Nearly £60k down-valuation by lender

Crashy_Time

Fiesto88 said:

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. 

Depends how much value you place on money and saving money I suppose? 

Rachylou1981

Just happened to us. 38K down valuation. Could not negotiate & we don't have the cash to top up on mortgage nor did we want to risk over paying so had to pull out. Devastated!

We've noticed it's sold again within the week so are intrigued to see what happens & if it goes at the amount they want. 

Do other lenders get to see the down valuation, in that it's on record or is it private? 

Crashy_Time

Rachylou1981 said:

Just happened to us. 38K down valuation. Could not negotiate & we don't have the cash to top up on mortgage nor did we want to risk over paying so had to pull out. Devastated!

We've noticed it's sold again within the week so are intrigued to see what happens & if it goes at the amount they want. 

Do other lenders get to see the down valuation, in that it's on record or is it private? 

Chances are they will still down value in the present climate, and the next buyers will probably have the same issue.

AdrianC

Rachylou1981 said:

Do other lenders get to see the down valuation, in that it's on record or is it private? 

It's not centrally recorded anywhere - it's just the surveyor reporting to their client, the lender.

But that surveyor may be used by several lenders, so would give the same figure to each... and different surveyors may well be working off the same basic comparables anyway.

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...

No, that would be a reckless gamble, your aim should be to get as much as possible off the asking price without scaring the seller away.

Crashy_Time

AdrianC said:

Rachylou1981 said:

Do other lenders get to see the down valuation, in that it's on record or is it private? 

It's not centrally recorded anywhere - it's just the surveyor reporting to their client, the lender.

But that surveyor may be used by several lenders, so would give the same figure to each... and different surveyors may well be working off the same basic comparables anyway.

True they are unlikely to revise their number much between lender requests.

MobileSaver

Crashy_Time said:

Fiesto88 said:

We ended up proceeding because we honestly felt at the time that we wouldn’t move ever again.

Depends how much value you place on money and saving money I suppose? 

You mean it depends on which you value more: money or happiness in a home you plan to spend the rest of your life?

Crashy_Time

MobileSaver said:

Crashy_Time said:

Fiesto88 said:

We ended up proceeding because we honestly felt at the time that we wouldn’t move ever again.

Depends how much value you place on money and saving money I suppose? 

You mean it depends on which you value more: money or happiness in a home you plan to spend the rest of your life?

It isn`t just money for most people though is it, it is debt at interest for a very long time? Even in the small minority of cases where people find a property that they want to live in for decades the bank is going to have the final decision on how much this dream is worth, smart cash money doesn`t pay 60k more than a valuation.

MobileSaver

Crashy_Time said:

MobileSaver said:

Crashy_Time said:

Fiesto88 said:

We ended up proceeding because we honestly felt at the time that we wouldn’t move ever again.

Depends how much value you place on money and saving money I suppose? 

You mean it depends on which you value more: money or happiness in a home you plan to spend the rest of your life?

It isn`t just money for most people though is it, it is debt at interest for a very long time? Even in the small minority of cases where people find a property that they want to live in for decades the bank is going to have the final decision on how much this dream is worth,

I've always been debt-averse and haven't had a penny of "debt at interest" for at least the last fifteen years but even I can see the attraction of debt at record-low interest rates.

I think your "small minority of cases" is way out! Over 50% of homeowners are aged 55 or above so I would hazard that the vast majority of those are in a property they want to spend the rest of their lives in.

Crashy_Time said:

smart cash money doesn`t pay 60k more than a valuation.

Is it smarter to spend the rest of your life in a bedsit in an undesirable part of Edinburgh or pay £60k over valuation to live in your dream home for the rest of you life? Answers on a postcard...

Crashy_Time

MobileSaver said:

Crashy_Time said:

MobileSaver said:

Crashy_Time said:

Fiesto88 said:

We ended up proceeding because we honestly felt at the time that we wouldn’t move ever again.

Depends how much value you place on money and saving money I suppose? 

You mean it depends on which you value more: money or happiness in a home you plan to spend the rest of your life?

It isn`t just money for most people though is it, it is debt at interest for a very long time? Even in the small minority of cases where people find a property that they want to live in for decades the bank is going to have the final decision on how much this dream is worth,

I've always been debt-averse and haven't had a penny of "debt at interest" for at least the last fifteen years but even I can see the attraction of debt at record-low interest rates.

I think your "small minority of cases" is way out! Over 50% of homeowners are aged 55 or above so I would hazard that the vast majority of those are in a property they want to spend the rest of their lives in.

Crashy_Time said:

smart cash money doesn`t pay 60k more than a valuation.

Is it smarter to spend the rest of your life in a bedsit in an undesirable part of Edinburgh or pay £60k over valuation to live in your dream home for the rest of you life? Answers on a postcard...

Of course I was talking about people trying to buy into this ridiculous bubble now, not people who got basic property at a low price years ago!

Could you tell us the most desirable part of Edinburgh in your opinion, and the least, and give reasons why they are so? You seem to know the city well?