Undervalued by a lot

SpiderLegs

user1977 said:

wazza99 said:

Thanks, we just feel let down by the estate agent (s) for getting it so wrong, their fees were £1800 (paid on sale) so not cheap and in return i'd expect some sort of professionalism and realistic pricing. Like yourself we expected a bit of undervaluing but not so much.

This is overvaluing rather than undervaluing. EAs (anecdotally) do it a lot to get your business, then let you down at a later stage when you realise you won't get the price they were shouting about.

It’s hardly overvaluing if three people have offered at that level.

Crashy_Time

Otb21 said:

wazza99 said:

Thanks, we just feel let down by the estate agent (s) for getting it so wrong, their fees were £1800 (paid on sale) so not cheap and in return i'd expect some sort of professionalism and realistic pricing. Like yourself we expected a bit of undervaluing but not so much.

Completely agree, it's a horrible position to be in as both a buyer and a seller. Perhaps a conversation with your buyer might be something to consider too if meeting in the middle is something on the cards for you both. 

I'm not sure if it's worth noting the fact that at 120k (unsure of your buyers position if they are fist time buyers or second property buyers etc) they could no longer be liable to pay stamp duty on the purchase which is further savings for them. Perhaps just something to remember if they seem unwilling to compromise on the price. 

Worse for the seller surely?

Anthony147

If the offers were from buyers paying cash - then the price was right.
Offers from buyers needing mortgages have a check / balance so providers only lend what they see as the “correct” amount against the property.

The provider is only concerned with the value their lending against, not how competitive, overheated or what asking prices are.
If they thought £135k was right they’d lend that amount for it.

Thrugelmir

Gavin83 said:

Why is there always the assumption that EAs are wrong on the valuation and surveyors are right? Both have knowledge of the local area, know what other houses are selling for and in many cases EAs see more of the house than surveyors do as often surveyors do nothing more than drive past the house, or even just look at it online. 

Surveyors do far more. They are accountable to the mortgage lenders who employ them. Property values are subjective. Buyers aren't using their own money which is why the heart rules the head. 

TheJP

london21 said:

Can you request a copy pf the report

some valuations are more generous than others.

The EA don't always get the valuation perfectly. 

Doubtful. The report wont tell them anything other than they have valued it at £120k max.

lookstraightahead

Gavin83 said:

Why is there always the assumption that EAs are wrong on the valuation and surveyors are right? Both have knowledge of the local area, know what other houses are selling for and in many cases EAs see more of the house than surveyors do as often surveyors do nothing more than drive past the house, or even just look at it online. You could argue that EAs have the motivation to overvalue and this is a fair argument but similarly you could argue that surveyors have the motivation to undervalue. It's not uncommon for lenders to be willing to value the house higher if the buyer is putting in more capital and therefore this makes a bit of a mockery of the valuation anyway. I can understand lenders being cautious at the moment but they certainly don't set the property value.

I'd suggest the least biased valuation would be the surveyor hired by the buyer themselves as they don't have any external pressures to value it differently.

So what is the true value of a house? I'd suggest it's no different to any other consumer item and the price is set by the buyers. If you won't pay more than your lender values it at and other buyers are then you are likely to struggle to find a house. Also if a seller is getting a lot less than they expect they might decide the right course of action is to pull their house off the market until lenders get less twitchy. This will then lead to less housing stock being available, competition increasing and making it even less likely for those sticking to lender valuations to secure a property.

The property market is unique in how valuations work. I suspect the reality is in a lot of cases the house is actually worth somewhere between what the EA values it at and what the lender values it at.

The true value of a house is what the people actually paying for the risk think.
as most people require the bank to 'own' their house, the true value is what the bank is willing to pay.
a little different with cash buyers - they're the ones who will value it themselves.
EAs don't value anything, they look at what money they need to make and what business they need to win to secure it.
People buying and selling are often too wrapped up in their circumstances to look with clarity at a building's worth,

Gavin83

Crashy_Time said:

Otb21 said:

wazza99 said:

Thanks, we just feel let down by the estate agent (s) for getting it so wrong, their fees were £1800 (paid on sale) so not cheap and in return i'd expect some sort of professionalism and realistic pricing. Like yourself we expected a bit of undervaluing but not so much.

Completely agree, it's a horrible position to be in as both a buyer and a seller. Perhaps a conversation with your buyer might be something to consider too if meeting in the middle is something on the cards for you both. 

I'm not sure if it's worth noting the fact that at 120k (unsure of your buyers position if they are fist time buyers or second property buyers etc) they could no longer be liable to pay stamp duty on the purchase which is further savings for them. Perhaps just something to remember if they seem unwilling to compromise on the price. 

Worse for the seller surely?

Probably. Saying that the sale will almost certainly fall through if it’s a large down valuation and if the buyer has fallen in love with the house it’s not exactly great for them either.

Thrugelmir said:

Gavin83 said:

Why is there always the assumption that EAs are wrong on the valuation and surveyors are right? Both have knowledge of the local area, know what other houses are selling for and in many cases EAs see more of the house than surveyors do as often surveyors do nothing more than drive past the house, or even just look at it online. 

Surveyors do far more. They are accountable to the mortgage lenders who employ them. Property values are subjective. Buyers aren't using their own money which is why the heart rules the head. 

You mention something I was suggesting. The surveyors are accountable to the lenders. They won’t want to make the mistake of overvaluing a house so they’re more likely take the less risky route and value it at less than they think it might be worth. Better to undervalue it than overvalue it and suffer the wrath of the lender.

I also don’t understand the logic of buyers not using their own money. It’s not a gift, they need to pay it back (plus some) so ultimately it will be their own money. However maybe I’m giving people too much credit here.

Crashy_Time

lookstraightahead said:

Gavin83 said:

Why is there always the assumption that EAs are wrong on the valuation and surveyors are right? Both have knowledge of the local area, know what other houses are selling for and in many cases EAs see more of the house than surveyors do as often surveyors do nothing more than drive past the house, or even just look at it online. You could argue that EAs have the motivation to overvalue and this is a fair argument but similarly you could argue that surveyors have the motivation to undervalue. It's not uncommon for lenders to be willing to value the house higher if the buyer is putting in more capital and therefore this makes a bit of a mockery of the valuation anyway. I can understand lenders being cautious at the moment but they certainly don't set the property value.

I'd suggest the least biased valuation would be the surveyor hired by the buyer themselves as they don't have any external pressures to value it differently.

So what is the true value of a house? I'd suggest it's no different to any other consumer item and the price is set by the buyers. If you won't pay more than your lender values it at and other buyers are then you are likely to struggle to find a house. Also if a seller is getting a lot less than they expect they might decide the right course of action is to pull their house off the market until lenders get less twitchy. This will then lead to less housing stock being available, competition increasing and making it even less likely for those sticking to lender valuations to secure a property.

The property market is unique in how valuations work. I suspect the reality is in a lot of cases the house is actually worth somewhere between what the EA values it at and what the lender values it at.

The true value of a house is what the people actually paying for the risk think.
as most people require the bank to 'own' their house, the true value is what the bank is willing to pay.
a little different with cash buyers - they're the ones who will value it themselves.
EAs don't value anything, they look at what money they need to make and what business they need to win to secure it.
People buying and selling are often too wrapped up in their circumstances to look with clarity at a building's worth,

Exactly, so many people get emotionally involved (buyers and sellers) and forget this basic fact.