Advice on down-valuation

firsttimebuyers2345

Hi All, 

Hoping to get some advice on how to proceed with a flat purchase. 

My partner and I are first time buyers, and have had an offer accepted at £550k on a two bed flat in South London. The asking price was £580k and we considered the agreed price to be fair based on similar properties in the area. However, we've just had the valuation back from the lender at £520k and this seems very low to us. The seller is not willing to move on the price and has offered to pay for us to get another valuation. I'm open to trying a new lender and seeing what the valuation comes back at, but our concern is if it does come back higher, should we go ahead with the purchase? 
We're only planning to live in the flat for 3 - 5 years, so don't want to take the risk that a few years down the line we're unable to sell if the true value is less than what we paid. 

My main two questions are, do different lenders come back with significantly different valuations? If it does come back significantly different, do we go with the higher one? 

Any advice would be much appreciated! 

JJR45

Personally, if you are only planning to live in it for 3 years, you will most probably be better off waiting and buying what ever you want more long term.
After stamp duty, fees etc it is a fair wack to pay for 3 years.

moneysavinghero

Not many people want to live in London flats at the moment. There is an exodus of people from flats into houses with gardens. Hence why you were able to get an offer accepted at 30k below asking when across the rest of the country houses are selling in days for much more than asking price.

The mortgage provider is protecting themselves, just as you don't want to be stuck with a property in 3-5 years that is worth less than it is now, neither do they. Maybe flats will become more popular in 5 years when Corona is just a memory and companies want employees back in the office. Or maybe working from home will become a permanent fixture. Where do you think things are going?

Yes different lenders may have a different appetite for risk and so may come back with different valuations. The higher one might have a higher interest rate to match the extra risk. You would also be taking on this risk but paying extra for the privilege of it - are you happy to do this?

AdrianC

firsttimebuyers2345 said:

Hoping to get some advice on how to proceed with a flat purchase. 

My partner and I are first time buyers, and have had an offer accepted at £550k on a two bed flat in South London. The asking price was £580k and we considered the agreed price to be fair based on similar properties in the area. However, we've just had the valuation back from the lender at £520k and this seems very low to us. The seller is not willing to move on the price and has offered to pay for us to get another valuation. I'm open to trying a new lender and seeing what the valuation comes back at, but our concern is if it does come back higher, should we go ahead with the purchase? 
We're only planning to live in the flat for 3 - 5 years, so don't want to take the risk that a few years down the line we're unable to sell if the true value is less than what we paid. 

My main two questions are, do different lenders come back with significantly different valuations? If it does come back significantly different, do we go with the higher one? 

Lenders use surveyors to give valuations. Multiple lenders may use the same surveyor.

But remember... the valuation is just the surveyor's opinion. You've given your opinion, and the vendor agreed with it. The vendor's EA gave their opinion.

None of this makes the slightest difference in any future sale - especially the surveyor's opinion, because nobody but you and your lender will ever see that again...

The big question... can you still afford to buy at the lower LtV that your lender will view your borrowing as?

Crashy_Time

The seller is trying it on, the next valuation could be even lower. Run away from this unless they take the full price cut.

es5595

If the vendor has offered to pay for a second valuation, why not go for it and see what it comes back at? 

If it comes in low again then you’ve got excellent grounds for negotiation, if not, you can have a think. 

As a pp mentioned, if you’re selling in three years, by the time you’ve paid stamp duty, solicitors fees, estate agent fees, moving expenses etc, you’re likely to bet out of pocket if house prices stagnate or drop. Although that does depend on the mortgage payment compared to whatever you’re currently paying. 

Sandtree

What does your crystal ball say? In three years time will we have returned to most people working in offices etc or will continue to be working from home on Teams or Zoom most the time? 

What LTV are you looking at based on your offer? Why sell in 3 years time?

AnotherJoe

There's also the situation of office blocks and large shops being converted to flats, putting additional downward pressure on prices. I wouldn't  buy a flat in london at the moment unless it was a very good price, and for three years, that's quite a gamble. 

firsttimebuyers2345

Thanks for the advice everyone, very much appreciated. 

We hoping to move out of London and buy somewhere bigger eventually, but know we need to stick around career wise for a while (my partners company are already phasing back into the office - crazy!) so we're seeing this as a shorter term purchase.

We're paying approx £700 more a month in rent than we would be on the mortgage + service charge, which will fairly add up over 5 years so I think we'll be better off even if prices stagnate/dip. 

LTV is 85% and we wouldn't be able to pay the difference in the valuation in cash. 

We've applied to another lender to get a second valuation, however we were limited in who we could apply to as my partners only been in her job for a couple of weeks so the mortgage we're looking at now is a worse rate (only about £50 a month more in interest, but still annoying). 

No crystal ball unfortunately but the general attitude seems to be wanting to move out of the City which is why this down valuation has really spooked me. Ideally the second comes back low again so we can negotiate, if not - higher price still worth it to stop renting? 

teachfast

It baffles me why anyone would want to live and work in London. I get it is busy but the prices to buy are just extortionate. You get a small shoebox for the same money as a decent family house elsewhere. £500k will get a lovely 4 bed detached with plenty of garden where I am. And renting for even more money seems absolutely ridiculous. 

Ok, some jobs can't be done anywhere other than London, agreed. But if you have choice, it seems inexplicable that you would stay.

As for the OP, £700 a month for 3 years is about £25k, so unless you're losing less than that (doesn't seem certain in my crystal ball) I'd stay put or find a cheaper rent to save a bigger deposit for when you move somewhere sensible.

lookstraightahead

teachfast said:

It baffles me why anyone would want to live and work in London. I get it is busy but the prices to buy are just extortionate. You get a small shoebox for the same money as a decent family house elsewhere. £500k will get a lovely 4 bed detached with plenty of garden where I am. And renting for even more money seems absolutely ridiculous. 

Ok, some jobs can't be done anywhere other than London, agreed. But if you have choice, it seems inexplicable that you would stay.

As for the OP, £700 a month for 3 years is about £25k, so unless you're losing less than that (doesn't seem certain in my crystal ball) I'd stay put or find a cheaper rent to save a bigger deposit for when you move somewhere sensible.

I am from the midlands and back now, but worked in London for years and bought a flat in south London. Best experience work wise ever. Daughter is just about to graduate and the opportunities are greater there, for her industry, she feels. It's not all about size 😜.