We've been down-valued by more than anyone expected. What can we do?

Ksw3

We've been offering over with a 30% deposit but have been outbid on every single one. Not a single house has come back to market. If we stuck to the asking price we would have even less hope of securing a house in this market. 

TXC

lookstraightahead said:

BornTooHula said:

I'd agree with others that, if multiple people are offering over asking, it seems to be the value of the property is in fact that hight

But the people with the money don't agree (the bank).

Interest rates are so low at the moment it's almost free money by the banks, so they need to be cautious. 

I could easily give away someone else's money.

This, this 1000x this.

Yes, a house is worth what people will pay for it. But the buyers aren't the "people" (cash buyers aside) - the banks are. Can't for the life of me see how people aren't making that distinction.

Therefore the actual "people" paying are deciding more and more that, actually, no, the houses are not worth what they're being asked to pay for them.

Good luck to any seller holding out for a mortgage buyer who also has this mystical rivers and rivers of hard cash to pull from!

Ramouth

There are a huge number of buyers between the extremes of cash buyer and full mortgage buyer.  For people with higher deposits a down valuation changes their LTV, but as long as it doesn’t tip them into a different mortgage rate bracket, it won’t matter much.

Some people will prioritise getting the best value when buying and will not pay more than the valuation (or will not be in a position to choose).  Others will prioritise a particular house or location and will be willing to outbid others in order to secure what they want (and have the cash to do so).  It takes all types to make the world go around.

jenni_fer

Ramouth said:

There are a huge number of buyers between the extremes of cash buyer and full mortgage buyer.  For people with higher deposits a down valuation changes their LTV, but as long as it doesn’t tip them into a different mortgage rate bracket, it won’t matter much.

Some people will prioritise getting the best value when buying and will not pay more than the valuation (or will not be in a position to choose).  Others will prioritise a particular house or location and will be willing to outbid others in order to secure what they want (and have the cash to do so).  It takes all types to make the world go around.

I think this is the bit that gets missed. The bank doesn't say "We think it's worth £20k less so we'll lend you £20k less" The bank says "We think the value is £180k not £200k and therefore that's the value we'll use for our LTV calculations".
If you are trying to borrow every penny to the top LTV bracket based on the higher value then yes of course that is a problem, if you are in the same LTV bracket as a result then the bank will still give you everything you have asked for.

Our new buyers have told us their deposit, if that's true, they will be in the same LTV band whether the valuation comes back at asking price or their higher offer.

user1977

TXC said:

lookstraightahead said:

BornTooHula said:

I'd agree with others that, if multiple people are offering over asking, it seems to be the value of the property is in fact that hight

But the people with the money don't agree (the bank).

Interest rates are so low at the moment it's almost free money by the banks, so they need to be cautious. 

I could easily give away someone else's money.

Good luck to any seller holding out for a mortgage buyer who also has this mystical rivers and rivers of hard cash to pull from!

Not sure why you think there's a contradiction there - lots of people have significant amounts of cash available to spend on property, and they'll tend to qualify for a mortgage as well. I've seen countless examples of properties selling for over the asking price/valuation - the buyers just as likely to be using a mortgage as any other property.

lookstraightahead

jenni_fer said:

Ramouth said:

There are a huge number of buyers between the extremes of cash buyer and full mortgage buyer.  For people with higher deposits a down valuation changes their LTV, but as long as it doesn’t tip them into a different mortgage rate bracket, it won’t matter much.

Some people will prioritise getting the best value when buying and will not pay more than the valuation (or will not be in a position to choose).  Others will prioritise a particular house or location and will be willing to outbid others in order to secure what they want (and have the cash to do so).  It takes all types to make the world go around.

I think this is the bit that gets missed. The bank doesn't say "We think it's worth £20k less so we'll lend you £20k less" The bank says "We think the value is £180k not £200k and therefore that's the value we'll use for our LTV calculations".
If you are trying to borrow every penny to the top LTV bracket based on the higher value then yes of course that is a problem, if you are in the same LTV bracket as a result then the bank will still give you everything you have asked for.

Our new buyers have told us their deposit, if that's true, they will be in the same LTV band whether the valuation comes back at asking price or their higher offer.

But how long have you been trying to move for?

if it makes no difference paying over, what difference does it make getting under? 

I would say vendors want to get over so that THEY don't have to pay over (don't want a higher mortgage).

The winners of course are those who sell higher and buy lower, rather than the rest of the chain who are just servicing their  finances.

Gavin83

TheJP said:

Love the polar opposite views

No request for notes, that's just how desperate they were for us to sell to them.

Of course... it didn't work out because we lost our onward purchase and have now just accepted a new £20k over asking offer from a different buyer who also wrote us a lovely note about why they wanted us to accept their offer!

If they are a mortgage buyer as well wont this just be another down valuation scenario? I get what people are saying regarding buyers honouring their offer, they would if the bank would lend on that amount (even though they can afford that amount). If the OP is going to accept offers over the valuation they may need to hold out for a cash buyer that isn't fazed about a down valuation.

It doesn’t even need to be a cash buyer. It’s well documented that lenders can value a house higher if their borrowers LTV ratio is lower and of course someone with more equity could choose to pour some of that into “overpaying”.

Personally I wouldn’t bother entertaining an over asking offer from a FTB unless for some reason they had a huge deposit. Unlike the OP I wouldn’t let it be an emotional decision either, it’s nothing more than a business transaction.

I guess my point is if you choose to offer over the EAs valuation you shouldn’t expect the lender to agree and therefore should be willing to make up the difference. I have far more sympathy when someone offers the asking price and the lender doesn’t agree but that’s not what we’re discussing here.

Gavin83

Snookie12cat said:

Gavin83 said:

Your buyers chose to offer over asking. They knew what the house was worth, should have expected the house to be down valued from this and therefore have had the funds available. The tactics they’re pulling are immoral.

In your shoes there’s absolutely no way I’d sell to them unless they met the original offer. I’d be re-marketing the property, regardless of other circumstances. It is of course your choice though.

A piece of advice for the future. Don’t choose your buyer based on how nice they are. Choose those who have the funds available to back up the offer they’ve made. That generally means no FTBs if the offer is over asking.

I think you give them to much credit. A lot of FTBs just want the house they found and don't really understand the ins and outs of valuation etc. To call them immortal is a bit much. 

I suspect you’re right in some cases. I also suspect in some cases the buyers are well aware they’ll never be able to cover their offer and hope that by the time they reduce their offer the vendor will be too invested to refuse. Truth is you’ll never know which category they fall into.

I also suspect the more frustrated people are with the house buying process the more likely they are to over offer and then reduce later. Given the market at the moment I imagine there are a lot of frustrated buyers out there. We lost out on several houses due to offers way over asking.

Saying that I don’t really have much sympathy. If you’re entering into a process as important as buying a house the least you can do is take some time to learn the basics.

Gavin83

lookstraightahead said:

jenni_fer said:

Ramouth said:

There are a huge number of buyers between the extremes of cash buyer and full mortgage buyer.  For people with higher deposits a down valuation changes their LTV, but as long as it doesn’t tip them into a different mortgage rate bracket, it won’t matter much.

Some people will prioritise getting the best value when buying and will not pay more than the valuation (or will not be in a position to choose).  Others will prioritise a particular house or location and will be willing to outbid others in order to secure what they want (and have the cash to do so).  It takes all types to make the world go around.

I think this is the bit that gets missed. The bank doesn't say "We think it's worth £20k less so we'll lend you £20k less" The bank says "We think the value is £180k not £200k and therefore that's the value we'll use for our LTV calculations".
If you are trying to borrow every penny to the top LTV bracket based on the higher value then yes of course that is a problem, if you are in the same LTV bracket as a result then the bank will still give you everything you have asked for.

Our new buyers have told us their deposit, if that's true, they will be in the same LTV band whether the valuation comes back at asking price or their higher offer.

But how long have you been trying to move for?

if it makes no difference paying over, what difference does it make getting under? 

I would say vendors want to get over so that THEY don't have to pay over (don't want a higher mortgage).

The winners of course are those who sell higher and buy lower, rather than the rest of the chain who are just servicing their  finances.

Of course all buyers want to pay under the asking price. However for a lot of people that’s just not realistic.

As I’ve mentioned earlier we’ve recently bought as FTBs. We offered on several houses before we got the one we did. Every single one went for over asking price, some significantly so. We got ours for asking price but that’s only because it needed a lot of work. Only houses round here going for less are those which have something seriously wrong with them. I don’t think our area is particularly unique at the moment either.

It’s reasonable to say the offer is fair but if the vendor is getting 5+ other offers higher than yours it’s unlikely you’ll be securing that property. I suspect once this has happened to someone multiple times they’ll be willing to offer more.

We could have possibly secured ours at £5k less. However there hasn’t been a single house come on the market since that we’ve liked and we’d have spent far more than that on rent. I don’t regret paying what we did but then again I didn’t over offer.

TheJP

Gavin83 said:

TheJP said:

Love the polar opposite views

No request for notes, that's just how desperate they were for us to sell to them.

Of course... it didn't work out because we lost our onward purchase and have now just accepted a new £20k over asking offer from a different buyer who also wrote us a lovely note about why they wanted us to accept their offer!

If they are a mortgage buyer as well wont this just be another down valuation scenario? I get what people are saying regarding buyers honouring their offer, they would if the bank would lend on that amount (even though they can afford that amount). If the OP is going to accept offers over the valuation they may need to hold out for a cash buyer that isn't fazed about a down valuation.

It doesn’t even need to be a cash buyer. It’s well documented that lenders can value a house higher if their borrowers LTV ratio is lower and of course someone with more equity could choose to pour some of that into “overpaying”.

Personally I wouldn’t bother entertaining an over asking offer from a FTB unless for some reason they had a huge deposit. Unlike the OP I wouldn’t let it be an emotional decision either, it’s nothing more than a business transaction.

I guess my point is if you choose to offer over the EAs valuation you shouldn’t expect the lender to agree and therefore should be willing to make up the difference. I have far more sympathy when someone offers the asking price and the lender doesn’t agree but that’s not what we’re discussing here.

Not in all cases will having a bigger deposit/lower LTV mean they will ignore the valuation from the lender even if they can still proceed. Who wants to pay £28k over what a house is deemed worth by industry experts? That's why perhaps in this case both buyer & seller may need to meet in the middle.

I don't think i would ever bid over the asking price purely for this scenario.