'Bouyant' Property Market in Scotland and Home Report Undervaluation

GemmaGeordie

Hello all, 
We have to relocate for work and looking at East Lothian, we've sold in England and are progressing with the sale. The market is extremely charged right now and whilst we have a good amount of cash to help ease the sale of our next place, the market is very quiet. We are being told that 'standard' properties are going for 10-20% over home report value, but 'special' ones are going up to 40% over. The house we have seen has a very low valuation compared to anything in the whole of the county and including similar style homes nearby - it's on HR value of 300k versus similar properties which are going for 450-500k (if you do it on square meterage alone it works out at £1000 less per sq meter than new builds or other older properties). This is despite the home report not showing anything untoward other than it needs some renovation work (but we have renovated 2 houses before and we think it is actually mostly decorative, which the HR backs up). 
Our personal circumstances are such that we do need to move, rentals are hard to come by and will be more expensive than paying a mortgage and we want to get our son into school in August. 

Now, with mortgages I know we can only get to the value of the home report - but my question is: what happens after purchase when the market value of the house ends up being a lot more than the HR value? Would the next home report take this into account alongside the house being fully renovated and attractive - especially as it is a unique one of a kind period property? Whilst we could push to 30% over HR value, I don't want us to be in a position where this puts us in a harder to sell environment. Other house prices in the area make me think that a resale value of 450-500k would not be unreasonable, but I don't know how future valuations are impacted by offers over HR value. 

Any other advice as what to be cautious of when bidding over HR value is much welcomed. We would also look to remortgage once we had renovated to improve our LTV and get a better rate. 

GemmaGeordie

It says this in the HR "Property market activity has been impacted due to the current response to Covid-19. This has

resulted in an unprecedented set of circumstances on which to make a valuation judgement.

The advice is therefore reported on the basis of “material valuation uncertainty” as per the RICS

Red Book Global definition. Consequently, less certainty can be attached to the valuation than

would otherwise be the case. It is recommended that the valuation of this property is kept

under frequent review as more market evidence becomes available." 

This sounds like generic covering themselves but it may help?

GemmaGeordie

Sorry and there are 21 notes of interest. 

user1977

GemmaGeordie said:

Sorry and there are 21 notes of interest. 

Ouch. I don't think you can apply much science to this sort of closing date - offer whatever you can afford and which won't make you hurt too much if you're successful. But in (sort of) answer to your question, yes the price achieved by "your" property will itself become a comparable used by other valuations in the area, so will tend to push valuations up.

GemmaGeordie

user1977 said:

GemmaGeordie said:

Sorry and there are 21 notes of interest. 

Ouch. I don't think you can apply much science to this sort of closing date - offer whatever you can afford and which won't make you hurt too much if you're successful. But in (sort of) answer to your question, yes the price achieved by "your" property will itself become a comparable used by other valuations in the area, so will tend to push valuations up.

Thank you - that's kind of what I am thinking - for me the line is "if this came up at fixed price for what we can maximum pay for it, would we be happy?" and compared to the rest of whats out there it would be a resounding yes! It's hard though when it's priced so low that you get anchored to that lower price and think about it as a bargain, rather than something more reasonable and possibly closer to its market price. Still you have to be careful not to go wild and get swept up in the current market! 

Thanks for the note on the comparable bit. As long as it will form part of that future valuation that's fine by us, we won't end up in negative equity so we should be fine.