Appeal Down-Valuation

Mo87

On the Revised Purchase price of £246,000
Halifax were lending me £164,410
Cash Deposit: £32,390 (13.2%)

On the Mortgage offer they previously issued under 'Special Conditions' it states
• In making this mortgage offer we have been made aware you will be receiving cash incentives from the vendor to the value of £10,300.

That offer was based on the following 'deal' which I am told was on the CML form;
£252,950 purchase price
3 % gifted deposit = £7588.50
Stamp duty £2648
Legal fee's £1500
TV Mounting -
Wardrobe Upgrade -
Flooring

New Deal
3 % gifted deposit = £7380 (-£208.50)
Stamp duty £2420 (-£228)
Legal fee's £1000 (-£500)
TV Mounting -
Wardrobe Upgrade -
£500 Towards Wardrobe Bedroom 2 (+£500)
Flooring

Not much material difference between them, no vast increase on the revised deal. Really confused

Time2go

You seem to have not factored in carpet costs that could be 3-4K as an incentive value. So now before wardrobe upgrade and tv mount you are on £15k which is well over builders 5% contribution allowed. Therefore they will deduct anything over that from valuation price.

Mo87

TV Mounting is £364
Flooring is for ground floor only, no value on this sum ?

Their is a lack of clarity from the developer, as they are saying they can't reduce the price of the house to the £240,000 from the original valuation as it negatively affects the value of other plots which have not sold or to be released and will show. Incentives can be offered to all buyers on the development however the value of this depends on what is negotiations on reservation.
Furthermore the money to cover the cost for said incentives comes from a separate allowance, as I asked to reduce these to get the price down to the £240,000 and this was rejected.

- Unclear on why this would affect valuation figure ?
- Other plots of identical house type have sold for close to the price of my plot which is a higher spec and in the next phase, last one sold in April for £242,950

Time2go

Because incentives do have an effect as far as surveyor is concerned. If you had twenty identical houses and one had everything top of range whereas rest of houses had everything basic logically The first home owner may try to charge a higher price for their home.However mortgage company are not interested in how plush carpets are theyjust care about how much bricks and mortar are worth

Therefore mortgage company want to make sure that the builder is not actually artificially increasing prices above market value by including lots of free extras. They therefore limit the amount of extras at 5% before they start taking it off list price.

Therefore on a £250000 house £12,500 of extras is acceptable but if they have you £15,000 then the surveyor would reduce value of property by £2,500 to £248,500 etc as they would say the price is artificially high for the building as actually price is including extras and they are only interested in bricks and mortar

Mo87

Oh ok ...

The fact that the offer they made us and I have to hand states £10,300 of options not sure if thats a good/bad thing ? Not sure how that figure has been derives as the above does not add up to that figure in any case on Example 1.


Stress

Mo87

So is the way around it should an issue arise for them to reduce the 'cash incentives' such as the legal fee's / stamp duty or gifted deposit and to offer items to the same value in upgrades such as bathrooms/kitchens etc ?

kingstreet

Time2go wrote: »

You seem to have not factored in carpet costs that could be 3-4K as an incentive value. So now before wardrobe upgrade and tv mount you are on £15k which is well over builders 5% contribution allowed. Therefore they will deduct anything over that from valuation price.

Only cash incentives count, fees paid, SDLT, deposit/cashback etc.

Non-cash incentives (carpets, tiles etc) aren't counted.

kingstreet

Cash incentives for shared equity applications are acceptable provided the total value of the loan plus incentive together does not exceed 95% of the value of the equity share being purchased.

£246,000 purchase price.
£49,200 HTB equity loan (assumed 20%)

£196,800 is 80% of purchase price.

£186,960 is 95% of the 80%.

Therefore the mortgage plus the cash incentives can't exceed that figure.

The mortgage is £164,410 so the cash incentives could be as much as £22,550 (£186,960 - £164,410) using the formula shown, but as that would exceed the 5% overall cash incentive limit, the 5% of £246k, or £12,300 would over-ride.

Mo87

Ok so as the only the cash incentives and you have 5% which would allow up to £12,300

Stamp Duty £2420
3% Gifted Deposit £7380
Legal Fees £1000
£500 Towards Wardrobes (Would this count in here or not ?)


£11,300 Inc the Wardrobes or £10,800 without.

Are the incentives likely to be an issue ? If so what is the best way to resolve it without loosing value in the deal.

kingstreet

Only CASH incentives are counted so you do not try to establish cash values for NON-CASH incentives which don't.

It's £10,800, so it's within the acceptable level.