Down valuation help

Lisa2000

NameUnavailable said:

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).

I understand the process I just mean everyone could anticipate it would be downvalued purely from the fact they have offered above asking price. It was never going to be valued at more than that.

lesalanos

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?

FTBs probably got excited, loved the house and never even knew that the mortgage valuation could/would end up lower 

ele_91

The mortgage valuation has nothing to do with the estate agent valuation, the mortgage company may have decided it was worth £150k or if the buyers had lower LTVs they might not have been so concerned about lending the agreed price. Someone with a 10% deposit will be riskier than someone with a 40% deposit; with a 40% deposit even if the value drops, if they need to repossess the lender will most likely get their original loan back. At just 10% deposit with a drop in value the lender will find it difficult to recoup their loan, hence they will only lend to what they perceive to be the property value. 

Often lenders outsource the valuations to third parties in the local area and a different lender might actually result in the same surveyor sent to the property. Your best move is to ask the other buyer what their deposit is and if they could make up a down valuation. I’m selling a FTB property and quite few have had high deposits up to 50% of the value so don’t presume they don’t have this either. 

lookstraightahead

The mortgage lender values the house - not you, not your buyers, not the estate agent. So your buyers don't know what the value is, until it's valued! 

lookstraightahead

Lisa2000 said:

NameUnavailable said:

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).

I understand the process I just mean everyone could anticipate it would be downvalued purely from the fact they have offered above asking price. It was never going to be valued at more than that.

You've got this all the wrong way round. 

Thrugelmir

As there were multiple bidders for your property. They bid each other up to a higher price. Which had nothing to do with the actual property value. Anyone could do that that to secure a property then turn round and say sorry cannot afford it.  Have to drop my offer. 

Markneath

Im not sure how you could expect this to be picked up any sooner, its always after the mortgage valuation that people relax a little.
If the buyers had 10% deposit and offered 145000 they only needed 14500 deposit but to up the offer to 150000 they only needed an extra 500 deposit and not an extra 5000 surely you understand that. 

The buyer obviously thought the house was worth 150,000 but unfortunately the lender doesn’t agree.

Considering the agent originally said 145,000 it sounds like a correct valuation! 

hazyjo

Lisa2000 said:

NameUnavailable said:

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).

I understand the process I just mean everyone could anticipate it would be downvalued purely from the fact they have offered above asking price. It was never going to be valued at more than that.

Not true. They will know what the agreed buying price is. Some are even valued over agreed price, even if the buyers are paying less. My SIL has recently bought a flat. It was valued around £30k more than they're paying.

They obviously feel your flat is either worth 145k, or that they think the buyer poses more of a risk so are lending cautiously (often the case with FTBs).

MFWannabe

Lisa2000 said:

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?

You happily accepted the higher offer knowing it was £5k above asking price so surely you can’t be that surprised the mortgage company have valued it at 145k? 

Your options: 
1) You negotiate with buyers, can they make up any of the shortfall? Meet you half way? 

2) You reduce to 145k
3) You say no to buyer and they have to pull out and you choose next person whose offered 148k bearing in mind your Estate Agents warning. There’s no guarantees same thing won’t happen again, probably likely to and if will depend if new buyer can make up the difference 

Carl2510

You was well within your rights to accept a higher price, but you can’t be complaining because the bank came in with a lower LTV by all means show them evidence it is worth 150K if you can.

But if you can’t you’ll have to either hope they make up the shortfall if not pull out. They can afford the house at 150K but just mortgaged which is different to having money in there pockets.