property was down valued - what to do?

oatcakes

Hi,
Sorry if this is a stupid question, I am a first-time buyer and don't have much knowledge when it comes to valuations.
I had an offer accepted for a £130k 2-bed semi and I had a £19.5k deposit (85% LTV).
I got an e-mail from my lender today saying that the property was valued at £125k which now meant that the LTV was 89%, therefore they're unable to proceed because they only offer 85% LTV mortgages at the moment (like most other mortgage providers).

What are my options here?
If I wanted to still go ahead with the down-valuation how much of my own money would I need to put down to cover the shortfall?

MWT

Reduce your offer to the seller, or increase your deposit, or a combination of both are the obvious ones to try before more drastic solutions.

ARH_2

Options:
a. Tell the vendor/agent that you're reducing the offer to 125k
b. Find the required extra (4.25k?)

deminimis

This is a bargaining chip with your seller.
Tell them you are reducing your offer and provide the explanation - ultimately, a professional surveyor has said the property is not worth what you have offered.
The seller may take it on the chin and/or ask their own seller (if they are also in a chain) for a reduction and/or make you a counter offer.

oatcakes

Thank you.
The down-valuation was done by Yorkshire Building Society.
Would going to another lender also be a viable option? For example Barclays also has some decent mortgage products available, if I was to switch to them they would also need to perform another valuation which now could be at £130k?

oatcakes

deminimis said:

This is a bargaining chip with your seller.
Tell them you are reducing your offer and provide the explanation - ultimately, a professional surveyor has said the property is not worth what you have offered.
The seller may take it on the chin and/or ask their own seller (if they are also in a chain) for a reduction and/or make you a counter offer.

Thanks.
I am currently not in a chain because I am renting on a monthly rolling contract.
The seller however is waiting for his new-build to be complete by March.

deminimis

oatcakes said:

Thank you.
The down-valuation was done by Yorkshire Building Society.
Would going to another lender also be a viable option? For example Barclays also has some decent mortgage products available, if I was to switch to them they would also need to perform another valuation which now could be at £130k?

You could try another lender, it would be v bad luck if they used the same valuer as Yorkshire.

Thanks.
I am currently not in a chain because I am renting on a monthly rolling contract.
The seller however is waiting for his new-build to be complete by March.

OK, sounds like your seller won't be able to price chip on their end of the chain (the new build).
I would still ask for a reduction, say you can't come up with the additional deposit. Their choices are to (i) refuse to budge, in which case they risk losing their buyer, (ii) offer a reduction.

Suseka97

Was £130k the asking price?  If so then your seller might be open to negotiation.  A seller doesn't have to accept a lower offer regardless of the valuation and it often depends on how long the house has been on the market and how confident they are they could get another buyer, if they are not willing to budget on price.  You could also speak with a broker to see if there are other lenders who could get you to the 89% LTV.

oatcakes

Suseka97 said:

Was £130k the asking price?  If so then your seller might be open to negotiation.  A seller doesn't have to accept a lower offer regardless of the valuation and it often depends on how long the house has been on the market and how confident they are they could get another buyer, if they are not willing to budget on price.  You could also speak with a broker to see if there are other lenders who could get you to the 89% LTV.

Nope.
Curiously the asking price was actually £125k, but there was "bidding war" between me and another potential buyer and we ended up agreeing on £130k.

Suseka97

oatcakes said:

Suseka97 said:

Was £130k the asking price?  If so then your seller might be open to negotiation.  A seller doesn't have to accept a lower offer regardless of the valuation and it often depends on how long the house has been on the market and how confident they are they could get another buyer, if they are not willing to budget on price.  You could also speak with a broker to see if there are other lenders who could get you to the 89% LTV.

Nope.
Curiously the asking price was actually £125k, but there was "bidding war" between me and another potential buyer and we ended up agreeing on £130k.

Aha.  Well, then I'd go back to the EA and see if there is any wriggle room on that now - given the outcome of the valuation. 

MWT

oatcakes said:

Nope.
Curiously the asking price was actually £125k, but there was "bidding war" between me and another potential buyer and we ended up agreeing on £130k.

The stamp duty holiday has created a few cases like this where the competition for houses pushes the price up beyond the real value and the mortgage lenders don't feel inclined to support the temporary price inflation that has been happening.

You may find your seller to be flexible since the £125k was their original asking price and any other prospective purchaser is likely to face the same problem that the valuation doesn't support the price.