FTB in a panic: Lender down-valued property by several thousand. How do I renegotiate price?

TXC

Sorry to slightly derail this conversation but downvalues have often confused me - does the property have to be worth what I'm paying or what I'm being lent as they're two slightly different things:

I.e on a 180k house / 90% LTV

What I'm paying is 180k
But what I'm being lent is £162k 

So surely if the bank's risk is capped at £162k the value only needs to come in at £162k, no?

SpiderLegs

TXC said:

Sorry to slightly derail this conversation but downvalues have often confused me - does the property have to be worth what I'm paying or what I'm being lent as they're two slightly different things:

I.e on a 180k house / 90% LTV

What I'm paying is 180k
But what I'm being lent is £162k 

So surely if the bank's risk is capped at £162k the value only needs to come in at £162k, no?

Except it isn’t 90% LTV in that case. Its 100%

Loan 162K
to
Value 162K

user1977

TXC said:

Sorry to slightly derail this conversation but downvalues have often confused me - does the property have to be worth what I'm paying or what I'm being lent as they're two slightly different things:

I.e on a 180k house / 90% LTV

What I'm paying is 180k
But what I'm being lent is £162k 

So surely if the bank's risk is capped at £162k the value only needs to come in at £162k, no?

No. The bank are only prepared to risk 90% of the value. If the value was £162k then you'd only be able to borrow 90% of £162k. In the event of a repossession they want a margin to cover the arrears, costs, any downfall in the market, etc.

The bank's risk isn't capped at £162k, if you move in and never make repayments then potentially there could be a year or more of interest to add to the £162k by the time they complete a repo sale, plus whatever their legal, marketing, clearance and lock-changing etc costs are, and depending on the state of the property and the market, they might not even be able to sell for £162k.

Thrugelmir

TXC said:

Sorry to slightly derail this conversation but downvalues have often confused me - does the property have to be worth what I'm paying or what I'm being lent as they're two slightly different things:

I.e on a 180k house / 90% LTV

What I'm paying is 180k
But what I'm being lent is £162k 

So surely if the bank's risk is capped at £162k the value only needs to come in at £162k, no?

If you default. The lender will want to dispose of the property as quickly as possible.  What will the property realise in a firesale situation. What you paid becomes irrelevant.  The lender wishes to recover £162k plus all it's costs and losses if at all possible. 

TXC

Got it! That's really clear, thought I might be missing something! thanks all

Crashy_Time

canaldumidi said:

Crashy_Time said:

Basically the seller will get the same news whoever buys it probably, so just tell them soon it is going to be 10k less of an offer and keep viewing properties.

not necesarily.

Valuation is not an exact science and different surveyors, for different lenders might value it differently.

Plus if a buyer has a low LTV application eg only borrowing 50% of purchase price, then many Valuers will simply value at purchase price as this clearly covers the mortgage lender's risk.

Not to mention cash buyers.....

So the next buyer might not have the same problem at all.

 Not always but often those types of buyer won`t overpay for a property, especially in a rising rates environment, if the seller wants to roll the dice that is up to them but the next valuation could well be a further "down-valuation" in this environment.

Crashy_Time

Sophie8916 said:

Crashy_Time said:

PirateSwan said:

Hi property peeps

Jumpy / red-faced FTB here

I'm looking for some advice on the down-valuing of a property I offered on a few weeks back

My lender has down-valued it at £7k less than the price I offered (and had accepted). (Backstory: it went to sealed bids. I am at a low ebb life wise and fell for all of the EA's selling tactics when making my bid. Properties are slipping out of affordability reach where I live, so panicked and offered the outer limits of what I can afford. £7k is a huge amount for me as my wage isn't fantastic)

I am totally kicking myself and am also worried if the down valuation will go against me in the future. I have read that when I come out of my fixed rate mortgage then a down valuation could work against me when I apply for a new fixed rate mortgage for the house.

Has anyone ever renegotiated after a down valuation? And If so, what sort of facts / figures did you put forward to support your case?

Buyers, how did you go about it? What did you say to the EA / vendor? And what was the outcome for you?

Sellers: Have you accepted a down valuation and what prompted you to make the decision?

I'd be eternally grateful for any advice anyone can give me. 

Thanks in advance.

P

Are you sure you should be buying a property, what happens when you get a large repair bill? The good news is that when mortgage rates rise houses are going to get cheaper, you should just wait IMO, or alternatively drop your offer by 10k citing "market conditions".

ah this is interesting, when do you think it will be? weve just sold out property (doing a sell high buy cheap approach!) and hoping within 6 months things may be cheaper for us

Follow the FED/BOE rate decisions and watch the 10 year yield, that is all you can do really, and get a feel for seller sentiment from PropertyLog, the only way is up unless we return to a deflationary environment, and that is good for dropping prices also.

Crashy_Time

Catsacor said:

morhen said:

I had a 15k down valuation from the survey the other month.  I took the survey around to the seller, and we went through it while drinking a cup of tea.  When we reached the end, I asked how would they feel about changing the sale price to match the survey valuation?  "Yes, seems fair to me" was the reply.  If you don't ask, you will never know

That is a very unusual scenario and it would have made me twitchy/suspicious/edgey/whatever ..... 
Sellers aren't usually kind and sweet and this scenario shouldn't be used as any form of yardstick.

If the present economic trajectory continues it will become much more frequent.

pretamang

This happened to me when buying. The seller wouldn't budge on price.

We went for a different mortgage, who did their own valuation and this time agreed with the full purchase price. 

This is a bit of a gamble - some lenders use the same valuer so it could have come back at the same price, or perhaps even lower. Plus we had to pay £500 for the 2nd survey, which we'd have lost if the valuation wasn't where we wanted it or the seller didn't move after a 2nd low valuation.

Can you find another mortgage to try a 2nd valuation, and can you afford to lose the fee if you can't find one that's free?

Sky_

Crashy_Time said:

Catsacor said:

morhen said:

I had a 15k down valuation from the survey the other month.  I took the survey around to the seller, and we went through it while drinking a cup of tea.  When we reached the end, I asked how would they feel about changing the sale price to match the survey valuation?  "Yes, seems fair to me" was the reply.  If you don't ask, you will never know

That is a very unusual scenario and it would have made me twitchy/suspicious/edgey/whatever ..... 
Sellers aren't usually kind and sweet and this scenario shouldn't be used as any form of yardstick.

If the present economic trajectory continues it will become much more frequent.

Which trajectory, out of interest?  Everything I have found indicates that sold prices are rising faster than ever since the pandemic began. For example https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/august2021 indicates a 10% increase over the last year.

I feel for first time buyers as prices were high enough 2 years ago--I live in a relatively affordable northern area and prices have gone crazy even here.