Property Downvalued by surveyor by £10k - where to go from here?

Natrc

Hi guys, 

The property we are buying has had its valuation and survey today. We have just been informed by our mortgage broker that the property has been valued at £175,000, £10k less than the asking prices we offerred of £185,000. We are understandably devastated, we adore this property and it literally is the perfect first home for us (ticks all the boxes), but we dont have the funds to make up the difference, and also know that its not a sensible financial decision.

We have spoken to the broker about our options who has advised us to revise our asking price to the valuation. We spoke to the estate agent and told them this, and they are going to speak to the seller, but they predict the seller will want to go back to market due to the interest they have had. We are expecting a reply tomorrow. 

My research suggests that the surveyor is correct in their lower valuation (identical property but more modern with bigger driveway and conservatory sold for £175,000 4-5 months ago in the same area). 

What are my options here. We have around £5k we were going to spend on renovations (although the house is ready to move into). Would it be sensible to meet in the middle or is this a bad financial position. This house wont be our forever home, but we will be hoping to stay there for at least 5-10 years. Its looking unlikely that the seller will come down to £175,000 as the estate agents "stand by their £185,000 valuation" and they have had a "lot of interest". My broker has said finding another lender is not really an option for us as we are a very complex case and struggled to find a lender to start with.

Any advice?

Update 02/11/2021: estate agent came back to us, said sellers were obviously shocked and dissapointed. They told me the sellers would not accept £175,000, so we have gone in at £177,500. We would be willing to go to £180,000 if it meant securing the sale, but we are very reluctant to do this if we dont have to. I will update when we hear from the estate agents tomorrow. 

Tatters26

I'd point out that anyone needing a mortgage that offers after you will have a surveyor go round and likely the same result.. 

sheffield_soldier

Houses generally go up in value over time. It depends how long you expect to stay there and what it means to you. If you are planning to be there 5 years plus then I don't expect you will lose 5k and probably gain. 

It does frustrate me that estate agents allow this to happen to be honest. There is only a limit over the asking price before this scenario happens. They should stop it at a limit unless there is a cash buyer involved. 

tacpot12

With those figures, meeting in the middle would probably be your best option. I would definitely try to get the seller to agree to this. If they do, you will need to tighten your belts significantly to recover the money you need for the renovation, but I think it will be worth making the scrifices in the long run. 

amnblog

‘A lot of interest’

makes me laugh, how big was the queue at the EstateAgents to buy at £185,000.

Don’t be afraid to walk away. You will get a better deal next time.

user1977

Natrc said:

the estate agents "stand by their £185,000 valuation" 

On what basis, given the comparable you've found?

Not sure why these keep on being called "downvaluations", as with many this sounds more like an overvaluation.

Natrc

Tatters26 said:

I'd point out that anyone needing a mortgage that offers after you will have a surveyor go round and likely the same result.. 

Thankfully our mortgage broker is excellent and he called ahead for us and basically told the estate agent exactly this. He told me she then understood. I am also going to reiterate our position and ability to move quickly and as first time buyers having no chain. 

sheffield_soldier said:

Houses generally go up in value over time. It depends how long you expect to stay there and what it means to you. If you are planning to be there 5 years plus then I don't expect you will lose 5k and probably gain. 

It does frustrate me that estate agents allow this to happen to be honest. There is only a limit over the asking price before this scenario happens. They should stop it at a limit unless there is a cash buyer involved. 

So its not really a "foot on the ladder" property for us, more like a "first proper family home", we have been lucky that in our area we have been able to afford 3 bed semis rather than tiny 2 bed houses, so its definetly a house for the long run. Its hard to say how long, but from August next year I am going to be starting a training programme that will be at least 3 years long (hopefully locally and definetly within commuting distance), and we want children so if you factor in maternity etc its definetly going to be a 5 year plus house absolutely. Probably more like a house for us to stay in until our mid to late 30s before upgrading to our "forever" or "larger" family home when children become more like teenagers (we have no kids right now, so this is like 15-20+ years off yet). Not to mention this house has potential for an extension at the side and at the back of the property, with potential to also add a bedroom in the attic, so we could definetly be there a long long time. I think if it was a "foot on the ladder" property we would not even dream going higher than valuation because we know in <5 years we would have to move on. 

I massively agree with your second statement. I genuinly dont understand why there isnt a law/rule to say all houses must be valued professionally before going onto the market to avoid this absolutely horrifically stressful situation for both buyers and sellers. Cash buyers is a totally different question, but if people knew the house was valued at a certain price then only people with extra cash would be able to go above that, and the process would be a lot more transparent. 

tacpot12 said:

With those figures, meeting in the middle would probably be your best option. I would definitely try to get the seller to agree to this. If they do, you will need to tighten your belts significantly to recover the money you need for the renovation, but I think it will be worth making the scrifices in the long run. 

Thank you for your comment, I agree I think this is likely where we are heading (and I genuinly dont think its unreasonable, to me the house is worth £180,000). We can recover the £5000 quite easily with overtime and saving a little longer/being frugal like we have been.
We are really lucky that we rent currently and have all the furniture we need for the new house already. The house has a brand new bathroom and the kicthen although not my style is perfectly functional, so we could live there happily and rennovate as and when we can afford it. I also have the benefit of many tradespeople in the family, so we can get labour very cheap. 

I can also sympathise with the sellers, this has been their very well loved family home, and to get a downvaluation is a big knock for them I imagine to (especially after the estate agent probably buttered them up a lot and sold them the world lol). But they sound reasonable, so I am hoping they are reasonable and realise that this will likely happen again with another mortgage buyer (we were also the only offer at £185,000, so likely they would have had to accept lower with somebody else anyway). £5k for us and them to lose is not very much at all in the grand scheme of things. Fingers crossed. 

amnblog said:

‘A lot of interest’

makes me laugh, how big was the queue at the EstateAgents to buy at £185,000.

Don’t be afraid to walk away. You will get a better deal next time.

Its like their catchphrase at the moment. I have to say they did have quite a lot of interest to view. Had come back onto the market a month prior due to a buyer pulling out due to change in personal circumstances. The house went back on the market on the thursday and we had our offer accepted on the friday. The estate agent said we were one of two offers, with the other just slightly lower than ours (but who knows if this is even true lol, they lie through their teeth). 

We are absolutely not afraid to walk away. We have discussed it tonight together me and my husband along with family and have decided our upper ceiling is £180,000 (so meet in the middle), and we have decided if they want more than that then we will walk away (and tbh good luck to them because i suspect they will struggle unless its a cash buyer). 

user1977 said:

Natrc said:

the estate agents "stand by their £185,000 valuation" 

On what basis, given the comparable you've found?

Not sure why these keep on being called "downvaluations", as with many this sounds more like an overvaluation.

I think they should be called "true valuations", because thats what they are. I know that surveyors do air on the side of caution for the lenders sake, so often they do give a slightly cautious value, but estate agents are not qualified to value houses and they never should in my opinion. 

The comparble that we have found is pretty compelling in the favour of the valuation at £175,000 tbh. 
- Last comparible property sold on our street was in March 2021, sold for £169,000, slightly different layout of house and no garage but still 3 beds. 
- Last very very similar property sold on the street next door in May 2021 sold for £175,000. This property had a bigger garden which was more private, a conservatory, a large 2 car driveway and had a converted single garage (which had been converted into an office). It was an almost identical property apart from these additions/differences. 
- comparibly sized properties in the area are selling for £170-£180

Houses currently of similar size are on the market for £175000-£190000, the higher ones being with the agents we are currently going through and the lower ones with another local agent. All comparible in size/space and similar levels of decor/dont need much work. But as we all know asking prices are often far removed from actual selling prices. 

I think those 3 examples are enough. The estate agents said to my mortgage broker that the market has moved very quickly in the last 6 months in response to the first 2 comparibles I have listed, but my mortage broker rightfully told me that houses in the area we are buying have in no way gone up more than £1-2k in the past 6 months, £10k is ridiculous (and he believes the estate agents know this, but simply dont care). They have no comparables, so thats why I suspect they have no gone a bit quiet and are trying to negotiate with us. The sellers seem very sensible and really nice, so I hope they see the reality of the situation and can meet us in the middle. 

amnblog

The property “ Had come back onto the market a month prior due to a buyer pulling out due to change in personal circumstances”

Not due to a prior down valuation then?

Natrc

amnblog said:

The property “ Had come back onto the market a month prior due to a buyer pulling out due to change in personal circumstances”

Not due to a prior down valuation then?

No, the estate agent confirmed that the previous buyers had not applied for the mortgage when they pulled out. 
I do believe this is true, because the sellers did seem very shocked at this valuation, so I suspect it is the first one they have had, and that we are the first to get to this stage. 

Im trying to be hopeful. The sellers originally put the property on the market in mid-september, and have already had a 2-3 week delay due to somebody pulling out previously, so I am hoping they just want to move on with things now and we can come to a deal that works for both of us. Whatever happens my ceiling is set at £180,000 and I will walk away if they wont budge. 

jst1986

I've got no practical advice but I've just had the same situation, I was lucky to amend my LTV to be able to make up the difference as there wasn't much negotiation to be had and I didn't want to lose the property. Its very much a sellers market at the minute so values are up and the mortgage providers haven't kept track. Fingers crossed the seller is happy to meet in the middle. 

Natrc

jst1986 said:

I've got no practical advice but I've just had the same situation, I was lucky to amend my LTV to be able to make up the difference as there wasn't much negotiation to be had and I didn't want to lose the property. Its very much a sellers market at the minute so values are up and the mortgage providers haven't kept track. Fingers crossed the seller is happy to meet in the middle. 

Thank you, sadly we are at 90% LTV already so no room to move on that front unless we want silly interest rates at 95% LTV.

Fingers crossed as you say!