Nearly £60k down-valuation by lender

Crashy_Time

Chappaz said:

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.

You can`t know that, and my gut feeling is that if you try to pay over the valuation you will certainly make a loss at some point in the future (that could still happen even if you get the 60k knocked off)

GDB2222

£2355 psm is quite close to the cost of building. So, as long as there’s a demand for housing in the area it can’t be built all that much more cheaply than you are paying.

Having said that, you are buying a very large house. Around 3000 sq ft, and possibly 6 or more bedrooms. In my experience larger homes are slightly cheaper to buy per square metre. Lots of possible reasons, eg economy of scale when building. 

Also, if there is a downturn in the market, it may be difficult to sell. Most People can live comfortably in a house half that size. Difficult to sell may translate into value drops.  

I take it that the other houses in the neighbourhood are a similar size and price?

AdrianC

Chappaz said:

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
...

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.

Hold on while I break the crystal ball out...

Question 1 that'll help us answer. When will the current pandemic/brexit market conditions fully return to normal?

Give us an authoritative answer to that, and we can build on it.

Salemicus

I am just jealous that you can get 341 sq m for £851k. Whereabouts is this?

Crashy_Time

Salemicus said:

I am just jealous that you can get 341 sq m for £851k. Whereabouts is this?

Chances are he will be getting it for a lot less than that.

AdrianC

Salemicus said:

I am just jealous that you can get 341 sq m for £851k. Whereabouts is this?

How about 400m2 for £825k?
With a shedload of character and some land...? In a touristy area, within easy access of main roads, two major cities within 45 miles?
https://www.rightmove.co.uk/properties/80180215#/

Go up to £900k, and you can get 400m2 AND grade II listed, with three acres...
https://www.rightmove.co.uk/properties/104613554#/

Crashy_Time

AdrianC said:

Salemicus said:

I am just jealous that you can get 341 sq m for £851k. Whereabouts is this?

How about 400m2 for £825k?
With a shedload of character and some land...? In a touristy area, within easy access of main roads, two major cities within 45 miles?
https://www.rightmove.co.uk/properties/80180215#/

Go up to £900k, and you can get get 400m2 AND grade II listed, with three acres...
https://www.rightmove.co.uk/properties/104613554#/

Originally the first one thought they could get 850k it looks like, would be interesting to see the price history.

GDB2222

If you can stretch to £2600 psm, there's this one:

https://www.rightmove.co.uk/properties/104814854#/


A tad more extensive at over 500 sqm, but seemingly excellent VFM.  

Crashy_Time

GDB2222 said:

If you can stretch to £2600 psm, there's this one:

https://www.rightmove.co.uk/properties/104814854#/


A tad more extensive at over 500 sqm, but seemingly excellent VFM.  

Nice, but if you can`t make it to that price, and are not too keen on open space try this one, nice cobbled area out back as well for fixing the bike or drying the clothes..110k knocked off so far, hopefully quite a bit to go before sanity is reached?

https://www.rightmove.co.uk/properties/81520838#/

Forgot to add, there is a Tesco across the road.

Fiesto88

Chappaz said:

Thrugelmir said:

10% isn't as dramatic as £64k.  There'll be plenty of comparatives for more recent sales in a wider radius of the property you are looking to purchase. This will provider the lender with a good indication as to the broader direction of travel. 

Lenders are naturally going to be cautious. The wider economic fall out from Covid hasn't even begun yet.  Lenders are under constant scrutiny with regards to capital buffers. Conservative mortgage lending forms part of board level policy in this regard. Banks are happy for you to risk your money but not theirs.  

Well it gets even stranger when looking beyond the street the property is in, as two within 50 metres (which were sold in the past few months, so very up-to-date prices) show a square metre value much closer to what I've agreed to pay, and they have much smaller gardens and fewer bedrooms etc.

If this is largely down to post-Covid caution, I'm thinking it may not be such a concern in the short-term. What's key to me are what the valuations would be like in 10+ years, so any slump in the next few years I can deal with.

Basically, I'm just after a second opinion on here as I want to know whether I'm completely insane to even pay what I've agreed given the lender's valuation, or whether there's some merit in my thought process.

I have two past experiences, but they won’t help you reach a conclusion. In 2012, we offered well below asking price on a property I considered to be perfect that had sat on the market for months. To our surprise, the vendor accepted and everything was fine until the mortgage valuation came back significantly lower. My heart wanted to go ahead, but my head said there was too much evidence we were overpaying. I’ve regretted not proceeding ever since and I’ve seen it eventually sell for £20k more than we offered and, more recently, sell again for over £100k more. 

On the flip side, when we bought our current place, mortgage valuation was fine but our own surveyor told us we were paying £30k too much. We ended up proceeding because we honestly felt at the time that we wouldn’t move ever again. Now that circumstances look a bit different and we’re potentially selling, I’m really regretting not negotiating down on the price we paid. But the test will come in what we manage to sell it for - I might be fretting over nothing. The local market has risen, but ours is a non-typical property for the area so very difficult to call. 

I guess, you could end up regretting the decision whichever way you go.