Mortgage valued house lower than agreed price - what to do next?

kungfu_navs

sophreeves said:

Hi,

it was advertised for £330k, sellers accepted our offer of £316k, but our mortgage company has valued it at £295k.  the estate agent will argue that 'the mortgage company would say that'.

At this point i would be asking the estate agent to supply the evidence of comparable sales in a 1 mile radius explaining why they valued it at £330k 

Thrugelmir

[Deleted User] said:

lookstraightahead said:

Why do buyers see it as a 'win' when a second lender values the property higher? 

Ok so buyers might really 'want' the house but doesn't it sit a bit awkwardly, especially when the market will probably (or might) slow down and interest rates rise. Paying more interest on a loan that those buyers have personally made bigger.

It all seems a bit wrong way around. 

"please, vendor, let me try and give you more money for your house - sit tight I will do all the hard work as well"

Not at all. Professional valuations are not gospel. You make an offer based on what you think its worth, probably in competition with other buyers offering similar. Market dictates value.

Confidence underpins markets.  

michael1234

kungfu_navs said:

sophreeves said:

Hi,

it was advertised for £330k, sellers accepted our offer of £316k, but our mortgage company has valued it at £295k.  the estate agent will argue that 'the mortgage company would say that'.

At this point i would be asking the estate agent to supply the evidence of comparable sales in a 1 mile radius explaining why they valued it at £330k 

They didn't - it was an asking price.

After spending a few years lending to property developers I have almost zero faith in rics valuers. There are literally dozens and dozens of examples of valuations being way, way off the mark. In this case the valuations of too high (often 100% or more) so I can fully believe they can value below as well.
https://p2pindependentforum.com/thread/18825/rics-culpability

Ultimately, despite being a supposedly professional organisation they can value for whatever their customer wants. Mortgage companies will ask for valuations as tight as possible whereas borrowers will ask for ultra top-end valuations.

Of course like in any profession some are worse than others.

lookstraightahead

[Deleted User] said:

lookstraightahead said:

Why do buyers see it as a 'win' when a second lender values the property higher? 

Ok so buyers might really 'want' the house but doesn't it sit a bit awkwardly, especially when the market will probably (or might) slow down and interest rates rise. Paying more interest on a loan that those buyers have personally made bigger.

It all seems a bit wrong way around. 

"please, vendor, let me try and give you more money for your house - sit tight I will do all the hard work as well"

Not at all. Professional valuations are not gospel. You make an offer based on what you think its worth, probably in competition with other buyers offering similar. Market dictates value.

I actually think some people put too much hope in a down valuation, as a green light to renegotiate. Try if you must, might work in some scanarios. But if this thread shows anything,  its that the vendor should refuse and its the buyers affair to raise finance (which might well be forthcoming with a different valuer).

It's easy when it's not actually your money and it's the bank taking the risk.

What a buyer thinks it's worth it based on so many subjective notions and 'dreams' whereas the bank will have limits on its risk.

Being 'down' valued is just pushing the buyer and vendor into reality.

NameUnavailable

When I was an EA and would value a property for instruction, so many vendors would explain how their home was 'the best in the street' because (insert typically irrelevant reason) and therefore worth £000's more than anything similar.

[Deleted User]

lookstraightahead said:

[Deleted User] said:

lookstraightahead said:

Why do buyers see it as a 'win' when a second lender values the property higher? 

Ok so buyers might really 'want' the house but doesn't it sit a bit awkwardly, especially when the market will probably (or might) slow down and interest rates rise. Paying more interest on a loan that those buyers have personally made bigger.

It all seems a bit wrong way around. 

"please, vendor, let me try and give you more money for your house - sit tight I will do all the hard work as well"

Not at all. Professional valuations are not gospel. You make an offer based on what you think its worth, probably in competition with other buyers offering similar. Market dictates value.

I actually think some people put too much hope in a down valuation, as a green light to renegotiate. Try if you must, might work in some scanarios. But if this thread shows anything,  its that the vendor should refuse and its the buyers affair to raise finance (which might well be forthcoming with a different valuer).

It's easy when it's not actually your money and it's the bank taking the risk.

What a buyer thinks it's worth it based on so many subjective notions and 'dreams' whereas the bank will have limits on its risk.

Being 'down' valued is just pushing the buyer and vendor into reality.

Getting back to the point I was responding to, then the second value is no less "reality" and there is no reason not to want it to correspond to the offer from the buyers point of view.

There have been several anecdotes form others of different valuations, I think it is simply to accept that there can be a variation in values - no?

Last year my relative was remortgaging and got valuations of 300k and 325k. 

I was remortgaging a let property last year which was bought for 190k several years ago and I suggested it was then worth 250. Lo and behold it was worth 250...

london21

lookstraightahead said:

Why do buyers see it as a 'win' when a second lender values the property higher? 

Ok so buyers might really 'want' the house but doesn't it sit a bit awkwardly, especially when the market will probably (or might) slow down and interest rates rise. Paying more interest on a loan that those buyers have personally made bigger.

It all seems a bit wrong way around. 

"please, vendor, let me try and give you more money for your house - sit tight I will do all the hard work as well"

My exact thought. I want a good deal and wouldn’t go out of my way to pay more.

fezster

A lenders mortgage valuation is not an indication of price, though. For starters, it would never be valued higher than an offer price. 

It's used by the lender to ascertain that what they're lending is indicative of the asset price based on historical data and current market trends - should the asset need to be sold, they want to reduce the risk of them losing their capital. If a buyers asking price is higher than the valuation, this might be an indication they are paying too much. On the other hand, if 5 other buyers are lined up behind them offering the same, then the valuation is too low. It's certainly not an exact science.

You could argue that every house is overvalued - in fact, that's what many people believe. That the property market is over inflated. This was being said 20 years ago, yet we've not seen prices collapse. 

MsACam

london21 said:

lookstraightahead said:

Why do buyers see it as a 'win' when a second lender values the property higher? 

Ok so buyers might really 'want' the house but doesn't it sit a bit awkwardly, especially when the market will probably (or might) slow down and interest rates rise. Paying more interest on a loan that those buyers have personally made bigger.

It all seems a bit wrong way around. 

"please, vendor, let me try and give you more money for your house - sit tight I will do all the hard work as well"

My exact thought. I want a good deal and wouldn’t go out of my way to pay more.

Good luck with that in the london market, unless you’re buying further out or a doer upper or other handicap property there’s no chance of a good deal. 

london21

MsACam said:

london21 said:

lookstraightahead said:

Why do buyers see it as a 'win' when a second lender values the property higher? 

Ok so buyers might really 'want' the house but doesn't it sit a bit awkwardly, especially when the market will probably (or might) slow down and interest rates rise. Paying more interest on a loan that those buyers have personally made bigger.

It all seems a bit wrong way around. 

"please, vendor, let me try and give you more money for your house - sit tight I will do all the hard work as well"

My exact thought. I want a good deal and wouldn’t go out of my way to pay more.

Good luck with that in the london market, unless you’re buying further out or a doer upper or other handicap property there’s no chance of a good deal. 

True, the market is a seller’s market at present and not enough supply.