Bank just undervalued house!! Help!

Da92

Hi all,

We are so close to buying our dream house - we're working through the solicitors paperwork, we have sorted out our survey with no major issues, we thought we were nearly there and bang! Today we got a call from the bank saying the property has been undervalued and they wont lend us the amount we need to buy the house at the price we agreed (and had to negotiate hard for!)

Any idea what happens next? We haven't told the estate agent yet as we don't know how to play it, we can afford the mortgage at the agreed cost of the house but the bank will not give us the mortgage.

Any advice??! Can we negotiate a bit with the banks and with the estate agents and meet in the middle? Anyone have any experience/ideas of what we can do?!

Thanks!!

davidmcn

Would help if you gave us some numbers. Can you afford to make up the difference? You're not realistically going to be able to "negotiate with the bank" about the valuation.

You may also be better to consider the bank's valuation to be correct, and you and the vendor's initial idea of the price to be an overvaluation.

Da92

So we agreed on £439k (and had the mortgage in principle based on that), but it has been valued at £410k...
when you say make up the difference, do you mean paying the 29k in cash? That's something that would be quite difficult as we have set aside money to do up the property abit,
I am really shocked to be honest, lots of houses in the area are on the market for similar to what we offered, so we felt like we were getting an alright deal! The house was initially on offer for £500k - we never viewed it then, and clearly noone else did as that was way to high, but when they dropped it to £450k we viewed it and put our offer down and eventually both settled on £439l.

Hope that all makes sense!

AdrianC

How much money were you looking at borrowing from your lender?

You think it's worth £439k, and you have every right to think that.
But your lender are less sure. And they have every right to think that, too.

Ultimately, if you can't make the numbers work, and the vendor doesn't want to renegotiate a price that will work, you are going to have to walk away.

Cakeguts

If you want this house you are going to have to make up the difference from you cash savings and then wait a bit longer to do some of the cosmetic work on it that you wish to do.

Da92

We have a good deposit and were offered a mortgage comfortably so thought they would be confident in giving us the mortgage! But I understand the valuation changes things considerably.

When you say - make the numbers work- is there anything we can do - apart from begging the seller to give it to us for 410k, to try and get the property?

We are so far through this process and have already spent so much money on surverys, solicitors, and now the valuation, plus we really want this house so just want to see if we have any other options?

I guess the first thing to do is to speak to the estate agent...sigh.

KBNewby

May be worth going to a broker and finding a different mortgage provider if you're convinced at the property value

Da92

Thank you all for your quick and helpful replies!
I didn't know we could pay the difference in cash, if that's allowed that seems like the best option (although will still try and get the price of the property down if the difference is that high, just dont think we can get it as far own as 410)

DoaM

What about post #7? Could you try a different mortgage provider?

AdrianC

Da92 wrote: »

We have a good deposit and were offered a mortgage comfortably so thought they would be confident in giving us the mortgage! But I understand the valuation changes things considerably.

No, not one bit.

Let's say you were looking at a £320k mortgage.

£320k mortgage + £119k equity = £439k purchase.
£320k @ £439k = 73% LtV

They've downvalued to £410k. They're still happy to lend £320k, but now they'll view it as 78% LtV.

You're still paying the same money for the same property. You're still borrowing the same amount. You're still putting the same equity in. It's just that the interest might be a little higher, because the lender are viewing it as £320k against a £410k property instead of a £439k one.

ToadsFriend

There does seem to be a HUGE increase in banks 'downvaluing' and it is not always down to the property being over priced at all...with market uncertainty banks do not want to expose themselves by lending large amounts. I have had a LOT of discussions about this lately, trust me!! haha

Try anther bank/valuer as they could value differently, or as someone else suggested, make up the money yourself or see if you can meet in the middle with the seller, as others may face same issue.

BUT it doesn't necessarily mean the house is prices worng, just that the bank daren't lend such a big amount at the moment..Keep us updated please!!