New Builds and Mortgage Valuation

paperback123

Hi,
I'm interested in a new build property which is currently under construction (they say it is 6 months away from completion but nothing is guaranteed). The initial price they are quoting is significantly more than I was expecting (it has not been officially released to the market yet and can try and negotiate if properly interested)... The market feels like it could be quite hot at the moment in this area and it is a small development so I'd imagine it won't be too difficult to find a buyer (or perhaps the builder is just bidding up the market). So one of the key questions I have is regarding the mortgage valuation. There may not be an insignificant risk that the mortgage valuation is notably lower than the asking price, which could then put the whole transaction in serious jeopardy if were to proceed.

Last year we had an offer accepted in the same location but on a much older property. There was a significant reduction in the valuation from the Mortgage company, with a few reasons cited (mainly be aware of a potential stamp duty bubble and a lack of comparable properties sold at a similar price in the recent past). This then caused the deal to fall through. This is a small village where there isn't much market movement in general. So I'm quite worried that a new build property (that seems quite expensive, even possibly over an above a new build premium) could face a significant de-valuation. Is there anything that I can do about this? It feels to me that all I can do is bid what I think is sensible and then if accepted pay the reserve fee, and get the mortgage rolling and the valuation. If there is a large shortfall between offer and valuation then there could be a pretty hefty sum to make up on top of the deposit, or try and renegotiate (not sure how likely with new build) or pull out of the deal (having lost a significant amount of the fees on the way). Surely a lot of the local properties can't all be faced with these forces that may cause a big gap between offer and valuation, otherwise the market is totally broken! Are there any specifics to be aware of for new build mortgage valuations?

Thanks.

Slithery

paperback123 said:

Last year we had an offer accepted in the same location but on a much older property. There was a significant reduction in the valuation from the Mortgage company, with a few reasons cited (mainly be aware of a potential stamp duty bubble and a lack of comparable properties sold at a similar price in the recent past). This then caused the deal to fall through. This is a small village where there isn't much market movement in general. So I'm quite worried that a new build property (that seems quite expensive, even possibly over an above a new build premium) could face a significant de-valuation. Is there anything that I can do about this?

Yes, there is.

You can have enough extra cash saved in the bank to make up the shortfall.

GixerKate

If the mortgage substantially down-valued then I would think you would be able to re-negotiate with the developer, it would be a problem for any other buyer who would be having a mortgage afterall.

Not quite the same but when I was buying my new build I was selling my previous house.  I offered on the new build and agreed a price but then my buyer for my previous house dropped out.  When I got another buyer he offered lower than my previous buyer.  I went back to the developer and explained that I now had a lower offer on the table and we then negotiated a lower price for the new build.