Mortgage valuation 28k lower than buying price

housebuyerARGH

We are currently in the process of buying a house. We’re 10 weeks down the line and through various delays from our mortgage broker we've finally had our mortgage agreement through. Their offer is what we need to proceed, the mortgage valuation of the property however is not. The price we are paying for the property is £375,000 and their valuation of it is £347,000.  We can proceed without asking the buyer for a reduction in price (our deposit is a healthy 39%). However, should we be asking at this late stage for a reduction in price? What effect will this have in the long run if we agree that we accept the mortgage valuation is £28,000 below the price that we are paying? We’ve had our own Rics approved Homebuyer Report through which agrees the market value of the property at £375,000.

I’ve done my own research of the area and there is nothing in comparison of the property we are purchasing at the down-graded price, either sold or for sale.  Have the mortgage surveyors preempted the property crash and this is what their valuation reflects? We’re waiting from an answer from our broker who is very slow to respond. Any knowledge shared would be greatly appreciated.

greatcrested

Market valuation is not an exact science. There is no real definitive 'market value' other than what someone is prepard o pay (ie you!) or what a professional believes would be what a buyer would normally be prepared to pay.

As you can see, different professionals can have different opinions, especially where there are no comparablelocal properties that have recently sold, or where a property is very idiosyncratic.

If you reduce your offer, the seller might or might not agree, immediately or following some re-negotiation. If they don't, what woould you do? If they do, there'd be some minor addtional paperwork eg to the contract and the mortgage application.

In the long run? Depends whether the market crashes, or picks up.....

I doubt your broker will be able to throw any greater light on the matter. End of the day, how badly do you want this property and how quickly?

AdrianC

The only effect is that your 61% LtV mortgage (based on £375k) is 66% LtV at £347k.

Everything else is up in the air. It's the exact same house you liked at £375k, in the exact same location and the exact same condition. Nobody knows what the market's going to do in the future, and previous sale prices are irrelevant to determining value anyway.

All that's happened is that two surveyors have disagreed in their opinion of the value today.

davidmcn

housebuyerARGH said:

the mortgage valuation...is £347,000.

We’ve had our own Rics approved Homebuyer Report through which agrees the market value of the property at £375,000.

So averaging at £361k, +/- 3.9%. Which is within the normal margin of error of 5% for valuations.

Chumy

I would go back and renegotiate with the seller.
Consider the below points:
1. It will affect your interest rate
2. You will be worse off in the nearer future
3. If it was a newbuild, Would u go back to the developer and renegotiate?
4. How much did the seller pay for the property? Is seller selling at a loss? I doubt it.
5. Can you afford a 2nd valuation? Seeing as you don't trust the current one.

Given the unknown times we are currently in, no matter how much I love the house, 28K below asking price is MUCH for a 375k house, Wouldnt have mattered to me on a 2Million£ house
Your choice really

numbercruncher8

The above responses are correct. It's only an opinion. But perhaps the lenders attitude to risk might have changed.
I remember a year I bought (end of 2006) which must have been close to the peak.... not many sales on the street, most of them were quite identical layouts, and I was c.10% over the last one that completed earlier that year. The homebuyer report I commissioned put their value down as the same price I had bid and accepted...... 
If you want a genuine second opinion, why not post the link of it (or a similar one). Unless its something very unique or no similar houses nearby (in which case a valuation would be volatile), there must be some comparables. 

As for long-run effects, there probably are none really if you are going to live there for the long term. If circumstances may change and you need to sell up after a couple of years there is nothing to say that future buyers may come across the same problem.

[Deleted User]

I've recently had an offer for a property accepted, if the valuation comes in lower, I would definitely consider revisiting my offer. I'd feel it is a powerful negotiating tool alongside background factors such as the COVID crisis and that I am not in a chain.
The difference with your situation is that you have a 2nd valuation which meets the price you have offered which could give you more confidence in your own assessment of the property's worth.

Vestraun

I would def be renegotiating, if the banks are thinking it’s a risk surely you would too?

timeism0ney

I would be negotiating again, definitely. 

ashe

In terms of negotiating power, it won’t give you much because everyone is in the same situation. Yes, you could walk away, but you’re unable to go view alternative properties and you won’t be able to get surveys done on them for peace of mind. Not like you can claim to have another property in your back pocket that is oven ready. If someone came to me now I’d be giving a negotiation short thrift. 

Crashy_Time

ashe said:

In terms of negotiating power, it won’t give you much because everyone is in the same situation. Yes, you could walk away, but you’re unable to go view alternative properties and you won’t be able to get surveys done on them for peace of mind. Not like you can claim to have another property in your back pocket that is oven ready. If someone came to me now I’d be giving a negotiation short thrift. 

Where would you find another buyer?