House valued at less than offer - what to do?!

amylou1107

Hi,
We recently had an offer accepted on a house.
Our mortgage company have just informed us that they only value it at £300k. It was on at £320k and our offer was £322k.
We are buying in an area that is in demand and it's very much a sellers market. There were other offers on the property hence our over asking price offer. Personally we believed the house to be valued what we offered given that similar properties have been on the market for similar.

Have anyone has any expect of down-valuation and any advice on what we should do next?
We don't want to loose the house but equally don't want to pay lots more than it's worth.

Any advice would be greatly appreciated as we are first time buyers.

Thanks!!!

Hoploz

It's a bit tricky. If you are the only person interested then you'd go back to the seller and renegotiate, and hopefully they'd accept the lower figure, bearing in mind other buyers may have the same problem in future.

However you have two problems. You have competition (probably) and you are FTB. As a FTB would it be right to assume you don't have free cash floating about to make up the difference? If you are getting a high LTV mortgage, eg 90% then you may be unable to proceed. If you (or your competition) are at a lower LTV then it can be possible to go ahead at the agreed price.

For example, if you were getting a 50% mortgage, it may be adjusted to be 45% of the total price, and you make the difference up in cash and it makes little difference. But if you are struggling to get to the price and are maxing out at 90% you probably can't be adjusting this.

G_M

What is the Loan To Value of the mortgage you've applied for?

If the mortgage amount is still within the value the lender has put on the property (and within the LTV for your particular mortgage product) then you can simply procede, making up any reduction in mortgage amount from your own funds.

Or you re-apply from a different lender.

Or you find another property.

Cakeguts

What you do in this situation is you put down a bigger deposit so that the extra price is paid for from your savings.

jojo9239

Our valuation has just come in at £160k we offered £170k as we haven't seen anything else we like and we love the house we are meeting her in the middle at £165k and making the 5k shortfall ourselves by changing from 15% deposit to a 10%.

Chanes

We had this situation but they sold it to us at what it was valued at. The only other thing we could have done was make up the difference in cash!

amylou1107

Thanks everyone.
We currently have 25% deposit (75%LTV) so could go to 80% LTV to make up the difference - obviously puts our monthly repayments up so if we can get the seller to come down a little that would be ideal.

I just worry about paying too much and then being in negative equity...

jojo9239

It depends how long you plan to be in the house for us this is our long term house 15/20 years so we don't mind making up the 5k

davidmcn

amylou1107 wrote: »

similar properties have been on the market for similar

But have they sold, and if so for how much?

Chanes

amylou1107 wrote: »

Thanks everyone.
We currently have 25% deposit (75%LTV) so could go to 80% LTV to make up the difference - obviously puts our monthly repayments up so if we can get the seller to come down a little that would be ideal.

I just worry about paying too much and then being in negative equity...

Again that is what happened with the house we bought back then! We got it at the valuation even though they wanted more...and then the market collapsed...in the 1990s. When we sold it we realised a loss of 25k and bought another house but when we sold that we realised a 100k profit!

Home ownership...not the easiest of things sometimes.

Hoploz

Remember, negative equity doesn't mean the house being worth less than you paid, it means being worth less than the loan amount.

Also, negative equity only really matters if you find you need to sell. If you keep the property then it'll eventually go up if it should dip.

With interest rates this low it's unlikely to be a problem unless you have a major change in your own circumstances - you just keep paying the mortgage. Very different to in the early 1990's when interest rates rocketed to 13% and beyond, meaning people couldn't make their payments and hence they were repossessed.