Down valuation help

Lisa2000

I'm selling my first home, put it on the market at £145,000, ended up getting a few offers, all first time buyers and the price ending up going to £150,000 after a bit of bidding back and forth. I happily accepted the highest offer.
Now a month down the line the survey has been done and the property was valued at £145,000, exactly as I expected, but this is classed as a down valuation and my buyers now cannot afford that price and have asked me to reduce to £145,000, they cannot put up any of the difference. I was surprised this could happen, everyone knows the property value surely? Should it really have gotten this far unnoticed that they couldn't afford the price they offered? Should their bank not be aware of the actual value even though they've offered above?
I don't really want to drop the price considering I had two other offers higher than £145,000 that have missed out. A month later one of them has found another property and the other has reinstated their original offer of £148,000. So I figured I'd go with the next best offer, I haven't found a property yet anyway, but my estate agent is warning me it will probably happen again and I will have to drop the price anyway. 
How does anyone ever sell their house above the asking price if this is the case? What should I do?

NameUnavailable

The issue here is that the mortgage company's valuation is less than the agreed price. Bascially they're saying the agreed price is overpriced. No problem with that if the buyer has the money but in this case they need a mortgage for the agreed price (I'm guessing that they just have enought for the deposit and legal fees).

So, you either reduce your price to keep the sale or go with another buyer who may or may not be able to proceed if it is down valued again.

lesalanos

If the mortgage company has valued it at 145 then the buyers would have to find that 5k on top of their deposit.  I assume that they cannot do this.

The next offer when valued may get it valued at 148 as it will likely be a different valuer.  If their value comes in at 145 then they may be able to afford the extra 3k on top of their deposit

Edit... posted at the same time as above 

davidmcn

Lisa2000 said:

Should their bank not be aware of the actual value even though they've offered above?

Not sure what you mean. The valuation is how the bank find out what the actual value is. Otherwise the bank doesn't "know" anything about the property.

How does anyone ever sell their house above the asking price if this is the case?

By selling to buyers who have enough cash to make up the difference, and enough confidence/incentive because there have been competitive bids for the property.

MaryNB

Lisa2000 said:

Now a month down the line the survey has been done and the property was valued at £145,000, exactly as I expected, but this is classed as a down valuation and my buyers now cannot afford that price and have asked me to reduce to £145,000, they cannot put up any of the difference. I was surprised this could happen, everyone knows the property value surely? Should it really have gotten this far unnoticed that they couldn't afford the price they offered? Should their bank not be aware of the actual value even though they've offered above?

The buyer presumably expected (or at least hoped) their bank would value it at the agreed priced. The amount you put it up for sale at has nothing to do with the bank's surveyor's valuation. There isn't a set value and not everyone will agree on the property's value, it's quite a subjective thing.  You valued it at £145k, the buyer thinks it's worth £150k, their bank thinks it's worth £145k and another buyer thinks it's worth £148k. 

They were able to afford £150k based on the expectation that the lender would agree. Unfortunately (I presume due to a high LTV) they now can't get the mortgage they need and don't have the deposit to make up the difference. I doubt they deliberately offered £150k with full knowledge that the bank would down value and they'd get away with only paying £145k. 

You could asked the other potential buyer if they can afford to make up the difference if the valuation comes in again at £145k.

NameUnavailable

Of course you don't know what the next bank valuation might be. Could be lower than £145K.........

Lisa2000

My point is why does it get his far down the line without it being known. I can understand it when someone markets their house over its value and then a down valuation occurs. But in this scenario everyone is fully aware of the difference between value and offer so this could have been predicted.
I recently put an offer on property above the asking price and for my DIP I stated the actual value of the property (not what I offered) and the amount I wanted to borrow based on that, so doesn't this mean the buyer told the bank that the value of the house was 150,000?

Lisa2000

NameUnavailable said:

Of course you don't know what the next bank valuation might be. Could be lower than £145K.........

This is my worry

Lisa2000

The buyer presumably expected (or at least hoped) their bank would value it at the agreed priced. The amount you put it up for sale at has nothing to do with the bank's surveyor's valuation. There isn't a set value and not everyone will agree on the property's value, it's quite a subjective thing.  You valued it at £145k, the buyer thinks it's worth £150k, their bank thinks it's worth £145k and another buyer thinks it's worth £148k. 

They were able to afford £150k based on the expectation that the lender would agree. Unfortunately (I presume due to a high LTV) they now can't get the mortgage they need and don't have the deposit to make up the difference. I doubt they deliberately offered £150k with full knowledge that the bank would down value and they'd get away with only paying £145k. 

You could asked the other potential buyer if they can afford to make up the difference if the valuation comes in again at £145k.

Considering all my offers were from first time buyers they probably all are on a quite high LTV.

davidmcn

Lisa2000 said:

My point is why does it get his far down the line without it being known. I can understand it when someone markets their house over its value and then a down valuation occurs. But in this scenario everyone is fully aware of the difference between value and offer so this could have been predicted.
I recently put an offer on property above the asking price and for my DIP I stated the actual value of the property (not what I offered) and the amount I wanted to borrow based on that, so doesn't this mean the buyer told the bank that the value of the house was 150,000?

The bank considers the "actual value" to be the lower of whatever the surveyor says it's worth and whatever the agreed price is. What the borrower thinks it's worth doesn't come into it. Presumably it's got "this far down the line" because everybody has had to wait for the survey to be done?

NameUnavailable

Lisa2000 said:

My point is why does it get his far down the line without it being known. I can understand it when someone markets their house over its value and then a down valuation occurs. But in this scenario everyone is fully aware of the difference between value and offer so this could have been predicted.
I recently put an offer on property above the asking price and for my DIP I stated the actual value of the property (not what I offered) and the amount I wanted to borrow based on that, so doesn't this mean the buyer told the bank that the value of the house was 150,000?

I'm not sure that you understand the usual process - if you need a mortgage, the lender will carry out their own valuation on the property to ensure they are happy that it is worth the purchase price (as they need to feel that they can sell it again for at least that if they had to repossess etc.).

They will only value it once the sale has been agreed and the legal process has started. If your buyers don't have spare cash to make up the difference the only way that they can proceed is if you reduce your asking price to match the lenders valuation, as that is all they will lend up to (including deposit).