Property significantly down valued, what now?

Chemical_Grrl

I’m worried we are going to lose the property, everything else is in place, our mortgage is agreed, because it’s shared ownership the price is set from the get go based on the valuation, does anyone have any experience of this situation or have any advice? Thanks

HampshireH

Aren't shared ownership properties often valued by the housing association (or whoever)?

Normally they have the opportunity to value and advertise for up to 8 weeks before a property goes on the open market.

Not always the case but frequently. The battle may be with the valuation the seller received on behalf of the HA

AnotherJoe

Chemical_Grrl wrote: »

Hi

We’re purchasing a shared ownership property as follows

Full value £315,000
40% share £126,000
£16,000 deposit
£110,000 mortgage

LTV 87.3% approx

However, the mortgage valuation has come back as £270,000 so the figures would be as follows:

40% share £108,000
£16,000 deposit
£92,000 mortgage

The original RICS valuation was done in August this year, the first buyer didn’t proceed so we have only been on board since November, the valuations are six months apart but a huge difference of £45,000, because it’s shared ownership the actual difference to the seller is £18,000. Does anyone have any experience of this, friends and family have said that the seller should be able to negotiate on the property she is buying if the market has dropped but I have no idea if that is the case, when I looked at Zoopla the property was valued on there as £282,000 so still less than the £315,000 valuation done in August.

Our broker has given us two options, contact the seller and tell her about the valuation and see what she says or go with another lender with no guarantees that the value will be different.

I’m worried we are going to lose the property, everything else is in place, our mortgage is agreed, because it’s shared ownership the price is set from the get go based on the valuation, does anyone have any experience of this situation or have any advice? Thanks

I think you should be worried that you may be paying far more for this than you need.
Tell the seller about the valuation and dont buy unless they drop the price.

Chemical_Grrl

Thanks for the replies, the way it works is the current owner had to have a RICS valuation done then the HA advertised the property for them for 4 weeks and nominated a buyer, the original valuation was done in August this year and was valid for 3 months, personally looking at other similar houses in the area I think it was over valued in the first place but I do think the mortgage valuation is on the low side, the seller bought it for £110,000 3 years ago and now its being valued at £108,000 (for the 40% share) I'm pretty sure even taking Brexit into account that the housing market has not fallen generally in the last 3 years, ultimately it will be the sellers decision because we are now stuck between a rock and a hard place

Cakeguts

Chemical_Grrl wrote: »

Thanks for the replies, the way it works is the current owner had to have a RICS valuation done then the HA advertised the property for them for 4 weeks and nominated a buyer, the original valuation was done in August this year and was valid for 3 months, personally looking at other similar houses in the area I think it was over valued in the first place but I do think the mortgage valuation is on the low side, the seller bought it for £110,000 3 years ago and now its being valued at £108,000 (for the 40% share) I'm pretty sure even taking Brexit into account that the housing market has not fallen generally in the last 3 years, ultimately it will be the sellers decision because we are now stuck between a rock and a hard place

Was it a new build when the sellers bought it 3 years ago? If so then many new builds do drop in value when they become 2nd hand.

Chemical_Grrl

Cakeguts wrote: »

Was it a new build when the sellers bought it 3 years ago? If so then many new builds do drop in value when they become 2nd hand.

Nope not a new build, it’s a 1960’s property in a established area, I don’t really get how two valuations from RICS qualified valuers can be so wildly different in the space of six months, the market has not dropped 14.3% approx in that time, it’s really frustrating

lookstraightahead

That's what happens with property. Sometimes selling prices differ that much from asking prices anyway

getmore4less

Chemical_Grrl wrote: »

Nope not a new build, it’s a 1960’s property in a established area, I don’t really get how two valuations from RICS qualified valuers can be so wildly different in the space of six months, the market has not dropped 14.3% approx in that time, it’s really frustrating

Well within acceptable margins of +- 10%, one goes high the other goes low and 6 month gap.

Thanks for the replies, the way it works is the current owner had to have a RICS valuation done then the HA advertised the property for them for 4 weeks and nominated a buyer, the original valuation was done in August this year and was valid for 3 months, personally looking at other similar houses in the area I think it was over valued in the first place but I do think the mortgage valuation is on the low side, the seller bought it for £110,000 3 years ago and now its being valued at £108,000 (for the 40% share) I'm pretty sure even taking Brexit into account that the housing market has not fallen generally in the last 3 years, ultimately it will be the sellers decision because we are now stuck between a rock and a hard place

That buyer pulled out.
Probably they dodged a bullet once they had researched they could get something better value like you realise you can.

That 3 month valuation was for the HA and has run out they probably still need to approve any sale and might need a new valuation.

Even if you can bridge the gap go back to the vendor with worst case and get them to make the next move.

Watch the market for all prices, sell through on land reg, SSTC and new on.
you need to keep this research up to date in your head so you know what to paying for a place in your chosen area.

I’m worried we are going to lose the property, everything else is in place, our mortgage is agreed, because it’s shared ownership the price is set from the get go based on the valuation

personally looking at other similar houses in the area I think it was over valued in the first place

Did you do that research before or after making an asking price offer?

You need to decide what you think it is worth to you in comparison to the others on the market and at that price and the lenders valuation/mortgage limit can you afford it?

getmore4less

I’m worried we are going to lose the property, everything else is in place,

Chemical_Grrl wrote: »

Nope not a new build, it’s a 1960’s property in a established area, I don’t really get how two valuations from RICS qualified valuers can be so wildly different in the space of six months, the market has not dropped 14.3% approx in that time, it’s really frustrating

Be really careful about talking yourself up into paying to much for this place.

if brave enough you could get a second opinion by posting links to the area or even the actual property.

9/10 the actual property is spotted even with just the area.

Gwendo40

AnotherJoe wrote: »

I think you should be worried that you may be paying far more for this than you need.
Tell the seller about the valuation and dont buy unless they drop the price.

Agreed.

I find it quite remarkable how almost every time a buyer is met with a down valuation following a mortgage survey they don't seem to be able to comprehend that the property simply isn't worth what it was on for.

It's quite bizarre.

Chemical_Grrl

Hi all

I appreciate your replies, however shared ownership is very different to a conventional sale, you don’t make an offer for the property, the price is set from the RICS valuation that the seller gets done at the start of the process, you then get selected for the property by the housing association based on first come first serve basis and having an assessment completed by an IFA. The previous buyer didn’t proceed because her deposit was dependant on the sale of an inherited property and that sale fell through so the seller chose to not go with that buyer because she wanted to proceed quickly, she already has a property she wants to move to, whilst I agree that valuations can vary I think the original valuation was too high and the lenders valuation is low, it doesn’t make sense for the property to be worth less than it was three years ago when property values have increased in that time although I get that it’s based on a number of factors, at the end of the day this is frustrating because we are now stuck, the seller has said she won’t sell at a loss so really don’t know what to do, I guess we are going to lose the property