Nearly £60k down-valuation by lender

ele_91

We had a downvaluation of around £15k (on a cheaper house) but the bank agreed to lend as we have a big deposit. We thought about negotiating but we are in a fast moving market, were the first to view and really want the house. The reality is if we try and negotiate they’ll probably put it back on and get asking price. You need to weigh up what the property means to you.

rik111

Why moan at the bank at under valuing it, either buy it at the price agreed or talk to the seller about the lower valuation and ask for a reduction.
Desk top valuations are not automatic, there is some input from a real person who's sole job is valuations and will carry out hundreds a year... 
You also habe no idea what the under offer property actually sold for so I cant see the relevence.

Chappaz

moneysavinghero said:

but if the sale of the £851k property that's under offer goes through at anywhere near what they were asking for, the valuation for the house we want would rocket back up again based on calculating it via this method.

But it's only under offer. It has not sold. The buyers have probably had the same under-valuation that you have had and are considering what they want to do.

Your post seems to be you explaining why you believe the banks valuation is wrong. But then you say you are worried about the resale value. If you believe the price you are paying is correct then why are you worrying about the resale value?

Banks don't care about whether you get your dream home or not, they just care about managing their risks.

Well that's the gamble. Do I proceed with the possibility that the under offer house will go through at near the listed price which then boosts up the automated valuations in the area. It has been off the market for well over a month now. In fact I may call their estate agent to see what's happening with it.

I'm worrying about the resale value because even if I find a buyer who agrees with what I think it's worth (which I believe I would), similar lending valuations in future (which may happen due to the rarity of house sales in the area) would mean the banks will only lend on a smaller amount, and therefore any buyer would need a low LTV mortgage with a very large deposit to make up the shortfall. And obviously that's a dealbreaker for most as people tend not to have such large lump sums sat in the bank for this purpose. So it may be a sale between two willing parties that's scuppered by a financial technicality.

It's like a self-fulfilling prophecy in a way. If banks down-value to protect against risk, more often than not the sellers either have to sell at those lower values, or take the house off the market and wait. And those that do sell end up lowering the area value and making the lender's valuation a reality...

davidmcn

Chappaz said:

moneysavinghero said:

but if the sale of the £851k property that's under offer goes through at anywhere near what they were asking for, the valuation for the house we want would rocket back up again based on calculating it via this method.

But it's only under offer. It has not sold. The buyers have probably had the same under-valuation that you have had and are considering what they want to do.

Your post seems to be you explaining why you believe the banks valuation is wrong. But then you say you are worried about the resale value. If you believe the price you are paying is correct then why are you worrying about the resale value?

Banks don't care about whether you get your dream home or not, they just care about managing their risks.

obviously that's a dealbreaker for most as people tend not to have such large lump sums sat in the bank for this purpose.

It would be a problem for many buyers, but I think you're underestimating the number who do have enough cash to make up the difference between the bank's valuation and the price they want to pay. That's how it works in a rising market. Whether this particular market is a rising one which justifies the price is of course a different question.

moneysavinghero

As most people need a mortgage then yes banks are the main driver of house prices. But banks do not want to turn down business, they only want to turn down risky business.

Chappaz

rik111 said:

Why moan at the bank at under valuing it, either buy it at the price agreed or talk to the seller about the lower valuation and ask for a reduction.
Desk top valuations are not automatic, there is some input from a real person who's sole job is valuations and will carry out hundreds a year... 
You also habe no idea what the under offer property actually sold for so I cant see the relevence.

You are wrong. The message back from the lender is that it was a fully automated valuation with no report available. Thanks for playing though.

Chappaz

davidmcn said:

It would be a problem for many buyers, but I think you're underestimating the number who do have enough cash to make up the difference between the bank's valuation and the price they want to pay. That's how it works in a rising market. Whether this particular market is a rising one which justifies the price is of course a different question.

Yes you may be right. In all honesty this doesn't look like it'll be a rising market in the near term (post-Covid and SDLT holiday etc), so there's probably merit in riding that out considering that I have no intention to sell in the near term.

ele_91 said:

We had a downvaluation of around £15k (on a cheaper house) but the bank agreed to lend as we have a big deposit. We thought about negotiating but we are in a fast moving market, were the first to view and really want the house. The reality is if we try and negotiate they’ll probably put it back on and get asking price. You need to weigh up what the property means to you.

Same here. We're leaning towards just getting it as it is a house we really like and any fluctuations in value will probably smooth themselves out in the long-term. I just wanted to make sure that I wasn't missing anything and that I'm not deemed utterly insane for even considering the purchase.

AdrianC

Chappaz said:

ele_91 said:

I think you can request a physical valuation if the desktop undervalued. Have you got a broker?

I do yes. Although from what I've read from the lender's own guidance, they will only consider a re-valuation if it makes a material difference to how much will be borrowed or what the interest rate will be (in this case it doesn't).

So the downvaluation keeps the LtV at a point you can still purchase, and there's not even a knock-on to the rate?

What's the problem, then?

Nobody will EVER see the lender's valuation once you've completed.

Crashy_Time

Chappaz said:

moneysavinghero said:

but if the sale of the £851k property that's under offer goes through at anywhere near what they were asking for, the valuation for the house we want would rocket back up again based on calculating it via this method.

But it's only under offer. It has not sold. The buyers have probably had the same under-valuation that you have had and are considering what they want to do.

Your post seems to be you explaining why you believe the banks valuation is wrong. But then you say you are worried about the resale value. If you believe the price you are paying is correct then why are you worrying about the resale value?

Banks don't care about whether you get your dream home or not, they just care about managing their risks.

Well that's the gamble. Do I proceed with the possibility that the under offer house will go through at near the listed price which then boosts up the automated valuations in the area. It has been off the market for well over a month now. In fact I may call their estate agent to see what's happening with it.

I'm worrying about the resale value because even if I find a buyer who agrees with what I think it's worth (which I believe I would), similar lending valuations in future (which may happen due to the rarity of house sales in the area) would mean the banks will only lend on a smaller amount, and therefore any buyer would need a low LTV mortgage with a very large deposit to make up the shortfall. And obviously that's a dealbreaker for most as people tend not to have such large lump sums sat in the bank for this purpose. So it may be a sale between two willing parties that's scuppered by a financial technicality.

It's like a self-fulfilling prophecy in a way. If banks down-value to protect against risk, more often than not the sellers either have to sell at those lower values, or take the house off the market and wait. And those that do sell end up lowering the area value and making the lender's valuation a reality...

Yes, the actual sales make the market, and the banks for the most part decide on the value of those sales.

Chappaz

AdrianC said:

So the downvaluation keeps the LtV at a point you can still purchase, and there's not even a knock-on to the rate?

What's the problem, then?

Nobody will EVER see the lender's valuation once you've completed.

The problem is whether this anomaly in the automated valuation (i.e. the rarity of nearby sales and just one 40% below average sale knocking the area average out) will also result in lenders giving similarly low auto-valuations to people who want to buy the property from me in the future, and therefore blocking anyone who doesn't have a huge deposit to allow for a low LTV mortgage (or just generally spooking them from doing the purchase full stop). 

It's not that I ever intend to sell any time soon, but if/when I do, it would be nice to know that I'm unlikely to make a loss on it.