Down Valuation

willmanz

Just got Santander's message saying the property, a 3 bedroom house, has been down valued, from £450000 to £430000. I have applied for a 15% deposit and for sure I can't afford to put the extra £20k cash. Its a property in the north east of London
This will definitely cause grief with the seller, as they chose us over other bidders 3 weeks ago because we could close quickly and they need to move abroad in January.
Santader is sending me a paper copy of the valuation, as the estate agent wants to see it before talking to the seller. Santander mentioned at the phone that the reason is because there weren't many sells in the area.
Is down valuation happening often lately?
Course of action, I have 2x options:
a) asking seller to reduce selling price to £430k. The most I can afford to put over in cash is £3k (which is the leftover from a lower deposit)
b) applying for a mortgage with a different lender
Not really sure option b would work as in that postcode there where only 2x sells in 2017 and 2016. I guess another valuator would apply same logic?

MattMattMattUK

willmanz said:

Is down valuation happening often lately?

Yes, they have become fairly common, as there has been both a surge in asking prices (usually rising by the stamp duty saving) and the lenders are worried about a bubble which will pop next year.

willmanz said:

a) asking seller to reduce selling price to £430k. The most I can afford to put over in cash is £3k (which is the leftover from a lower deposit)

This is your most sensible route, the house probably is not worth £450k, so paying £20k over the odds is not sensible.

willmanz said:

b) applying for a mortgage with a different lender

You will probably receive a similar, if not he same valuation, it might even be lower, this is not a solution.
You also have option C, find a different house.

willmanz said:

Not really sure option b would work as in that postcode there where only 2x sells in 2017 and 2016. I guess another valuator would apply same logic?

They would apply methodology based on similar properties in a wider area, the regional and national market, the risk of a bubble bursting etc. 

willmanz

Thank you for your answer.
Estate agent now wants to send a PVQ (Post Valuation Query) to Santander.
Anyone knows what could be the outcome of that? They insist saying that it is not an appeal, so I wonder what could be the benefit of it.

K_S

willmanz said:

Thank you for your answer.
Estate agent now wants to send a PVQ (Post Valuation Query) to Santander.
Anyone knows what could be the outcome of that? They insist saying that it is not an appeal, so I wonder what could be the benefit of it.

@willmanz From what I know, if the potential borrower wants to challenge a valuation (and the lender accepts the grounds for challenge), the surveyor will review the valuation done via the PVQ process. From experience, let me just say that it is unlikely to come back with a different result given that the reason given is a lack of comparables.

For example this is what the Nationwide Valuation Manual instructs surveyors to do -

Going through another lender may not help as many lenders use the same panel of firms in one area, so if this was done by e-Surv, the next one commissioned by (say) Halifax might use the same company.

Down vals are happening more frequently than usual, but the ones I've seen are mostly due to overly inflated selling prices (albeit with buyers willing to buy at that price!).

Out of interest, which area of NE London is this? Very reasonable price for a 3 bed terrace (?) if in zones 3/4.

willmanz

Thanks for your answer.
It is in Chingford, E4 postcode.
Estate Agent presented 4 other recent sales in the area to justify the 450k value.
I had to send that letter on their behalf today and I will wait for Santander feedback.
To be fair, I've been looking for properties in the area for months and the asking price looked reasonable comparing it with the local market. It's a 3 beds with garage attached and room for expansion over it.

K_S

willmanz said:

Thanks for your answer.
It is in Chingford, E4 postcode.
Estate Agent presented 4 other recent sales in the area to justify the 450k value.
I had to send that letter on their behalf today and I will wait for Santander feedback.
To be fair, I've been looking for properties in the area for months and the asking price looked reasonable comparing it with the local market. It's a 3 beds with garage attached and room for expansion over it.

 @willmanz That does seem like a good price. Fingers crossed, they come back with a positive update! I rarely see down-vals overturned, so it'd be nice to see one happen. Do keep the thread updated.

JakeMM

Just a quick note to say I wouldn't worry about the grief to the seller, as Santander are citing problems with their property, not with your finances. Let the estate agent argue this out, and earn their commission! 

You also don't know the situation of the other buyers, but you can pretty much guarantee that none of them were cash buyers - as the seller would have likely sold to them instead of to yourself.

These things happen with properties. I've known people have "drive-by" valuations done, and even mortgage companies throw a fuss over valuations when neighbouring properties have been sold a month prior to the property being bought!

willmanz

So update:
Santander says appeal not possible: if we want, we can instruct another valuation with a different company for £490.
Estate Agent asked us to use their mortgage broker to find a different lender: their broker costs £549 in fees. Which I wouldn't mind on day 1, but it's kind of irritating when I was basically done with the mortgage application by myself.
I'm asking Estate Agent if seller is willing to discuss a lower offer, near valuation rate.

K_S

willmanz said:

So update:
Santander says appeal not possible: if we want, we can instruct another valuation with a different company for £490.
Estate Agent asked us to use their mortgage broker to find a different lender: their broker costs £549 in fees. Which I wouldn't mind on day 1, but it's kind of irritating when I was basically done with the mortgage application by myself.
I'm asking Estate Agent if seller is willing to discuss a lower offer, near valuation rate.

@willmanz Sorry to hear that. In your place, I would be loath to spend any more money upfront (val fees or broker fees) that may end up being a sunk cost on this particular house. Given the lack of comparables, the next valuation may return the same number.

The EA is trying to plug their broker as usual, but beware of going down that route without doing proper reasearch, perhaps following the MSE guidance here. And imho, a £549 fee for an 85% LTV London mortgage is hugely excessive. That's just my opinion.

I guess the EA expects a flat no from the seller to any request for negotiation, hence their current approach.

willmanz

So seller rejected a 435k offer.
I communicated to EA that we won't pursue a new lender, leaving our offer on in case seller changes their mind (until mortgage offer expires, which is on 15th December)
EA said they will check with the other offers they had.

SpiderLegs

willmanz said:

So seller rejected a 435k offer.
I communicated to EA that we won't pursue a new lender, leaving our offer on in case seller changes their mind (until mortgage offer expires, which is on 15th December)
EA said they will check with the other offers they had.

100% correct approach.