Mortgages for properties in Scottish cities

ScottishSaver14

Hi @MrPez

Think there is a misunderstanding on your side on the below: 

"If this is a general trend, surely that implies that properties are systematically being undervalued? What kind of system can market a flat at 189k only for it to sell at 250k?? Makes no sense!

The bigger problem is that mortgage companies will only lend on the valuation which means anything you offer over valuation (because otherwise you won't get it) you have to find yourself"

If a flat is 'Marketed' at offers over 189k - that's not the VALUATION price. 
Each listing will have a home report done by the sellers side. In this, there will be a section which covers home report value. This is often 10% + more than the 'marketing' price (as you have said - to garner interest) and is the amount the surveyer has said the house is worth and therefore what the bank will lend on. 

Aka: advertised as OO 189k 
Home report value: 220k 
Bank will lend on 220k. Not only up to 189. 

However, yes if you offer and have an offer accepted OVER the home report value then you foot the bill for that portion yourself. So if you offered £230k - you would pay your deposit + another 10k. 

MrPez

Hi ScottishSaver14
Apologies, I don't think I explained my rant properly. I understand that the marketing value is completely different to the valuation, it is the valuation on the home report that I take issue with. It is this figure that seems to be systematically low. The value of a property is clearly influenced by it's location so if properties in a certain area routinely go for, say, 10% over HR value, then those HR values are wrong!
This thread seems to have turned into a debate on house prices in cities compared to outside where the prices are lower. My issue was never about the actual price of a particular property. Like others have said, whether you choose a commute over city life is down to the individual.
Lover_of_Lycra - it really isn't rocket science to set a HR valuation. I think you're forgetting that sellers pay a lot of money for these reports, and, for a lot of city properties, they are not getting what they are paying for.
I also think that people are forgetting that this issue doesn't just impact first time buyers or those moving into cities. Everyone who owns a property for which they had to pay more than the HR valuation and also has a mortgage on that property is overpaying. The interest rate that you pay is a reflection of the loan-to-value ratio. If your mortgage company takes the value as being that dictated by the HR and not the purchase price then your LTV is higher than it should be and therefore your interest rate is also higher. This doesn't just last for the first term of your mortgage either, when you come to remortgage the company will use the original valuation and inflate it by the rate of house price increase that is on their database. So the situation will be the same, you will have a higher LTV (and a poorer interest rate) than you should. Of course, you could always opt for a new valuation, but then in all likelihood you would get another inacurate estimate by the valuers.
I'm very surprised more people don't take issue with this. Over the course of a mortgage it can cost home owners a huge amount of money.

MovingForwards

They are not inaccurate valuations, the valuations are roughly right, give or take a bit.

It's the people who are paying more than the property is valued at which cause the issues.

Had people buying around Edinburgh not go all out with their offers eg making them over the HB report, I'm sure many who have done the commuter belt would have actually purchased in Edinburgh.

I speak with newly qualified doctors, or with a few years experience under their belt, they can't afford to buy around here as their income isn't enough to buy around Edinburgh. 

If the ones valued at £135k, listed for OO £125k, sell at around £135k then it would be possible to save a bit more and buy here, but they are not.

Rather than keep saving for another 10 years, to try and buy a studio flat at the silly selling prices of today, stay in a rental for the next 10 years as the monthly rent gets silly too plus end up with an even shorter mortgage term, it makes no sense to even try and stay around here. Leave the people with deeper pockets to max themselves out to buy local.

The salaries for a lot of locals, doing normal jobs, means they cannot afford to buy. There is no 'Edinburgh weighting', or any other city, like there is in London.

So, if you want to moan at someone, blame the people paying the high cost.

Blame the landlords for snapping up the cheap / trashed properties as they can buy a flat as a cash buyer, put a kitchen / bathroom in, decorate and rent it out.

Blame the landlords for taking the properties out the normal rental market and turning them into Airbnb, as they can charge even more.

Blame the council for allowing the amount of Airbnb around, reducing the available rental market.

fewcloudy

MrPez.

Nope, I don’t agree with that.

The Home Report says what the surveyor reckons the value is.  If someone chooses to pay more for the property, that’s hardly the fault of the surveyors is it? 

Right at this moment in time (and at the time you appear to be in the market for a property) the properties are almost all advertised as Offers Over.  But it was not ever thus.  I have lived through times when all properties were advertised as Fixed Price.  This was purely down to the buoyancy of the market. It was difficult to sell.  I have seen years when what few properties there were on the market were advertised as Offers Around (from about 2009-2013, in the depths of an economic crash). Desperate sellers.

During both of these periods of time, the property could very likely sell for UNDER the surveyors valuation.
Is it possible you have only been looking at properties in recent months/years?
Even today, if there is only 1 Note of Interest shown, a cheeky offer may succeed if the seller needs to sell.
In the late 90’s/00’s, I once made an offer (lost out) and there were over 20 Notes of Interest

We have a system up here where you are effectively blind bidding against (maybe) some other blind bidders. As soon as a house is marketed as Fixed Price for a quick sale, that aspect is gone.

I do hope that helps, and I haven’t misunderstood you totally.

Caz3121

MrPez said:

 It seems to be very area-dependent but in popular areas the selling price could easily be 25% over valuation.  

when we were buying in Edinburgh we were also not in a position to get into bidding wars and pay significantly over the home report value....we were fortunate that we found a property before it went on the market (friend of friend) and negotiated £5k over home report value and they saved the agents fees and people trailing through the house on open viewings
Good state schools can significantly affect the amount people will pay over the home report (I guess they compare the costs of private schools v's the property excess price) we are not in an area with the best schools (don't have kids at home so not an issue) 

MrPez

fewcloudy said:

The Home Report says what the surveyor reckons the value is.  If someone chooses to pay more for the property, that’s hardly the fault of the surveyors is it? 

I agree here, and if it were a one-off I would accept it. However, if the vast majority of properties sell for a given percentage over this valuation then that is the state of the market and should be reflected in the valuation just as many other factors should be - proximity to schools, public transport etc. 
Again, the topic seems to have moved back to house prices in the city compared to those in the commuter belt. Whether properties in cities are too expensive is a different argument (which I agree with btw). My point would apply just as well to a property valued at £100k selling for £115k as one valued at £250k selling for £288k.
MovingForwards to suggest that people are causing the problem by paying more than a property is worth just doesn't make sense to me. Markets adjust and people (not individual, but on average) will pay what they need, and are willing, to in order to in order to get the property they want. 
I understand that over the years the way properties are sold has changed (fixed price, offers over etc), but these changes are a result of changes in demand and I would argue that a true valuation should account for this.
I might be missing something here, but if a valuation isn't an indication on what the seller can expect to get - given all factors - then what exactly is it? Something is worth exactly what someone else is willing to pay to get it.

Tooskint

There are certain areas of glasgow that have always been expensive like west end and shawlands but these hold there values and people pay well over asking price.  It always used to be at least 10 percent over home report as a minimum for any property.  Maybe go for fixed price or less expensive areas that wont expect you to give as much over asking price 

fewcloudy

MrPez said:

I'm very surprised more people don't take issue with this.

Actually, no one else takes issue with this. Only you. That in itself probably says it all. I don’t mean that offensively, but there have been millions of house sales in say last 20 years and I never heard your argument before, I think you are very mistaken in your premise.

But I’ll try again. You seem to think this issue you have identified, this ‘incorrect valuation “, is the status quo in Scotland. It is not. We are mentioning cities because you yourself did in your opening post, and it is where you wish to live. It is also where, most often, the conditions occur that create the situation you find troubling.  We call this supply and demand.  It seems that the areas in which you hope to purchase currently have more demand than supply?

As an example, my parents successfully bought a house mid-December last year. Not a great time to sell most would agree.  A 2 bedroom bungalow, a des res in a very nice part of Edinburgh.  OO £430k, got it for £450k.  Let's forget for a moment that for many people in much of Scotland/UK, that is a ridiculous amount of money to pay for a 2 bed house!
They paid less than 5% over the marketed price, even less over the valuation. So no ‘25% increase in a week’ going on there. Very little demand, at those prices, at that time of year. A lot more demand for FTB just now in Glasgow perhaps?

As I alluded to in last post, it’s blind bidding. Offers Over in Scotland is like buying a house as if you were sitting in an auction room. Except the difference is, when you are ‘bidding’ for your item (house) you do not know what the other bids are, IF ANY. So buyers tend to put in their very best bid that can, if they really want it. 
When sometimes items sell at auction for much more than estimated value, we do not immediately think about how mistaken the value/surveyor was right? Someone thought it was worth more to them, so they paid whatever they could afford to secure the purchase.

Anyway, I wish you every success in buying a house in Glasgow soon. I don’t think I can add anything else to this thread without repeating what I, and others, have already said.

MrPez

Well I appreciate your comments but on this I think we'll have to agree to disagree. 

edinburgher

I live in a nice bit of the Southside. Overs over for the really desirable stuff is +30% (unless it's a tear down internally), can be £££,£££ above home report depending on whether or not it goes to a closing date (it always goes to a closing date).

We *only* paid 14% above the Home Report valuation for our shoe box and suffice to say, you're not the only person who finds the discrepancy to be odd. I had multiple conversations with confused (English) call centre staff as to why I was paying above the valuation. Finding the extra money to cover the shortfall was pretty miserable...