Mortgage valuation has come back less than our offer, how to approach it?

AC78

We agreed a purchase price of 660k on a property in rural Cambridgeshire that was marketed at 680k.

Our mortgage provided (The Halifax) had their surveyor visit last week and has valued the property at 620k (40k beneath our agreed offer price), it is not their policy to share their valuation logic, so I don't know the exact reasoning, but it would be fair to assume it's due to their view on the market value of the property rather than any structural defects etc. as the property is in good condition. 

I have my own survey booked in next week, which will also provide me with a valuation.

What course of action should we take? It was hard enough to negotiate the 20k discount at the start, but it doesn't sit well us that our mortgage provider has valued it so much lower (mortgage broker has said that there has been an increase in down valuations over the year, but whose to know if this is as a result of that or not). 

My mortgage payments will be affected, but not significantly and we can obviously afford the 660k price that we offered, but ideally i would like the price i pay to be much closer to my mortgage providers valuation.

Do I face into into now with the agent? Do I wait until i've had my surveyor do their valuation (this clearly won't change my mortgage providers valuation, but will provide a second reference point for negotiation, if they are aligned with the mortgage provider). If they are not aligned, that raises a separate question i guess!

I know the sellers have found a property and they are making a decent step up in their property move, which may mean they are more financially capable of accepting the negotiation, or that they are trying to squeeze it for everything to make that step up! Tricky one. 

I'm a bit stuck, what would you do? Has anyone faced into a down valuation and successfully renegotiated?

Thanks 

AdrianC

Of course you can ask the vendors to take some of that hit.

But what if they say "no"? Are you prepared to walk away over 6% of the purchase price...?

A downvaluation will affect the nominal LtV of your mortgage, but assuming you aren't hard up against the maximum they'll lend, it won't affect what they're willing to lend you.

Thrugelmir

Speak to the Estate Agent. You've nothing to hide. 

jimmyjammy001

The estate agent and vendors have over valued their property and are likely just being greedy, they need to realise house prices are coming down, no doubt they've inflated it due to the stamp duty holiday, the next buyers will just have the same problem when it comes to the bank valuation. The sellers need to understand that. 

lookstraightahead

I'm sure lenders' valuations are very much on the careful side at present. However, I personally wouldn't be paying over valuation. I just couldn't. But lots of vendors won't budge for whatever reason. So it's really up to you as to whether you want to take the hit, ask for a reduction, or walk away. Personally I would be reducing my offer and would risk walking. Otherwise your paying a price which is just pie in the sky.

lookstraightahead

*you're ...

AC78

So, do you think I should face into it now, rather than wait for my survey? 

Crashy_Time

Basically, unless they have other buyers willing to overpay, their choices are to take your reduced offer or hold onto a house that they want to sell. It looks likely that they hoped you would fund their next purchase, and the fact that they are about 60k over market value with their asking price means you might need to be firm and stick to your guns, they obviously don`t understand economic reality or are just trying it on...?

Crashy_Time

jimmyjammy001 said:

The estate agent and vendors have over valued their property and are likely just being greedy, they need to realise house prices are coming down, no doubt they've inflated it due to the stamp duty holiday, the next buyers will just have the same problem when it comes to the bank valuation. The sellers need to understand that. 

Exactly, this is how sellers who try it on get caught out, bank lending has changed, they missed the window for silly pricing and maybe catching an unwary buyer.

AdrianC

All valuations are just an individual's opinion.

The vendor asked an EA for their opinion on the value.
Between them, they came up with a figure they agreed on, and put it on the ad. That figure was £680k.
You viewed the property, and came up with a figure you liked. £660k. The vendor agreed on that figure with you, and the offer was accepted.
Now your lender has asked a surveyor for their opinion of a good lender-security value. They've come up with £620k.

Three different numbers, three different purposes. And, yes, there's £60k between them... But if you work on the agreed offer price, they're only -6% to +3%.

~5% isn't a bad margin for variation, is it?

Scotbot

AC78 said:

So, do you think I should face into it now, rather than wait for my survey? 

Personally I would wait for the survey.  If it finds faults you can use the cost of fixing as a negotiation tactic. You can also ask the surveyor for a valuation which again may help negotiations or may reassure you.