Homebuyers Report

thesurveyor

Hi guys,


I'm after some advice.


I'm a first time buyer and I've had a offer accepted on a property for a certain amount.


however the homebuyers report has said that the market value is substantially more than the accepted value.


will this affect my mortgage?


thanks

Cakeguts

It won't make any difference. The mortgage is based on what you are paying.

G_M

Just be grateful you've got a bargain.

phill99

As above. It means that you are buying something for less than its open market value.


However, make sure that the figure you are looking at is the open market value and not the reinstatement value. The reinstatement value is the cost to rebuild it and is relatively common to have this higher than the OMV.

Surrey_EA

phill99 wrote: »

However, make sure that the figure you are looking at is the open market value and not the reinstatement value. The reinstatement value is the cost to rebuild it and is relatively common to have this higher than the OMV.

I would have said the opposite is true.

The land will carry a value on its own, even if there is not a property that exists on it.

Are you saying it is relatively common for properties to be sold for less than they cost to build?

kingstreet

Have you seen a copy of the mortgage report & valuation?

That seems to be such a big difference, I'd wonder if it was a C&P error from the report done previously.

hounsehunterftb

Lucky you! Lender wouldn't be worried if valuation is higher than offer. Other way round is a concer. We just got out survey result and valuation is exactly the same as our offer price.

phill99 wrote: »

However, make sure that the figure you are looking at is the open market value and not the reinstatement value. The reinstatement value is the cost to rebuild it and is relatively common to have this higher than the OMV.

Its the opposite from what I have read. Also in our homebuyer report, reinstatement value is 10K lesser than the valuation.

saajan_12

Surrey_EA wrote: »

I would have said the opposite is true.

The land will carry a value on its own, even if there is not a property that exists on it.

Are you saying it is relatively common for properties to be sold for less than they cost to build?

Reinstatement value includes
*demolition & and excavation of foundations
*removal of materials
*new building materials (often higher cost that when first built)
*labour cost (often higher cost than when first built)

So, with an older property that was built when materials/labour were cheaper, the market value may have reflected the lower rebuilt cost at the time. The market value may not have increased as fast as materials/labour costs so they are sold for less than they would cost to REbuild TODAY.

Surrey_EA

saajan_12 wrote: »

Reinstatement value includes
*demolition & and excavation of foundations
*removal of materials
*new building materials (often higher cost that when first built)
*labour cost (often higher cost than when first built)

So, with an older property that was built when materials/labour were cheaper, the market value may have reflected the lower rebuilt cost at the time. The market value may not have increased as fast as materials/labour costs so they are sold for less than they would cost to REbuild TODAY.

Perhaps it depends on whereabouts in the country a property is located, but where I am in the world land that can be built on carries a significant value, and by comparison the house is often the cheaper component.

Locally to me it would be considered practically unheard of for the reinstatement value to be greater than the sale price, regardless of the age of the property.

kingstreet

A semi in Fulham = rebuild cost significantly less than market value.

A terrace in Burnley = rebuild cost significantly higher than market value.

In the first instance, the value of the land will be far higher than the cost of the building on it.

In the second, the opposite applies and the damage to the adjoining properties from eg a fire will increase the cost dramatically.

Surrey_EA

kingstreet wrote: »

A semi in Fulham = rebuild cost significantly less than market value.

A terrace in Burnley = rebuild cost significantly higher than market value.

In the first instance, the value of the land will be far higher than the cost of the building on it.

In the second, the opposite applies and the damage to the adjoining properties from eg a fire will increase the cost dramatically.

All agreed.

However, I would suggest that it is likely there are many, many more properties in the second group than the first.