Absurdly Low Home Report Valuation

weddingringman

I spotted a period house listed at 200k in a popular area. They regularly sell for 250 - 260k in this type of condition (dated period home, sought after postcode) as they tend to go for 325 - 350k once done up. Regardless of covid impacting prices, the valuation is ridiculously low so we offered an initial £228k. It was knocked back as there are around 20 more viewings lined up this week and it only came on this morning. We plan to go as high as 250-260k as it is fundamentally worth that.

We have about 100k equity but my question is regarding LTV. Will our lender (TSB) send their valuer in during their mortgage process to ‘correct‘ the valuation if we buy it... ie. to get a more accurate LTV. Or would it look like this from their point of view...

250 purchase price with 100k deposit, equates to 50k ‘over the odds’ so we would have 50k against 200k valuation therefore 75% LTV.

We would strongly argue that it’s an absolute minimum of 225k, so 100k deposit would be 25k ‘over the odds’ and 75k ‘deposit’ equating to 67% LTV. Ie. Better mortgage products.

Do lenders ‘correct’ clear and obvious under-valuations, particularly where you can easily evidence similar  recent sold prices? 

davidmcn

(Scotland, for the benefit of confused foreign readers).

Banks will generally just use the Home Report unless the HR surveyors aren't on their panel - I haven't heard of being able to request a different one just to get a more helpful valuation. Even if they get their own valuation done, that surveyor will know what the HR valuation was and I suspect it would be a brave one who decided their counterpart was completely misguided. Are you sure there isn't some comparable evidence (or something specific to this property) pointing towards a lower valuation?

weddingringman

I look at property listings and their sold prices religiously and where I live there are maybe only 10 streets have this type of period property. There really isn’t anything to suggest it would be less than 240k, let alone 200k.

It’s a small street and they are all essentially the same, and even in 2006 one in a similar condition sold for 260k. Prices where I live are comfortably above 2006 levels so it makes this valuation all the more daft. 

I guess it would be a case of accepting that our LTV would be toward 80-85% over a short 2 year fix until we looked for a new deal. At which point I think we would have no issue arguing it was worth 250k, even with a dip in prices.

[Deleted User]

If it simplifies things, most lenders won't give better mortgage products at 67% or 75%.   The bandings are (usually) : 
0-60
60.1%-75%
75.1%-85%
85.1-90%
90.1%-95%

Tsb would give you the same interest rate for both of your examples 

weddingringman

That does help thanks. I did a pretty nifty matrix of various offers with their respective deposits required to meet the 70, 75 and 80 LTV triggers. I listed TSBs monthly cost for both 5yr and 2yr fixes in all instances, noticing that 80% LTV looked poorer value for money. 

If 70% and 75% are effectively the same rate... then I think my strategy would be to simply satisfy the 25% deposit and no more. So if we offer £252,500, the deposit would be 50k + 52.5k = 102.5k

lifegoeson2013

Interesting reading - I'm a seller (in Scotland) but house not on market yet.  The estate agent valued it at 300k, then the Home Report came in at 220k!  I've looked at similar properties that have sold, which is difficult because the house is very unique, it's a period property, the old lodge house on an estate, with 4 bedrooms, 2 baths, large dining kitchen, extensive grounds, outbuildings, an additional plot of 212 sq.m, perfect for a granny flat to be built.  I could on.  I could see that they sold for between £260k and £340k.  So I queried the value with the surveyor and apparently it was valued on sq.metres price and that is that!  This house is so unique, albeit needing modernised as it was my late father's.  I worry now that it's going to put buyers off because if such a unique home is on so cheap people might think "I wonder what's wrong with it..."  Also on the Home Report the surveyor has noted that there is a wasp nest in one of the conifer trees in the garden?!!?  Really!!  Another point is that the LBBT is applied for properties at 250k and over so this will affect the selling price too.  Feel pretty fed up as I'm sure that we'll have a potential buyer similar to the OP where LTV is important.    OP - I have my fingers crossed for you!

Thrugelmir

Unique properties are difficult to value. Development potential is in the eyes of the purchaser and may well influence the amount that they are willing to pay to secure the property.