Mortgage valuation back and downvalued by 50k... yes 50k

TXC

I had this happen recently, the valuation came back at around £25k under offer price - about 14%, and considerably below even the marketed OIEO price. I did offer 7k additional cash but the seller did not accept.

I was not willing to move lenders for a couple of reasons:

1. We weren't talking negligible amounts, if the valuation had been 5k or so out (and I wasn't able to plug the difference as I am) I probably would have looked at other lenders, but £25k pointed to a fundamental discrepancy and I would have been highly surprised if another lender had been able to get meaningfully closer to the amount. Especially because, as stated earlier, providers tend to use the same valuers between them.

2. My offer was with a large international bank with whom I've been a customer for 15 years, so I am inclined to trust their judgement more than I would a smaller building society or sole mortgage provider, and absolutely more than the EA/Seller.

3. The mortgage I had secured was the most favourable rate I could find in the market for my position, and I was approved. - I didn't and still don't see why I should take a rate increase, along with jumping through hoops by way of yet another mortgage application/interview, to secure a house because the seller's ambitions do not match the independent valuation.

The seller has now re-"sold stc" the property to the next highest bidder, its my view that we'll see it back on the market again just after christmas due to another down valuation - this is a typical FTB home and  first time buyers with a lot of cash to overpay are few and far between.

There seems to be a considerable increase in downvaluations at the moment which i can only see as a good thing, sellers and EAs both need to be brought back down to reality regarding just how much they can expect to sell for.

OP - the bank has done you a favour, paying 50k over valuation for a house doesn;t feel like the smartest move, but you need to do whats best for you.

The seller probably won't budge immediately because a climbdown by 50k from expectation to reality is mentaly very large. But unless they can secure a cash buyer (who likely will want to pay under valuation for the ease of cash anyway) they're goign to have to manage their expectations.

RogerBareford

TXC said:

I had this happen recently, the valuation came back at around £25k under offer price - about 14%, and considerably below even the marketed OIEO price. I did offer 7k additional cash but the seller did not accept.

I was not willing to move lenders for a couple of reasons:

1. We weren't talking negligible amounts, if the valuation had been 5k or so out (and I wasn't able to plug the difference as I am) I probably would have looked at other lenders, but £25k pointed to a fundamental discrepancy and I would have been highly surprised if another lender had been able to get meaningfully closer to the amount. Especially because, as stated earlier, providers tend to use the same valuers between them.

2. My offer was with a large international bank with whom I've been a customer for 15 years, so I am inclined to trust their judgement more than I would a smaller building society or sole mortgage provider, and absolutely more than the EA/Seller.

3. The mortgage I had secured was the most favourable rate I could find in the market for my position, and I was approved. - I didn't and still don't see why I should take a rate increase, along with jumping through hoops by way of yet another mortgage application/interview, to secure a house because the seller's ambitions do not match the independent valuation.

The seller has now re-"sold stc" the property to the next highest bidder, its my view that we'll see it back on the market again just after christmas due to another down valuation - this is a typical FTB home and  first time buyers with a lot of cash to overpay are few and far between.

There seems to be a considerable increase in downvaluations at the moment which i can only see as a good thing, sellers and EAs both need to be brought back down to reality regarding just how much they can expect to sell for.

OP - the bank has done you a favour, paying 50k over valuation for a house doesn;t feel like the smartest move, but you need to do whats best for you.

The seller probably won't budge immediately because a climbdown by 50k from expectation to reality is mentaly very large. But unless they can secure a cash buyer (who likely will want to pay under valuation for the ease of cash anyway) they're goign to have to manage their expectations.

The way house buying works in this country just seems so wrong. You have made an offer to buy the property at (£X) because your happy to pay that and then the bank come back and say actually it's only worth (£X - £25k) according to us so you decide to recind your original offer.

You might aswell just offer £10million pounds on each house and then when the bank comes back with the value say "actually yea i want to pay that instead".

I think buyers are part of the problem by offering these amounts and then changing their mind when the valuation comes in.

I understand that nobody wants to pay more than it's "worth" but that just makes a mokery of the whole system when buyers are offering as much as they can to beat other buyers and then change their mind when the valuation comes in.

I know it isn't your fault it's just rubbish how the whole system works when it comes to "offers" and people just make up numbers until an official survey is done. It's much better in scotland where the people selling will produce a valuation so atleast the buyers have some information up front.

Crashy_Time

bmthmark said:

I would not budge from £390k. That's what its been valued at, the current vendor is clearly trying to get you to pay over the odds.
What you have to remember is that you don't want to putting  yourself in a position where if you need to sell in the  next few months you are £50k in negative equity. I know its very unlikely you would sell that quick, but you just don't know.
If I were you and they refuse to sell for the recommended price, I would find another property.

Excellent advice.

firstbuyer

As an update, the vendor pondered lowering to 400k for a week and yesterday changed their mind and the property is going back on the market.

Will be watching it closely to see if it ever sells and how much for!

Thanks for the advice all.

csgohan4

firstbuyer said:

As an update, the vendor pondered lowering to 400k for a week and yesterday changed their mind and the property is going back on the market.

Will be watching it closely to see if it ever sells and how much for!

Thanks for the advice all.

The vendor will encounter the same issue with buyers needing a mortgage. Good luck, but I suspect wanting their cake and eat. They might get the price they want it for, if they wait long enough

Hodge58

In the current climate this is the old story of the man with the Penny black stamp. Only 2 of these in the world valued at 2 million each. He bought the other one and burnt it. Everyone asked why would you do that. Because the only one left is mins and now worth 6 million. In the recent rush for property it has left a shortage and people will pay more but only because there is a shortage and not because it is worth more. Look at local prices from 3 years ago and plot a line up and you will see it peak like Epsteins heartbeat in a chicken ranch.

Crashy_Time

firstbuyer said:

As an update, the vendor pondered lowering to 400k for a week and yesterday changed their mind and the property is going back on the market.

Will be watching it closely to see if it ever sells and how much for!

Thanks for the advice all.

What changed their mind, do you know, it looks like the general economy is in for another dive to me?

firstbuyer

Crashy_Time said:

firstbuyer said:

As an update, the vendor pondered lowering to 400k for a week and yesterday changed their mind and the property is going back on the market.

Will be watching it closely to see if it ever sells and how much for!

Thanks for the advice all.

What changed their mind, do you know, it looks like the general economy is in for another dive to me?

They saw the £££££ signs! Lol

Have offered elsewhere now, hoping it is accepted and we're in for our 3rd time trying to buy a house now! offered 15k under this time so lets see!

firstbuyer

csgohan4 said:

firstbuyer said:

As an update, the vendor pondered lowering to 400k for a week and yesterday changed their mind and the property is going back on the market.

Will be watching it closely to see if it ever sells and how much for!

Thanks for the advice all.

The vendor will encounter the same issue with buyers needing a mortgage. Good luck, but I suspect wanting their cake and eat. They might get the price they want it for, if they wait long enough

Yup, the bitter person inside me hopes they end up having to sell it for 390 even if it is to someone else.

4 bed in the road next to the house was put on today for 425k. Albeit it needs a lot of work. In hindsight, painfully so, think this whole situation has been a learning curve for me.

RogerBareford

Hodge58 said:

In the current climate this is the old story of the man with the Penny black stamp. Only 2 of these in the world valued at 2 million each. He bought the other one and burnt it. Everyone asked why would you do that. Because the only one left is mins and now worth 6 million. In the recent rush for property it has left a shortage and people will pay more but only because there is a shortage and not because it is worth more. Look at local prices from 3 years ago and plot a line up and you will see it peak like Epsteins heartbeat in a chicken ranch.

Property is only worth as much as people will pay for it. So if people are willing to pay more because there is not enough supply to meet demand then that makes it worth that amount.