Bidding over asking price - risk bank won't value it as high as we pay?

AdrianC

GeorgeRob wrote: »

Yes, thanks but this wasn't my question.. My point was, if they do value it lower than the price we offer, are we in danger of losing our deposit at that point, or can we just pull out and lose the survey fee. And I think it seems that there is no danger of losing the deposit from what people are saying.

You won't get close to exchange of contracts until the lender is happy with the property providing adequate security.

saajan_12

Cakeguts wrote: »

So let me get this straight. You have offered £199k for a house marketed at 185k in Manchester? I know prices in Greater Manchester have been rising but I don't think they have gone up that much since the house was marketed unless it has been on the market for about 5 years.

No one sells a house for less than they can get for it.

An asking price isn’t an absolute answer to the property value. It is simply what the seller / estate agent choose to market at.
* Seller / agent may not know the market value (ie what the market is willing to pay) especially if it’s a unique house or there aren’t recent sales in the area.
* May have marketed low to attract interest, expecting price to be pushed up in a bidding war.
* Seller may be in a rush to move on for other overriding personal reasons and price low to entice a quick sale.

Property transactions aren’t the same as buying a product off the shelf. The asking price is really just a guide, there’s always a negotiation expected.

streetlovin wrote: »

I don't understand why anyone would pay above the asking price. Surely if the house is worth £199k the seller would try to sell it for that price. Not sure why anyone would pay the money when the house is not worth that much.. So yes, there's every chance that Opinion 1 will happen. It can happen to anyone.

And no, in England you run searches, surveys, valuations and secure a mortgage offer to satisfy yourself with the property and your financing first. THEN you pay the deposit & exchange contracts. The mortgage offer is usually valid for 3-6 months for you to complete the purchase, and it is very rare that the lender revalues the property after you’ve exchanged (read: paid deposit), so Option 1 is extremely unlikely.

GeorgeRob

Cakeguts wrote: »

So let me get this straight. You have offered £199k for a house marketed at 185k in Manchester? I know prices in Greater Manchester have been rising but I don't think they have gone up that much since the house was marketed unless it has been on the market for about 5 years.

You need to go and look at this house again. If this house is bigger and nicer and cheaper than others surrounding it then there is something that is making it cheaper. What to look for. Road humps means a lot of traffic, pub next door or pub carpark over the back fence, mainline railway line over the back fence, no off street parking and double yellow lines outside, needs a new roof, planning permission for new block of flats next door or new housing development over back fence, backs onto a motorway, close to fire station/ ambulance station, risk of flooding. There is going to be something that you didn't notice or know about.

No one sells a house for less than they can get for it. So if a house appears to be cheaper than you would think there is either something wrong with the house or something about the location that puts people off buying it. The fewer the people who want to buy the lower the marketing price. So before you worry too much about the mortgage find out what it is that is making this house appear cheap for what it is.

Thanks, that's a very sensible, helpful and reasonable reply!

It's not uncommon in Manchester at the moment. My friend paid £14k over the asking price for his house, and the bank agreed that was the value for the mortgage.

This house isn't cheaper than the others we've seen (same asking [price as 3 others nearby), but it is much more nicely decorated, and the 3rd bedroom is slightly larger.

No road humps. No pub, no pub car park. railway nearby but several streets in between. It does have off street parking. Don't know about the roof.. will presumably find out about that in the survey? Its an end terrace, so no room for new block of flats next door. Is not next to a motorway, fire station or ambulance station. No flood risk.

It is however only about 1/2 km from a football stadium though, which will be a pain on match days. I presume this is a big factor. But then, all the houses nearby are!

There were 27 viewings of the house on one day last saturday, and there's been 8 bids, 7 of which were over the asking price.

GeorgeRob

AdrianC wrote: »

You won't get close to exchange of contracts until the lender is happy with the property providing adequate security.

Sorry, could you please just explain what this means in more simplistic terms, for an idiot like me? Thanks.

GeorgeRob

saajan_12 wrote: »

An asking price isn’t an absolute answer to the property value. It is simply what the seller / estate agent choose to market at.
* Seller / agent may not know the market value (ie what the market is willing to pay) especially if it’s a unique house or there aren’t recent sales in the area.
* May have marketed low to attract interest, expecting price to be pushed up in a bidding war.
* Seller may be in a rush to move on for other overriding personal reasons and price low to entice a quick sale.

Property transactions aren’t the same as buying a product off the shelf. The asking price is really just a guide, there’s always a negotiation expected.




And no, in England you run searches, surveys, valuations and secure a mortgage offer to satisfy yourself with the property and your financing first. THEN you pay the deposit & exchange contracts. The mortgage offer is usually valid for 3-6 months for you to complete the purchase, and it is very rare that the lender revalues the property after you’ve exchanged (read: paid deposit), so Option 1 is extremely unlikely.

Thank you for confirming and answering my actual question perfectly

lincroft1710

GeorgeRob wrote: »

Sorry, could you please just explain what this means in more simplistic terms, for an idiot like me? Thanks.

Until you get a definite mortgage offer on the property you will not be able to exchange contracts. Without a mortgage offer, you are not in a position to think about the actual purchase stage of the house buying process.

AdrianC

GeorgeRob wrote: »

Sorry, could you please just explain what this means in more simplistic terms, for an idiot like me? Thanks.

You make an offer.
The offer is accepted.
You start work on finalising the money, on the searches, on all the other details.
Draft contracts are drawn up and, eventually, signed.
Nothing is legally binding yet.
ONLY when both the buyer's and vendor's solicitors are happy everything is ready will the signed contracts be exchanged and the 10% deposit paid. At that stage, whoever backs out is liable for all costs the other side incurs.

Don't get confused between the two meanings of deposit.

When you exchange contracts, the buyer gives (usually) 10% of the purchase price as a downpayment on the purchase, to show that they intend to go through with it.

If you need a mortgage, you borrow some of the purchase price, but you need to provide some of the money yourself, since 100% mortgages no longer exist. In your case, this is around £10k.

GeorgeRob

That's great, thanks Adrian!

And thanks everyone. This forum is ridiculously helpful!

nykied

Yes, I second the 'ridiculously helpful' bit, as I came on to post a topic about what happens if the lender values the property at less than your offer and all of the above have answered my question!

kingstreet

It's worth bearing in mind the lender doesn't value the property. This is delegated to a chartered surveyor with whom the lender contracts for a mortgage report & valuation.

Surveyors typically use comparables; the recent (last four months) sold prices of similar property in the vicinity (under 0.5 miles) to establish the if the value hits the agreed price.

For a guide, check the sold prices on Rightmove to establish of there are comparables for your chosen property;-

http://www.rightmove.co.uk/house-prices.html