Natwest huge house undervaluation - what is happening?

yessuz

So, we are selling our house and buying another.
We decided, after suggestion by the broker, to apply for Natwest mortgage (currently we are with Santander).
So the house valuation which we are buying just came back, with massive undervaluation (asking price 298, agreed price 292k, valuation 270k), which is 8% lower.... Since we are going with 85% LTV it screws us heavily...
The house we want to buy is 6 years old, detached..
the thing is, there are 6 houses which has had sale agreed in vicinity (same type, similar size) with prices 315 and up. Moreover, there are same type, but smaller new builds, built on the brown field, which are being marketed at 315 (but you still need to add some stuff to it to move in). This is a very popular market town, where houses are being sold in 1-2 weeks on appearing on the market, as long it is not a quirky nonsense... in example, we sold our 3 bed semi house within a single week (went on market on friday, got 12 viewings and 2 offers by end of Wednesday and agreed sale on Thursday. so market is very live and in huge demand.
In short, there are no such home values in our area what we got valuated. They simply do not exist. 270 is the region of semi detached houses in our area.
We came back to our agent with request to reduce sale price, which, obviously was denied (and right so, as these prices are just not there). We asked for the comparables pack, and we got number of properties with much higher prices than we are buying, however, agents struggle to get COMPLETED properties in past 6 months, as due to lock down, completions were not happening at that time frame...

are lenders artificially reducing values intentionally, or what? How the hell do they get those house valuations? 

elliedarlington

I just came on the forum to say similar, so can't help but can be a fellow sufferer!
£340k offer accepted on a house with guide price £325-350k. Zoopla estimates had it £331-366k, and the price was sensible in terms of houses in the same street. I pulled out of a house over the road which was smaller and terraced (vs. this end-of-terrace) at only £2k less. My broker got in touch with me today to say that Virgin (after an electronic valuation) have valued it at £314k, some £26k off what I had accepted. Obviously the seller isn't going to agree to drop the price by that much (I haven't asked yet, but surely not)! My solicitor has said she's not able to advise, so I'm devastated as I think this means I'm going to lose the house. 

cooky123

Hi I’m in similar situation after waiting almost a month ours was undervalued by 20k so we asked the seller he wouldn’t drop the price and feels it’s worth more so we actually found another place that we preferred the area of and so we have now done a change of property form for our lender and I don’t know how this works broker has said he sends that over and I’m just waiting again. 

davidmcn

As you've discovered, it's completed prices which matter - no point including merely asking, or even "agreed", prices, because (like yours) they're meaningless unless the sale actually happens at that price.

However, if this is the general attitude of surveyors, then I suspect vendors are going to have to swallow it to some extent.

[Deleted User]

There have been a couple of rumours that certain lenders are asking surveyors to price properties 6-12 months in the future making assumptions on the market.  Not sure how true this is but we are definitely seeing a lot of downvaluations at the higher ltv brackets.  
It might be that another surveyor firm will value differently so worth another shot if you think its still good value.  

Thrugelmir

yessuz said:

We asked for the comparables pack, and we got number of properties with much higher prices than we are buying, however, agents struggle to get COMPLETED properties in past 6 months, as due to lock down, completions were not happening at that time frame...

are lenders artificially reducing values intentionally, or what? How the hell do they get those house valuations? 

Actual house sales. Well at least the broader trend in the locality.  Plenty of economic uncertainty.  Lenders will cautious. After all it’s their money at risk not yours.

dunstonh

So the house valuation which we are buying just came back, with massive undervaluation (asking price 298, agreed price 292k, valuation 270k), which is 8% lower.... Since we are going with 85% LTV it screws us heavily...

8% is not a massive undervaluation.

Estate agents broadly price about 5-15% higher than they expect the property to sell for.   Asking price is £298k.  So, 10% off that is £268,200.     In a rising market, mortgage valuations will be a little more optimistic but in a fear market they will not have that.

This could be a case if you overpaying on the more likely value as you only knocked 2% off the asking price.   

the thing is, there are 6 houses which has had sale agreed in vicinity (same type, similar size) with prices 315 and up.

Is that before the recession or after? 

Moreover, there are same type, but smaller new builds, built on the brown field, which are being marketed at 315 (but you still need to add some stuff to it to move in).

New builds sell at a premium and being marketed at and the actual purchase price are two different things.

are lenders artificially reducing values intentionally, or what? How the hell do they get those house valuations? 

Lenders have always given valuers instructions that vary throughout an economic cycle.   They will be more generous in a the boom period of a cycle and more restrictive in the recession part of the cycle.

As for how the hell do they get those valuations; it is no different to how the estate agent got the value.  Largely on guess work with a mixture of optimism or pessimism

jamielutz1987

Deleted_User said:

There have been a couple of rumours that certain lenders are asking surveyors to price properties 6-12 months in the future making assumptions on the market.  Not sure how true this is but we are definitely seeing a lot of downvaluations at the higher ltv brackets.  

It might be that another surveyor firm will value differently so worth another shot if you think its still good value.  

It's very likely that this is indeed the reason for wildly varying valuations.

In August, our neighbour a few houses down had his sale fall through after the buyer's lender downvalued the property by about 10% (I think it was Barclays but might be one of the other big ones). That was desktop.

The buyer's broker reapplied through a building society (never heard of them) who did a physical valuation 2 weeks later that came out at the agreed sale price!

It's bonkers.

browneyone

NatWest undervalued our house by 33k and I'm going off sold and completed prices not asking price.

yessuz

I got valuation with HSBC, with different valuator.
New valuation came even less than NATWEST.
I mean there are no such prices in our town as the valuars putting in these valuations. not for the last year or so. it is sad and crazy

Brock_and_Roll

Despite all the alogrithms, spreadsheets and databases of sold prices, markets are ultimately moved by sentiment. As a banker myself of 30+ years I have been through many ups and downs - the booms when the sales guys are riding high and spreadsheets are "tinkered with" to fit the optimistic FOMO mantra..... and the downturns when the credit & risk guys regain control with their "difficult" questions! 

As the moment I can tell you that the sentiment is very nervous - "everyone" is expecting a downturn as unemployment kicks in and all this debt the country has taken on starts feeding through to tax rises and/or services cuts.  A survey of just a handful of the UK's largest business last month said they expected to cut over 100,000 jobs and I am afraid the picture nationwide will be much higher. I am also expecting some very large and high profile insolvencies. This sentiment seeps through organisations and starts to become an accepted inevitability and a self fulfilling prophecy - this in turn feeds through to lending policies and the discussions lenders have with partners such as surveyors......

......a house is worth what someone is wiling to pay for it (and a lender lend against!)