Homebuyers report valuation lower than bank valuation and accepted offer

unusual_confidence78

Hi,

I had my offer accepted to buy a property for £590,000 and the mortgage has been approved by my lender.However, we recently received the Home Buyers report and they have valued it at £550,000.

The rest of the report didn't find anything too scary (the property is <10 years old) - minor damp issue,additional surveys i.e. gas, electric recommended but nothing major to cause £40k of price drop.We spoke to the Home Buyers surveyor to understand how he arrived at the valuation and he said that they normally consider multiple factors including prices of other properties sold nearby, location etc. and the main concern with our property (the reason it was valued low) was the location.

There could be optimistic and pessimistic surveyors out there but I believe that location is a factor that the lender surveyor would also have considered while approving the mortgage.So, wondering how there can be £40,000 difference between the 2 valuations. Also, I am not sure if I need to pay heed to the Home Buyer's report valuation as the lender is happy to lend me the mortgage money which essentially means they agree with the £590,000 price.

I don't believe we can negotiate with the vendor based on just the Home Buyers report valuation as they are aware that the lender has approved our mortgage.There were 2 other parties bidding for the property when I had my offer accepted, so I worry that if I try to negotiate,I will potentially lose out altogether as the seller could go to one of them.

Any thoughts/advice?

Peppermint90

....well, your lender agrees with the £590,000 price minus your £deposit...

davidmcn

How was the lender's valuation carried out? (and what's the loan to value ratio of your mortgage?)

Many lenders are working from desktop valuations, which aren't particularly accurate, but that isn't necessarily a concern to them if they're reasonably confident they can cover the loan by repossessing.

The difference is only £570k +/- 3.5%, which is within normal margins of error for valuation - it's not an exact science.

AdrianC

unusual_confidence78 said:

I had my offer accepted to buy a property for £590,000 and the mortgage has been approved by my lender.However, we recently received the Home Buyers report and they have valued it at £550,000.

The rest of the report didn't find anything too scary (the property is <10 years old) - minor damp issue,additional surveys i.e. gas, electric recommended but nothing major to cause £40k of price drop.

They aren't looking at it as "Well, everybody says the house is worth £590k, but there's £40k wrong with it." - they're looking at it simply as "This house, this location, right now... £?" - and their answer to that is £550k, not £590k.

So, wondering how there can be £40,000 difference between the 2 valuations.

Very simple...

Four people have an opinion on the value.

The EA (1) suggested an asking price to the vendor.
The vendor (2) agreed with that, and the house went on the market at that price.

You (3) came along, and gave your opinion of the value, in the form of your offer. Maybe that agreed with the EA, maybe it was lower, maybe it was higher given that there was another offer.
The vendor agreed with your opinion, and the offer was accepted.

Now your lender has asked their surveyor (4) what his opinion is. His opinion is lower than you and the vendor agreed.

Also, I am not sure if I need to pay heed to the Home Buyer's report valuation as the lender is happy to lend me the mortgage money which essentially means they agree with the £590,000 price.

The lender only use their valuation to determine the loan-to-value of the mortgage you want.

You don't say how much equity you have.
Let's say £140k - so you want to borrow £450k.
You view that as £450k against £590k, so 76% LtV.
The lender view that as £450k against £550k, so 82% LtV.

But they're still happy to lend you £450k at 82% LtV, so there's no practical difference arising from the surveyor's opinion.

unusual_confidence78

davidmcn said:

The difference is only £570k +/- 3.5%, which is within normal margins of error for valuation - it's not an exact science.

The evaluation was for £550K, so its really +/- 7.5% approx.

AdrianC

unusual_confidence78 said:

davidmcn said:

The difference is only £570k +/- 3.5%, which is within normal margins of error for valuation - it's not an exact science.

The evaluation was for £550K, so its really +/- 7.5% approx.

Umm, no.

£550k + 7.5% does indeed = £590k
but £550k - 7.5% = £508k. And nobody has suggested that.

The range of valuations is £40k, from £550k to £590k, with a centre point of £570k. So £570k +/- £20k, which is +/- 3.5%

unusual_confidence78

AdrianC said:

unusual_confidence78 said:

davidmcn said:

The difference is only £570k +/- 3.5%, which is within normal margins of error for valuation - it's not an exact science.

The evaluation was for £550K, so its really +/- 7.5% approx.

Umm, no.

£550k + 7.5% does indeed = £590k
but £550k - 7.5% = £508k. And nobody has suggested that.

The range of valuations is £40k, from £550k to £590k, with a centre point of £570k. So £570k +/- £20k, which is +/- 3.5%

I see what you mean, thanks for clarifying.