go with a lower offer where the buyer had equity. It would be too much of a risk that you would drop your offer post valuation.