Mortgage Valuation Rejection

whiteho2

I was wondering if anyone could advise me on the following situation with regards to the sale of my property.

I own a purpose-built mansions apartment located in a nice suburb of  West London.

The property is a period building, two bedroom, built around 1900 and is of sound maintenance and is well run by a management agent. The service charge is very reasonable and there is a sinking fund to cover any large scale projects that may occur, with no know work on the horizon.

The property is located above commercial premises – a restaurant, as the entire block is a a mixture of commercial premises on ground floor, with apartments above.

The building was always built to be used in this way as its located on a nice high street. There are extractors at the rear of the property, approximately 5 meters away and they cause no problem or issue in relation to sound, smell etc.

The property has sold 5 times in the last 20 years and I purchased it in 2013.

We have now been on the market since Autumn 2020 and have received 4 rejected valuations by RICS appointed surveyors on behalf of the various lenders our buyers have attempted to mortgage with.

I've owned the property for 7 years and I have never had an issue with mortgaging or remortgaging the property and the current sale price, which is now reduced so we can hopefully settle this matter, is considered very low for this area.

The first buyer and second buyer we had are first time owners, but their respective borrowing amounts are quite low in terms of LVT.

They are both permanently employed and frankly it’s the valuation surveys being carried out that have resulted in the sales falling through.

 

My question is, what has happened for the RICS surveyors to suddenly find fault with our property?

As mentioned, it has an excellent sale record, the value is quite low for the area and it is located within an area where demand is high – since our first sale fell through, we found another buyer within two weeks.

 

Right now, I’m not sure how we can mitigate this issue – are we now left with a property of zero value in the eyes of the banks? What circumstances have changed for the surveyors to now find issues with the property.

There have been no internal adjustments and it's arguably a better property now than since I purchased it, in terms of condition and decoration.

 

If there is any light you can shed or advice for us to get this across the line then I would very much appreciate it. I haven’t received a full reason as to why the sales have failed, just that the valuations have been rejected.

If it’s because of the restaurants below, then as mentioned, this was never a problem in the past and the building is purpose built for such mixed use.

 

As you can imagine, this situation is causing a huge amount of stress.

 

Thank you!

Thrugelmir

Commercial decision by the lenders as to the type of property they'll consider adequate security for the mortgage advance. Either find a cash buyer or send the property to auction. Surveyor works purely under the instructions of the lender. 

davidmcn

Difficult unless anybody is actually telling you the reason, but a restaurant downstairs is the most likely problem for many lenders. Lending criteria change from time to time, so what was acceptable in years gone by may be undesirable now. It's possible buyers just need directed towards more suitable lenders.

MaryNB

Do you know if the buyers used brokers who would have recommended appropriate lenders for a flat above a commercial premises? Or were you maybe unlucky that the four lenders were not keen on granting a mortgage for this type of arrangement. Lenders have become much stricter since 2013, but I'm not sure if this extends to issues with flats above commercial premises.

YellowCarBlueCar

My understanding is that lenders can be reluctant to lend on flats above commercial premises for a few reasons.  One is that they see the property as being harder to sell-on if they ever needed to repossess, and another is the risk of the property below not being occupied and maintained.
I can only guess that with the perceived "downturn on the High Street" this is becoming more of an issue for mainstream lenders.

As you know, flats above shops can and do sell - just not as easily as in purely residential blocks.  I guess you just need a buyer who wants your flat enough to go to a broker who can find them a lender who is prepared to lend on a flat above a restaurant.

whiteho2

MaryNB said:

Do you know if the buyers used brokers who would have recommended appropriate lenders for a flat above a commercial premises? Or were you maybe unlucky that the four lenders were not keen on granting a mortgage for this type of arrangement. Lenders have become much stricter since 2013, but I'm not sure if this extends to issues with flats above commercial premises.

Thanks for your reply.
Yes they have both used good brokers who explained the situation to each lender. They all knew it was above 'commerical' and Natwest are the usual go-to for such agreements. Natwests statement to the broker is essentially "approved pending surveyors comments". Its almost like its the RICS surveyor who's putting a dampener on everything and not the actual banks, which is even more frustrating. Like I mentioned, demand is high and I found another buyer within 2 weeks!

The place has sold 5 times in 20 years so theres good history on the property. So very strange!

FTB_Help

Do you know if the shops downstairs have changed recently (i.e from an estate agent to a restaurant) i do remeber vaguely reading about people fibdibg it hard to get mortgages on flats above commercial premises.

My friend lives above a commercial premise in London and just out of interest got the flat valued a few years back and was told it was worth about 40% less than what she paid for (and was a lot less than other flats in the area) she wasnt adamant on selling so didn't push further on why

whiteho2

FTB_Help said:

Do you know if the shops downstairs have changed recently (i.e from an estate agent to a restaurant) i do remeber vaguely reading about people fibdibg it hard to get mortgages on flats above commercial premises.

My friend lives above a commercial premise in London and just out of interest got the flat valued a few years back and was told it was worth about 40% less than what she paid for (and was a lot less than other flats in the area) she wasnt adamant on selling so didn't push further on why

No change since I bought the place. Back then, I had no problem getting a mortgage and I was a first time buyer. I could understand this if it was some dodgy bedsit above a takeaway joint but its a beautiful period apartment in a purpose built, mixed use building.

If I cant sell it, Im not quite sure what I supposed to do. Its my only form of equity.

I cant believe this is the case for the many other flats located above restaurants or commercial premises in the country?! Someone suggested auction but holding out for a cash buyer could take months if not years. I wish I had never bought the place, which is very sad when its your happy home.

FTB_Help

Dont worry, people will still buy your flat.

You just need to get someone who will love it enough to find a lender that will approve.

Im not sure if there is some other surveyor you can find yourself to get it valued and checked for your own piece of mind, it might help bring to light any "issues"

numbercruncher8

Have you read any of the reports? 

If no you could commission one yourself and compare what it says to the one you got when you purchased the property. Like others say it is most likely the commercial premises downstairs, and banks don't have any obligation to you to keep the parameters the same.

Also you don't have to go to auction for a cash buyer, if it's priced low enough one will come. If the area is desirable enough then this should not be a problem, as the lenders valuation does not reflect the rental ability and at a certain price the yields will be worth it.

whiteho2

numbercruncher8 said:

Have you read any of the reports? 

If no you could commission one yourself and compare what it says to the one you got when you purchased the property. Like others say it is most likely the commercial premises downstairs, and banks don't have any obligation to you to keep the parameters the same.

Also you don't have to go to auction for a cash buyer, if it's priced low enough one will come. If the area is desirable enough then this should not be a problem, as the lenders valuation does not reflect the rental ability and at a certain price the yields will be worth it.

Thats not a bad idea. Just so I can at least get hold of one. If this next fails, I will request a copy from the seller but I like your idea. I would just love to actually know from RICS what specific criteria their appointed surveyors are now working toward. It all feels very cloak and dagger and everyone, literally everyone I have spoken to, either in the property industry or not cant believe this is the case. It feel like a bigger farce than the whole cladding saga. 

Appreciate your responses everyone!