Negotiating after mortgage valuation lower than agreed sale price

Didyousaysomething

Hello,
I'm interested in finding out how one is supposed to proceed if a mortgage valuation comes back as significantly lower than an agreed sale price.
A bit of context: We're first time buyers. The house went on the market for 280k. Following bidding from us and others, they accepted our final offer of 300k (this may seem crazy but unfortunately this is just what is happening with the houses around where we live.. hate to be a part of it but at our age we just need a house of our own!!).
We researched sale prices in the area/street and though it's 7% or thereabouts over asking price, didn't feel that this was out of whack with other houses that have sold on this street. However the valuation has come back at 275k, so below asking price. The reason stated was that the agreed price was not supported by comparable evidence. I'm assuming the reason for this being that though almost identical houses on the street have gone for that much over asking, ours has been converted from 3 to 2 bedroom (to make one bedroom bigger), 2 reception rooms have been made into one (therefore taking out another potential bedroom) and some renovation is needed in the kitchen.
Obviously we want to negotiate, but were wondering how best to go about this. Instinctively we'd just email the agent and ask them to inform the seller so we can start negotiations, then wait for the seller to make us an offer which we would then negotiate if necessary. Does anyone else have experience with this great a difference in price? And how has that panned out in terms of how the seller reacted?
Many thanks!

Alter_ego

If you want to reduce your offer, you need to convey that to the seller. No good waiting for them to say anything.
They have accepted your offer - ball in your court.

chambta

You need to use it to your advantage. If they're not prepared to play ball you either need to stump up the difference or walk away.

Hoploz

I suppose tell them the valuation and ask them what price they would settle for.

Can you make up the shortfall if they still want mre than the valuation? Will it affect your mortgage offer in terms of LTV if you do agree to stump up the difference in cash?

Be prepared for them to offer the house to the other interested bidders. If any of them are buying without a mortgage, or with a larger % deposit, they may still be able to proceed at a higher price than you are able.

Cakeguts

A house is only worth what someone will pay for it. In your case it is worth 300k to you. However the mortgage valuation says it is worth less. What you are supposed to do is to make up the difference with cash that you have saved not try to reduce your offer.

If you try to reduce your offer the chances are that the seller will try to sell to someone else who is able to pay the price.

davidmcn

Didyousaysomething wrote: »

this may seem crazy but unfortunately this is just what is happening with the houses around where we live

It's all down to the local market, and if it's how you describe then I suspect that a mere 9% over valuation might be the sort of thing which is expected and which other buyers can afford.

nicmyles

Yep, we had this. Took the following steps:

-Offer accepted at £360k on a flat, off a £375k asking price. Our offer was based on our extensive viewings of other properties in the area and knowing what we could get for the money, so we were pretty confident we weren't over-paying.
-Valuation came back at £345k, which really surprised us.
-We asked if they would sell us the flat for £345k. They said no, but were in a difficult position in that they'd found where they wanted to move to. They therefore needed to sell asap so as not to lose it, but the new price wouldn't have been enough anyway.
-We were still happy to pay £360k as long as the mortgage company would lend it, based on looking at comparable sale prices in the area. We worked with the vendor's estate agent to put together a list of five comparable properties with sale prices that supported the offer price to give to the surveyor to ask him to look again at the valuation.
-Surveyor looked at them, but refused to change their mind.
-We reluctantly pulled out of the purchase.
-A few days later, the vendors came back to us and asked whether there was any way we could do £350k, as they'd managed to borrow £10k from family to help them bridge the remaining gap to still make their onward purchase.
-We agreed to bridge the remaining £5k out of our own savings and settled on £350k.

So you can still get a good outcome from this, but dependent on a range of different factors. Primarily how much you want the property, your confidence in the market, your vendor's situation, etc.

I think generally I'd just be up-front with the vendors about your financial position and see what they're prepared to do on price. And worth talking to the agents to put together a case to overturn the valuation, although I don't think this often works.

But if nothing else it helped give us peace of mind that we weren't over-paying and that the eventual £5k we paid above valuation price wasn't a mistake (four years on when we're selling for a really decent profit, it definitely was not a mistake).

You could also try again with a different lender, but I think a lot of the time they use the same companies anyway, so probably not worth bothering.

bris

This was common 10-15 years ago, people were wanting the right house and were willing to pay way over the asking for it. Those times changed in the crash but the right house in the right area have always had a premium attached.


As far as I can tell you knew you were paying over the odds for it as it's price was 280k, only 5k more than value so why the surprise?


I would try and negotiate but don't be surprised when they say no, sought after houses always have someone waiting in the wings.