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

Crashy_Time

What does the seller say OP?

Crashy_Time

fezster said:

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. 

Not really, not if those buyer`s lenders also "down-value", what buyers offer and what sellers think they can get is pretty meaningless if borrowed money is involved, especially in the very tricky economic environment at the moment.

MsACam

in current market the other buyers will just foot the difference in cash and drop down the LTV ratio as the differences in rates between 25/20/15 deposit in current interest climate is very small. 

Crashy_Time

MsACam said:

in current market the other buyers will just foot the difference in cash and drop down the LTV ratio as the differences in rates between 25/20/15 deposit in current interest climate is very small. 

What happened with the SDH says that is unlikely in a lot of cases but of course it depends on the house and the buyer.

jay213

fezster said:

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. 

You could say that never materialized 20 years ago due to unforeseen government intervention and the various props that they have implemented up to the present day.

fezster

Crashy_Time said:

fezster said:

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. 

Not really, not if those buyer`s lenders also "down-value", what buyers offer and what sellers think they can get is pretty meaningless if borrowed money is involved, especially in the very tricky economic environment at the moment.

How is an evaluation arrived at? Or put another way - why do valuations increase? What factors dictate a "rising property market"?

Supply/demand and matching seller prices to buyer prices will always dictate what a property is "worth". Valuations will never reflect to 100% certainty the current "worth" of a property. 

fezster

jay213 said:

fezster said:

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. 

You could say that never materialized 20 years ago due to unforeseen government intervention and the various props that they have implemented up to the present day.

Yes, I agree. No government ever wants to preside over a fall in property values, because of how the electorate think their primary residence price reflects how wealthy they are. Unless they plan on downsizing in the very near term, that is seldom true.

lookstraightahead

fezster said:

Crashy_Time said:

fezster said:

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. 

Not really, not if those buyer`s lenders also "down-value", what buyers offer and what sellers think they can get is pretty meaningless if borrowed money is involved, especially in the very tricky economic environment at the moment.

How is an evaluation arrived at? Or put another way - why do valuations increase? What factors dictate a "rising property market"?

Supply/demand and matching seller prices to buyer prices will always dictate what a property is "worth". Valuations will never reflect to 100% certainty the current "worth" of a property. 

Agreed - except in these time of weirdness it's a bit like the toilet paper fiasco - sellers thinking they can get whatever they like and buyers paying whatever they can get their hands on without thinking.

The problem is that most of this is 'borrowed' money and the banks are 'under' valuing because they don't take the risk with their own money, unlike buyers who appear to have no concept of what they are doing and don't weigh up what these ridiculous amounts might cost them in the future.

Crashy_Time

fezster said:

Crashy_Time said:

fezster said:

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. 

Not really, not if those buyer`s lenders also "down-value", what buyers offer and what sellers think they can get is pretty meaningless if borrowed money is involved, especially in the very tricky economic environment at the moment.

How is an evaluation arrived at? Or put another way - why do valuations increase? What factors dictate a "rising property market"?

Supply/demand and matching seller prices to buyer prices will always dictate what a property is "worth". Valuations will never reflect to 100% certainty the current "worth" of a property. 

The lenders perception of risk and what they think the property might be worth if they have to repo. Lenders as well as buyers can get carried away in a rising market......

fezster

Crashy_Time said:

fezster said:

Crashy_Time said:

fezster said:

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. 

Not really, not if those buyer`s lenders also "down-value", what buyers offer and what sellers think they can get is pretty meaningless if borrowed money is involved, especially in the very tricky economic environment at the moment.

How is an evaluation arrived at? Or put another way - why do valuations increase? What factors dictate a "rising property market"?

Supply/demand and matching seller prices to buyer prices will always dictate what a property is "worth". Valuations will never reflect to 100% certainty the current "worth" of a property. 

The lenders perception of risk and what they think the property might be worth if they have to repo. Lenders as well as buyers can get carried away in a rising market......

Most lenders will have the property valued by an independent rics surveyor.

Amongst other things, one of the primary inputs into a rics valuation is recently sold prices nearby for similar properties.