Down Valuation in Survey Report

merrygoroundhk

Hi，

I will feel grateful if I can have some advice on my home purchase.

I am in the progress of cash buying my first property in the UK to move in, as we sold an overseas property. Last week, we received the Survey Report and found the valuation is  £20K lower than our agreed purchasing price. Though the percentage is around 7%, some people may consider it as a reasonable allowance, the value difference at  £20K is a bit shock to us. I am thinking of negotiation but feel puzzled about the way to proceed- because it was us who made the offer, it is difficult for me to build up perfect logic.

 My questions are:

1. Is it normal to have a down valuation in a survey report?

2. Is it normal to use the surveyor's valuation for price negotiation? The house itself has no expensive work to repair or renovate. All the work is not expensive.

3. I plan to approach the EA to ask for help, but my only reason is the down-valuation in the survey report. Is it a good enough reason?

Thank you for your advice in advance.

Sandtree

merrygoroundhk said:

I am thinking of negotiation but feel puzzled about the way to proceed- because it was us who made the offer

Not sure what you are meaning by this but then not aware of the HK house purchase process to possibly be able to get.  Its normal in the UK that the buyer is making the offer.

1) Its variable... when the market is stable then its uncommon but when in uncertain times it happens more often as there is much more opinion involved in what's going to happen next

2) It can be, though in many cases its because buyers are dependent on a mortgage which won't work with the revised price. Ultimately both parties can walk away until contracts are exchanged so an attempt to renegotiate can result in the vendor calling it quits

3) EA is employed by the seller not you, the reality is actually slightly more complex but just remember that when talking to them... they'll tell you the price you agreed to pay is fair and the survey is wrong but they'll tell the vendor that your revised offer is worth considering and can they wait to restart the whole process to find another buyer.

user1977

Think of it more as a "valuation" than a "down-valuation", and the price you had agreed as an "overvaluation". How did you arrive at the price you offered?

badger09

You presumably offered what you thought it was worth. Asking price? Above asking price? 

The surveyor thinks it’s worth £20k less. The vendor probably thinks it’s worth £20k more! In other words, valuation is not a precise science. I think 7% is an acceptable difference of opinion. 

You say the house has no expensive repairs necessary, in which case I don’t think you have much chance of negotiating a reduction in the price. You could try, but be prepared for the vendor to refuse to negotiate, especially as in many parts of the UK, prices are still rising and demand far outstrips supply. 

Good luck

Noneforit999

As others have said, its not a down valuation. A down valuation is where a mortgage lender values it at less than you are paying.

As you are a cash buyer, you can technically pay whatever you want for a property as there is no lender to satisfy.

I don't think 7% is a huge difference, you could probably get a survey done from another company and find they value it differently still.

If there are no major works in the survey report to be done and you made the offer then I don't think you have much recourse for a renegotation, its hardly the vendors fault a surveyor felt the house was worth less then you offered.

I suppose its worth trying to renegotiate but if I were a vendor in the current market where houses are mostly selling over the odds, I would play hard ball and refuse to reduce the price based knowing 1) You must want the house as you offered on it and 2) You have already spent money on the survey and likely started conveyancing etc so pulling out will cost you.

merrygoroundhk

user1977 said:

Think of it more as a "valuation" than a "down-valuation", and the price you had agreed as an "overvaluation". How did you arrive at the price you offered?

We offered more than the asking price from the beginning. The asking price is £265K, and we tried 267K at first bid-2K more than the asking price.

Then the EA required us to give the best and final offer because there were four offers in total on the house. Then, we go to the ceiling of our budget of £280K. We feel okay if the difference is within £15K, but it turns out that it is more than we thought.

user1977

merrygoroundhk said:

user1977 said:

Think of it more as a "valuation" than a "down-valuation", and the price you had agreed as an "overvaluation". How did you arrive at the price you offered?

We offered more than the asking price from the beginning. The asking price is £265K, and we tried 267K at first bid-2K more than the asking price.

Then the EA required us to give the best and final offer because there were four offers in total on the house. Then, we go to the ceiling of our budget of £280K. We feel okay if the difference is within £15K, but it turns out that it is more than we thought.

Ok, but how did you decide that was the correct market value for the house? The surveyor's valuation is largely based on what similar properties have sold for recently - is that the sort of research you did?

As mentioned above, bear in mind that valuation isn't an exact science - the normal margin for error is at least +/- 5%, so it's possible both figures are in the "correct" zone.

comeandgo

You offered more than suggested price to ensure you got the property now you don’t want to pay that amount.  If you were to try and reduce your price with me I’d tell you to take a hike., especially when there were others interested in the property but as you have not yet exchanged you are perfectly entitled to walk away.  

merrygoroundhk

user1977 said:

merrygoroundhk said:

user1977 said:

Think of it more as a "valuation" than a "down-valuation", and the price you had agreed as an "overvaluation". How did you arrive at the price you offered?

We offered more than the asking price from the beginning. The asking price is £265K, and we tried 267K at first bid-2K more than the asking price.

Then the EA required us to give the best and final offer because there were four offers in total on the house. Then, we go to the ceiling of our budget of £280K. We feel okay if the difference is within £15K, but it turns out that it is more than we thought.

Ok, but how did you decide that was the correct market value for the house? The surveyor's valuation is largely based on what similar properties have sold for recently - is that the sort of research you did?

As mentioned above, bear in mind that valuation isn't an exact science - the normal margin for error is at least +/- 5%, so it's possible both figures are in the "correct" zone.

There were not so many transactions on the same street. The last two were 4-beds sold at £340K and £360K in Jun and Dec2021 respectively. Also,  I had viewed another house in Dec 2021, which was a 4-bed detached. It was sold over the asking price of 300K. I had tried to bid it by adding 2K up than the asking price but was failed.
The property I intended to purchase is a detached property with 3 Beds plus 1 Study Room. I viewed it in last month and I thought the 280K offer was reasonable at that time.

Slithery

merrygoroundhk said:
I thought the 280K offer was reasonable.

Then you should pay £280k.

Thelane

We had something similar recently. We
offered above the price to ensure we got it. The mortgage valued it lower than our offer(7%)but we were prepared to pay more to ensure we got the house we want and decided the market demand at the moment is higher than the valuation