revising offer after survey

Fidenex

Hi all.

FTB here trying to navigate the nightmare that is London buying!

Had made an offer on a flat which was on market for some time - previous buyer pulled out apparently due to not being able to get a mortgage. EA quite pushy with trying to rush through the sale but ironically vendor a bit intransigent in relation to negotiation and access to property for surveys and there have been a lot of delays on their end - we are now 3+ months into the conveyancing process.

I was able to get an offer accepted under asking, but following from survey a number of issues were identified:
- comparable flats in the same block sold were in better condition and sold for less, one that was on market for more was modernised but beyond my budget.
- surveyor says at least £10k in repairs needed, with potential for additional work needed upon inspection by specialists. I've looked into costs of additional repairs and this could potentially add another £10k.
- flat dated and requires modernisation, adding to more work and cost and surveyor thinks there will be limited capital gains at current offer price.

Due to LTV, a desktop valuation was performed by mortgage lender but surveyor's own valuation has come in £10k less than offer price. My broker stated with a downvaluation this would affect the mortgage offer and I'd either need to renegotiate or cough up more deposit to cover the balance.

Given the difficulties with the vendor in initial negotiation, and EA seeming to try and push the sale without having time for the relevant checks to take place, wondering if I can request further reduction based on the surveyor valuation and cost of repairs. Vendor is an a chain, but I don't know how far it goes. 

Any help would be appreciated!

Mahsroh

To clarify, what did the desktop valuation from the lender value it at? Not sure if you're saying you're surveyor who did your homebuyers survey has downvalued it, or the lender..... I seems like the former but based on what your broker has told you, i'm not sure if it's the latter. 

To pick up on the points, we'd need more info on what the £10k of repairs are and what requires inspection by specialists, to establish whether they warrant a price reduction.

However, stuff mentioned on the other bullet points shouldn't warrant it. Property prices are increasing so what comparable flats in the same block sold for previously is kind of irrelevant unless they've been sold in the last couple of months (and the surveyor is aware of what they sold for which is unlikely). As for the flat being dated and needing modernising, you knew this when you viewed and put your offer in, didn't you?  

MaryNB

Unless the prices weren't available due to the HMLR lag, a review of other flats in the block should have been done before the offer was made, not after. It most areas of the UK I would agree with Mahsroh that prices are increasing so fast those prices are somewhat out of date. However, I thought I read a while ago that the prices of London flats were stagnating (due to the so called "race for space"), especially so called luxury flats. 

In the context of London property prices, I think £10k downvaluation is negligable... Obviously though if you have a 95% LTV, £10k can seem huge.  What is your LTV?

Fidenex

Thank you for your feedback.

The prices weren't available as they were in the process of their own sales while this one was on market. Since the offer was accepted and the time it has passed the prices were available for the surveyor to examine - so they were within the last six months. The sold price history of the other flats have been updated on Zoopla and on HMLR now.

I'm not sure what the valuation from the lender came to but am happy to check - the mortgage as approved based on the 75% LTV. The surveyor's valuation was via the Level 3 report valuating at £370k. That is also why I'm a bit confused as if the downvaluation was via the surveyor report, why would it affect the mortgage?

The 10k of repairs (based on what was RAG'd as red) fall in with:
- replacing cabinets in kitchen due to damaged units
- cracked bathroom basin
- missing internal door
- out of date fuse box and potential rewiring
- outdated gas meter
- new boiler needed 
- broken extractor fan
- checks on pipes for lead
- no gas or electricity safety certificates

Some of the cosmetic bits I agree would have been assumed in the offer price - it's the more substantive bits such as boiler, electricity, missing door (I had assumed open plan), etc which were raised in the survey.

Noneforit999

Fidenex said:

Thank you for your feedback.

The prices weren't available as they were in the process of their own sales while this one was on market. Since the offer was accepted and the time it has passed the prices were available for the surveyor to examine - so they were within the last six months. The sold price history of the other flats have been updated on Zoopla and on HMLR now.

I'm not sure what the valuation from the lender came to but am happy to check - the mortgage as approved based on the 75% LTV. The surveyor's valuation was via the Level 3 report valuating at £370k. That is also why I'm a bit confused as if the downvaluation was via the surveyor report, why would it affect the mortgage?

The 10k of repairs (based on what was RAG'd as red) fall in with:
- replacing cabinets in kitchen due to damaged units
- cracked bathroom basin
- missing internal door
- out of date fuse box and potential rewiring
- outdated gas meter
- new boiler needed 
- broken extractor fan
- checks on pipes for lead
- no gas or electricity safety certificates

Some of the cosmetic bits I agree would have been assumed in the offer price - it's the more substantive bits such as boiler, electricity, missing door (I had assumed open plan), etc which were raised in the survey.

If the mortgage is approved then the valuation likely came back the same as the sale price which is all that matters from a borrowing perspective. I can't see how a valuation from a separately arranged survey has any bearing on the mortgage offer unless they are suggesting you change your offer and adjust your borrowing accordingly if the vendor accepts?

- replacing cabinets in kitchen due to damaged units  - How badly damaged? Could you manage with them for now?
- cracked bathroom basin - Few hundred quid for a new one and fitting. 
- missing internal door - Assuming the frame is still there maybe £100
- out of date fuse box and potential rewiring - Most fuse boxes are out of date as soon as the reg change. Potential rewiring likely to cover himself but I would ask for clarification from the surveyor on why he thinks that. 
- outdated gas meter - No idea on this, I wasn't aware they had a date. Perhaps its the same concept as the consumer unit but maybe someone else can confirm?
- new boiler needed - Needed or suggested? Is it working ok? How old is it?
- broken extractor fan - £25 from Screwfix and £50 for a sparky to change it. 
- checks on pipes for lead - Unsure on this, what pipes?
- no gas or electricity safety certificates - Standard rear end covering. Unless you have a new build and happen to still have the original certificates (which we do actually), most people don't have original certificates for gas or electric installs unless they did stuff recently. 

Unless the whole kitchen needs replacing, the boiler is literally on its last legs and/or the whole house needs a rewire because its faulty or dangerous I can't see how that list is anywhere near £10k and looks like par for the course for an older property to me. 

MaryNB

Fidenex said:

Thank you for your feedback.

The prices weren't available as they were in the process of their own sales while this one was on market. Since the offer was accepted and the time it has passed the prices were available for the surveyor to examine - so they were within the last six months. The sold price history of the other flats have been updated on Zoopla and on HMLR now.

I'm not sure what the valuation from the lender came to but am happy to check - the mortgage as approved based on the 75% LTV. The surveyor's valuation was via the Level 3 report valuating at £370k. That is also why I'm a bit confused as if the downvaluation was via the surveyor report, why would it affect the mortgage?

The 10k of repairs (based on what was RAG'd as red) fall in with:
- replacing cabinets in kitchen due to damaged units
How damaged, are they still functional or is it more than just general wear and tear? Did you notice during the viewing? I wouldn't allow much for it unless there's major damage (that you didn't see during the viewing). It's not a brand new flat.

- cracked bathroom basin
Is it usable or leaking? Either way you can get a new one for less than £100. Add on some cost for labour and removal of the old one and still on won't make a dent in £10k.
- missing internal door
Can get a new one for less than £100 (obviously depends on quality).
- out of date fuse box and potential rewiring
Just because it is "out of date" doesn't mean it is unsafe. Regs are updated more frequently than things need to be replaced. Are you going to get an EICR? If I was selling I wouldn't take money off for the fuse box or for rewiring without proof the work is actually needed.
- outdated gas meter
The gas meter belongs to the energy supplier so if they feel the need to replace it they will. I don't see how that's your cost. 
- new boiler needed 
did you ask how old the boiler was when you viewed? How "needed is "needed"? Are you likely to be without hot water in the near future? This is probably the only thing I would  allow for - if you weren't made aware before and it's a fairly urgent issue. In future always ask during a viewing. It's a good question. Still nowhere close to £10k, more like £3k for purchase and installation (although will depend on the type of boiler).
- broken extractor fan
Minor
- checks on pipes for lead
Advice is to replace but I wouldn't consider it urgent, or a major job (unless the pipe is very difficult to access). 
- no gas or electricity safety certificates
No obligation for them to provide it. You can get an EICR and gas safety cert done if you wish.

Some of the cosmetic bits I agree would have been assumed in the offer price - it's the more substantive bits such as boiler, electricity, missing door (I had assumed open plan), etc which were raised in the survey.

See above

Since you mentioned your broker, I incorrectly presumed the lender's valuation was the same. With an LTV of 75% it might bring you into a higher LTV band (with a higher interest rate) and so your lender will need to reassess and reissue the offer. You only need to bump up your deposit if it's a BTL mortgage with a minimum 25% deposit.

I don't know how your survey will impact on it your lender's valuation (your solicitor will be acting for you and your lender so they may ask for it and be obliged to send it on if they have it). It's a tiny difference for a London flat but I have no idea how a lender deals with a different variation on a homebuyers report so wouldn't want to guess either way.
 

newsgroupmonkey_

MaryNB said:

Unless the prices weren't available due to the HMLR lag, a review of other flats in the block should have been done before the offer was made, not after. It most areas of the UK I would agree with Mahsroh that prices are increasing so fast those prices are somewhat out of date. However, I thought I read a while ago that the prices of London flats were stagnating (due to the so called "race for space"), especially so called luxury flats. 

In the context of London property prices, I think £10k downvaluation is negligable... Obviously though if you have a 95% LTV, £10k can seem huge.  What is your LTV?

Whilst this is true, as I've previously mentioned, comparables can only be done on HMLR sold prices, so yes, whilst out of date, that's all they're allowed to use (with a little grace - and I'd suggest that £10k on a London property would be).

Fidenex

Thank you all.

In relation to the boiler - this was flagged as requiring "remedial action" by the gas service checklist. I don't know how old the boiler is but the surveyor suggested a combination boiler would provide appropriate pressure. The surveyor said it would need replacing as it would not work with the existing shower.

the damage to the kitchen units - was not visible when I viewed it. Apparently the units are quite old and of a style it would be hard to simply replace so it would need upgrading as a result. 

I also didn't see any issue with the bathroom basin when I viewed. So as there was a cracked basin, the surveyor noted this would need replacing and would fall in line with general upgrading.

with the gas meter, that unit and surrounding bit is quite rusted and the cabinet would need replacing, and the meter itself does look very old. 

 I did anticipate some upgrading of the kitchen and bathroom to be needed. It was more of a surprise the other issues flagged and that other flats that were modernised sold in the same period for a lower price. While things like the door, extractor fan,  are all relatively easily sorted, and potential the vendor could replace themselves, I wonder if the £10k figure comprises potentiality of replacing a boiler, rewiring? I also don't know that the implication is of the lack of an "earthing cable".  

My conveyancer wasn't given an EICR so I don't imagine the vendor to have one - so it sounds like something I'd need to source to then see if the rewiring and new fuse box is needed?

MaryNB

Fidenex said:

Thank you all.

In relation to the boiler - this was flagged as requiring "remedial action" by the gas service checklist. I don't know how old the boiler is but the surveyor suggested a combination boiler would provide appropriate pressure. The surveyor said it would need replacing as it would not work with the existing shower.

the damage to the kitchen units - was not visible when I viewed it. Apparently the units are quite old and of a style it would be hard to simply replace so it would need upgrading as a result. 

I also didn't see any issue with the bathroom basin when I viewed. So as there was a cracked basin, the surveyor noted this would need replacing and would fall in line with general upgrading.

with the gas meter, that unit and surrounding bit is quite rusted and the cabinet would need replacing, and the meter itself does look very old. 

 I did anticipate some upgrading of the kitchen and bathroom to be needed. It was more of a surprise the other issues flagged and that other flats that were modernised sold in the same period for a lower price. While things like the door, extractor fan,  are all relatively easily sorted, and potential the vendor could replace themselves, I wonder if the £10k figure comprises potentiality of replacing a boiler, rewiring? I also don't know that the implication is of the lack of an "earthing cable".  

My conveyancer wasn't given an EICR so I don't imagine the vendor to have one - so it sounds like something I'd need to source to then see if the rewiring and new fuse box is needed?

Kitchen units being quote old - is that not something you would have seen? It doesn't "need" upgrading if it functions ok. If you think it's past it's prime that would have come out of the viewing and should have factored into your offer. However if the surveyor opened the cupboards and everything is rotten and falling apart I think a reduction would be fair enough.

If you purchase the place, and are concerned the gas meter is a hazard contact your energy supplier to assess it and have it replaced. Although if they find there is no issue they may charge for tests carried out. Or simply request a smart meter and they'll replace it for free. It's belongs the energy company, you shouldn't meddle with it. You're not even allow to move it, it's illegal - has to be done by your supplier.
With regards to the meter box I don't think it's an issue to replace it - as long as you don't interfere with the meter. It won't be a significant cost.

You will need to procure an EICR yourself. A seller would only do it as a good will gesture, there's no obligation on them to provide it. It would be unusual for them to have one. It's more common with rental properties where it's a legal requirement. A homeowner may have electrical installation certs if they had work done but no obligation to have an EICR done to sell. It generally forms part of the buyer's assessment of the property. 


The thing about a survey is the surveyor will always err on the side of caution. If something does go wrong you might go after them for not highlighting it on a report, or underestimating the severity of an issue. It's up to you investigate further to see if the work is urgent, and make you own assessment as well. Is replacing an missing internal door an urgent piece of work? It's the consumer unit actually dangerous or just a bit old?  They're not in the house long enough to make absolute assessments on everything and give accurate detailed quotes. Also gas and electrics are almost always red because a surveyor isn't a gas engineer or an electrician. 

lookstraightahead

I see no evidence of prices rising in London, the suburbs, or the midlands.

Op, don't be drawn in to panic buying. However, also consider that the things that need doing to the property appear to be quite normal.

canaldumidi

Fidenex said:

.....

I'm not sure what the valuation from the lender came to but am happy to check - the mortgage as approved based on the 75% LTV. The surveyor's valuation was via the Level 3 report valuating at £370k. That is also why I'm a bit confused as if the downvaluation was via the surveyor report, why would it affect the mortgage?

The 10k of repairs (based on what was RAG'd as red) fall in with:
- replacing cabinets in kitchen due to damaged units : unless they are falling to bits/unuseable, this is a matter of choice. You can choose to live with some 2nd hand cabinets just as the vendor has, or choose to replace them. Your choice - your cost.
- cracked bathroom basin as above unless it is leaking. But a new basin is around £100 (£45 to £500 here!)
- missing internal door you must have been aware! I've removed the door between my kitchen and dining room (though the door is stored), but a replacement door will cost you £100 (£25 to £250 here). And if you 'assumed open plan' then what's the problem? You obviously liked having no door there, like me in my kitchen.
- out of date fuse box and potential rewiring that depends on a report by a sparkie, but yes, IF a complete re-wire is needed that could cost several £K.
- outdated gas meter gas meters are the legal responsibility of the gas network company. The owner's liability is limited to informing them.
- new boiler needed  Does it work? If it works, replacing it is a choice. Your choice.
- broken extractor fan £45? (£25 to £95 here)
- checks on pipes for lead  I assume the mains water pipe? Please clarify. Mind you, mine are lead and I'm practically normal!!! In fact many very old original lead pipes are so internally crusted with limescale that the water has no contact with the lead. Yes - I know that's a mad assumption, but what do you expect after 20 years living with leadpipes......
- no gas or electricity safety certificates 90% of privately owned properties have no certificates. If worried, pay a professional to provide them.

Some of the cosmetic bits I agree would have been assumed in the offer price - it's the more substantive bits such as boiler, electricity, missing door (I had assumed open plan), etc which were raised in the survey.

As explained, once the lender's solicitor (who happens to also be your solicitor) has seen a valuation that is lower than the purchase price, he has a duty to inform his client (the lender). Whether the lender chooses to take any action is up to them and their lending policy.