Lowered offer due to mortgage refusal, how to wait it out?

HenryDF

We’ve just had our mortgage application declined at the last minute. The reason given was simply their valuation put the property value below our offer which throws the loan to value ratio off.

We’re FTB and probably over eager for a quick buy, our lender took ages to decline us so we’ve already sorted as much of the legal side of things with our solicitor as possible.

On reflection the property was overpriced, our hearts had clouded our judgment. We have no intention of paying over the odds so have to make a new offer. The issue is its highly unlikely to be accepted. We were already below the original asking price and the seller was not happy as it was.

The property will soon go back on the market but surely they are going to run into the same problems with the next buyer.

We’re still interested in the property, at a more realistic price and we’re in a position to wait it out.

If we keep our rejected offer on the table and the buyer comes back to us how much of this process are we going to have to start over again? Obviously we will need a new mortgage application (which I suppose could be declined yet again) but legal work such as the searches etc done by our solicitor won’t all need redoing will they?

We’ve already paid out a lot on surveys and solicitors and we want to use that as best we can to improve our position as buyers and hopefully not see any money wasted if the seller comes around to our offer. Any advice? Thanks.

Hoploz

How much money difference are we talking here? If you could make up the difference (or some of it if you want to reduce your offer) perhaps you could apply for a different mortgage product which has a different LTV ratio allowance? Speak to your broker for options on this. It is entirely possible a different lender could come up with a different valuation as well.

However, if you really feel you've overpaid and you are not prepared to proceed then you'll have to tell the EA this. It's an interesting one as right now the market is a bit iffy, the referendum being blamed as well as a seasonal dip, the market is a bit flat right now around here, is it the same in your area? If so this might work in your favour.

Regarding waiting it out, some searches and surveys have time restrictions so they're only valid for 6 weeks or so. So you may well have to redo some of the work if outside the time frames. Your solicitor can advise on these implications. As you say, you've incurred costs already. Think carefully about whether you want to throw this money away, or whether you'd be better off investigating different ways to still proceed. Are you going to find another house as good for less? If you're going to be in there for a while then a few k now could be soon forgotten if in 10 years time the value has increased by 50% for example.

booksurr

the seller wants what they want for it. How many other lower offers it will take before they adjust their expectation is guesswork

obviously the money you have paid to date is wasted if you do not buy it. You should not have allowed the solicitor to progress so far until your mortgage offer was confirmed. Clearly if the vendor will accept your offer in the fullness of time because they have recognised they are over priced and need to lower their hopes then the legal work is already done. Whether your ability to proceed quickly at that point is of any interest to the vendor is guesswork.They may or may not have had to delay and/or rework their own plans to accommodate the lower price they will now get.

alternatively of course the property may actually be in an area of rising prices and lower mortgage valuation notwithstanding if the delays is many months the "value" may have caught up with the asking price. It is all speculation.

The only thing certain at the moment is unless you can find extra money yourself you are not buying that house with a mortgage from that lender. How much of a difference is there from your theoretical max borrowing amount and what they valued that property at? Were you realistic to start with? How much was your mortgage in principle amount and how is that different to the actuality of the amount needed for that property?

Cakeguts

This is one of the learning curves of buying a house. Many purchases do not complete. Sometimes the survey shows up a problem, sometimes it is the searches and sometimes it is the valuation. If it is the valuation then you have to make up the difference between the valuation and your offer out of savings that you have if you still want the house.

You seller doesn't have to sell their house to you just because they accepted your offer. Also you don't have to buy it if you feel it is overpriced.

You must tell the Estate Agent what has happened so that they can talk to the seller.

If you are finding the searches and buying costs expensive then buying a house may not be for you. Owning a property is expensive. You have to budget for repairs to the property. If you find paying for the legals for buying a house expensive you are going to have a problem with paying for repairs and saving money in case you are unable to pay the mortgage for some reason.

eddddy

HenryDF wrote: »

If we keep our rejected offer on the table and the buyer comes back to us how much of this process are we going to have to start over again? Obviously we will need a new mortgage application (which I suppose could be declined yet again) but legal work such as the searches etc done by our solicitor won’t all need redoing will they?

Most mortgage lenders require that searches are no more than 6 months old on completion.

Was the mortgage declined - or did they just say something like "We valued the house at £x, so the maximum we will lend is £y"?

If that's the case, they are offering to lend (but not as much as you had asked for) - and typically, that offer would be valid for 6 months.


The best plan might be to keep your offer on the table whilst looking for other properties. Tell the EA what you're doing.

If you find another property you want to offer on, you could tell the EA to give this seller a final chance to accept your offer - if you want.

HenryDF

How much of a difference is there from your theoretical max borrowing amount and what they valued that property at? Were you realistic to start with?

Our mortgage in principle was about £30k more than the current value of the property according to our lender. We negotiated down but being as objective as possible we still overvalued it.

How much money difference are we talking here? If you could make up the difference (or some of it if you want to reduce your offer) perhaps you could apply for a different mortgage product which has a different LTV ratio allowance? Speak to your broker for options on this. It is entirely possible a different lender could come up with a different valuation as well.

The difference here is ‘only’ less than £10k but we were already pushing the limits of what we were willing to spend, as I said we loved the property and were somewhat blinded to its potential flaws. After coming back down to earth a little I find most compromises we can make would leave us in a riskier financial situation than I’m comfortable with. (The property needs work and it’s a little unclear how much this could cost)

Think carefully about whether you want to throw this money away, or whether you'd be better off investigating different ways to still proceed. Are you going to find another house as good for less? If you're going to be in there for a while then a few k now could be soon forgotten if in 10 years time the value has increased by 50% for example.

Yes unfortunately I will risk regretting this over what seems like a relatively small sum of money. But I might live to regret overpaying even more.

You should not have allowed the solicitor to progress so far until your mortgage offer was confirmed.

Lesson learned on jumping the gun with solicitors.

Regarding waiting it out, some searches and surveys have time restrictions so they're only valid for 6 weeks or so. So you may well have to redo some of the work if outside the time frames.

Thanks, will look into this.

If you are finding the searches and buying costs expensive then buying a house may not be for you. Owning a property is expensive. You have to budget for repairs to the property. If you find paying for the legals for buying a house expensive you are going to have a problem with paying for repairs and saving money in case you are unable to pay the mortgage for some reason. .

Of course we budgeted for the potential that these surveys and legal fees may be lost. As you say that’s the way these things sometimes go. I just didn’t want to overlook something that might be salvaged if the seller changes their mind in time.

Was the mortgage declined - or did they just say something like "We valued the house at £x, so the maximum we will lend is £y"?

It was outright declined. I had thought maybe a retention pending some works or as you said but no. Was told our only recourse was to reapply from scratch if we lower our offer.

I should mention we are absolutely in contact with the estate agents and have kept them informed of things. The ball is in the vendors court at the moment.

Thanks for all responses.