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New Build - Mortgage valuation less than purchase price

We submitted our FTB mortgage application on 9th May with Santander and today they have come back to say that the valuation for the new build is less than the purchase price.

Purchase price is £335k, valuation came back at £320k.

My broker is now querying with the company which carried out the valuation to confirm whether they included the parking facility as part of the valuation, as this was an add-on I accepted which raised the price from £320k to £335k. I’m not overly optimistic however, as the broker has advised that such oversights are very rare.

What are my options from here? Do I go back to the developer and request that they lower the price? If the developer requests a second valuation, do they foot the bill for this or is it down to me?

We are using Help to Buy scheme to provide 20%, 75% mortgage and 5% deposit from us.

I’m also a bit sceptical as we have gone with the builder’s broker and solicitor recommendations, which is great when things go like clockwork, but now we have run into this issue I question whether they will be working more for the builder’s interests rather than our own.

I’d be grateful for any advice on the best way to take this forward, as we really don’t want to lose the property and is in an area that we like.
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Comments

  • FTBAngst
    FTBAngst Posts: 130 Forumite
    I think it’s generally a bad idea to use the developer’s recommended anything.

    When my friend brought a new build the sales person said if that happened the developer will normally lower the price. But it didn’t come to that so it’s hard to know if she was just bs-ing.

    Someone will correct me if I’m wrong but I don’t think you can use help to buy if the valuation is lower than the price you agreed to pay.

    Are considering still buying it for £335k? The valuation is telling you its over priced, add on that the ‘new build premium’ and that help to buy has inflated house prices and your low deposit. If you need to sell anytime soon, are you concerned about how much negative equity you’ll have? If you’re deposit is 5% that’s almost the same amount the bank thinks you’re overpaying. Have you spoken to the developer? Or asked the mortgage broker why they don’t think the developer should lower the price in light of this information?
  • Danz123
    Danz123 Posts: 31 Forumite
    FTBAngst wrote: »
    I think it’s generally a bad idea to use the developer’s recommended anything.

    When my friend brought a new build the sales person said if that happened the developer will normally lower the price. But it didn’t come to that so it’s hard to know if she was just bs-ing.

    Someone will correct me if I’m wrong but I don’t think you can use help to buy if the valuation is lower than the price you agreed to pay.

    Are considering still buying it for £335k? The valuation is telling you its over priced, add on that the ‘new build premium’ and that help to buy has inflated house prices and your low deposit. If you need to sell anytime soon, are you concerned about how much negative equity you’ll have? If you’re deposit is 5% that’s almost the same amount the bank thinks you’re overpaying. Have you spoken to the developer? Or asked the mortgage broker why they don’t think the developer should lower the price in light of this information?

    I think that £335k for the area we're looking at is very reasonable, good transport links, 2 bed, spacious, private parking space etc. Nothing outlandish.

    I haven't approach the developer yet, pending the query to the surveyor as to whether he included the parking space in his valuation. Once I know where we stand on this point, I can then escalate further.

    Should I ask the developer directly via their sales team to lower their price, or make this request through my solicitor to raise his end?
  • FTBAngst
    FTBAngst Posts: 130 Forumite
    Danz123 wrote: »
    I think that £335k for the area we're looking at is very reasonable, good transport links, 2 bed, spacious, private parking space etc. Nothing outlandish.

    I haven't approach the developer yet, pending the query to the surveyor as to whether he included the parking space in his valuation. Once I know where we stand on this point, I can then escalate further.

    Should I ask the developer directly via their sales team to lower their price, or make this request through my solicitor to raise his end?

    This has actually never happened to me so I’m not sure. Your broker seems like the most logical person. If you’re willing and happy to proceed at £335k you first need to make sure you can borrow enough for that amount. If your broker has said oversights like forgetting to include parking are rare, what did they say after that?
  • Danz123
    Danz123 Posts: 31 Forumite
    FTBAngst wrote: »
    This has actually never happened to me so I’m not sure. Your broker seems like the most logical person. If you’re willing and happy to proceed at £335k you first need to make sure you can borrow enough for that amount. If your broker has said oversights like forgetting to include parking are rare, what did they say after that?

    I'd of course be happier to pay £320k if that's what the bank's valuation is, I'm not necessarily arguing that it should be the higher figure.

    Broker said that if the surveyor forgot to include parking as part of valuation, that may explain the shortfall. But if he comes back and confirms valuation included parking, then we would have to get a second valuation done (he indicated at my expense) or looking at an alternative lender.
  • Lokolo
    Lokolo Posts: 20,861 Forumite
    Part of the Furniture 10,000 Posts
    Danz123 wrote: »
    Broker said that if the surveyor forgot to include parking as part of valuation, that may explain the shortfall. But if he comes back and confirms valuation included parking, then we would have to get a second valuation done (he indicated at my expense) or looking at an alternative lender.

    Or go back to the developer and state that the house isn't worth as much as they are saying and that you will only pay £320k.
  • Danz123
    Danz123 Posts: 31 Forumite
    Lokolo wrote: »
    Or go back to the developer and state that the house isn't worth as much as they are saying and that you will only pay £320k.

    I'm tempted to just pick up the phone and make lots of noise directly to the developer, but should I be leaving this to the broker? As I don't want to tread on his toes if he has a strategy in mind.
  • Grenage
    Grenage Posts: 3,152 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Don't be concerned with treading on anyone's toes; you're spending a lot of money - you're the customer.


    You absolutely don't want to pay any more than is necessary. What if you need to sell the house after a year due to bad circumstances?


    You'd potentially have overpaid by 15k, the house (as it's second hand) would likely have dipped another 5%, and possibly the prices are down due to economic uncertainty. You could be 40k in negative equity.


    Be as economical as you can, and if the builders won't play ball - go elsewhere.
  • kingstreet
    kingstreet Posts: 39,204 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    As a newbuild specialist broker our job is to act on our client's instructions.

    When you get a downvaluation, you first establish if an appeal might be successful. You gather comparables to put to the surveyor. If there are none, you are unlikely to be successful.

    If the client wishes to renegotiate with the builder, that is their choice and we will await the outcome. Sometimes the price is reduced, other times the builder will offer to pay for another valuation, or for a new valuation with a new lender. If the client chooses one of these options, we will do what is necessary to reach their desired outcome as quickly as possible.

    However we cannot influence the pricing decision in any way. That will be entirely between builder and purchaser.

    A builder might be an introducer but our responsibility is to our client alone.
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • Danz123
    Danz123 Posts: 31 Forumite
    Thanks for this advice Kingstreet, very useful, wasn't aware that the broker can't negotiate on the price on our behalf to resolve this particular issue. I'll go straight to the builder myself then and see what they say.

    I doubt there is any basis for a successful appeal as we've reserved a plot in phase 1 of a large development, so no other obvious comparables (at least not many) as it's very early on in the project. I also wouldn't want to waste much time on appealing as I understand that decisions are rarely reversed, even with a strong case and supporting evidence
  • Crashy_Time
    Crashy_Time Posts: 13,386 Forumite
    10,000 Posts Seventh Anniversary Name Dropper
    Grenage wrote: »
    Don't be concerned with treading on anyone's toes; you're spending a lot of money - you're the customer.


    You absolutely don't want to pay any more than is necessary. What if you need to sell the house after a year due to bad circumstances?


    You'd potentially have overpaid by 15k, the house (as it's second hand) would likely have dipped another 5%, and possibly the prices are down due to economic uncertainty. You could be 40k in negative equity.


    Be as economical as you can, and if the builders won't play ball - go elsewhere.

    Good advice.
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