Down Valuation in Survey Report

merrygoroundhk

Thelane said:

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

Thank you very much for your information. I wonder if a lower valuation in the survey report is a common issue. When I asked some friends, all said they did not have experience before, so I posted here to get advice or information, in case I need the next step.

Deedoodee

merrygoroundhk said:

Thelane said:

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

Thank you very much for your information. I wonder if a lower valuation in the survey report is a common issue. When I asked some friends, all said they did not have experience before, so I posted here to get advice or information, in case I need the next step.

Have your friends bought recently/ in the same area? When my friends bought their houses a few years ago and they all paid under asking. Everything I viewed went for over asking (up to 10% I think) so they can’t really relate. 

I’m preparing for a similar thing to happen with the valuation. I need to see how much it will be and then consider cost of renting while looking for another house, cost of giving up more weekends to view houses, cost of starting the process again etc because it might balance out or the value of not doing it all again will be worth it. 

badger09

merrygoroundhk said:

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 Dec2020 respectively. Also,  I viewed a house in Dec, which is a 4-bed detached, and was sold for over £300K. I had bided with 2K plus the asking price but was told the offer was too low. Considering the property I intended to purchase is a detached property with 3 Beds plus 1 Study Room, I thought the 280K offer was reasonable.

OK, so in December (?) you offered £280k on a house with asking price £265k, and you thought £280k was reasonable. In March, a valuer thinks its worth £265k, but he has few local comparisons. By the time you complete the purchase, probably around end of May, or June, depending on the length of the chain, solicitors' & clients' motivation etc, it could very well be worth £300k.

By all means, try to negotiate a reduction, but be prepared for the vendor to refuse, and to remarket the property at £280k, or even higher. 

merrygoroundhk

Deedoodee said:

merrygoroundhk said:

Thelane said:

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

Thank you very much for your information. I wonder if a lower valuation in the survey report is a common issue. When I asked some friends, all said they did not have experience before, so I posted here to get advice or information, in case I need the next step.

Have your friends bought recently/ in the same area? When my friends bought their houses a few years ago and they all paid under asking. Everything I viewed went for over asking (up to 10% I think) so they can’t really relate. 

I’m preparing for a similar thing to happen with the valuation. I need to see how much it will be and then consider cost of renting while looking for another house, cost of giving up more weekends to view houses, cost of starting the process again etc because it might balance out or the value of not doing it all again will be worth it. 

Very good advice. Thank you.
My friends did tell me they had bought their houses by giving over asking prices, but they never experienced the problem of lower valuation lower than offers. 

steve866

It isn't really a problem, if anything it confirms that the agent listed it at the right market price and that you are paying 7% of the 'value' to secure the property. The seller would have taken your offer because it was both highest and you are a cash buyer, I'd imagine they'd be pretty miffed if you went back to renegotiate.

If you like the house and think you'll be there long term then I wouldn't worry about paying over. If you think you might move in the next few years you might want to try and renegotiate or buy elsewhere. 

eidand

You have zero reason basically. You are the one who offered over asking, in fact it's probably why you got the house to begin with.

Whatever a survey evaluation says it's irrelevant. All it did was to confirm whatever the asking price was, that was correct at the time and it simply had more interest which is why you had to offer more to get it.

If you were not prepared to pay 280k then you shouldn't have offered 280k, that's common sense really.

If you do decide to pull out then let the vendor know immediately, you've wasted enough of their time as it is.

Mark_Michalowski

badger09 said:

merrygoroundhk said:

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 Dec2020 respectively. Also,  I viewed a house in Dec, which is a 4-bed detached, and was sold for over £300K. I had bided with 2K plus the asking price but was told the offer was too low. Considering the property I intended to purchase is a detached property with 3 Beds plus 1 Study Room, I thought the 280K offer was reasonable.

OK, so in December (?) you offered £280k on a house with asking price £265k, and you thought £280k was reasonable. In March, a valuer thinks its worth £265k, but he has few local comparisons. By the time you complete the purchase, probably around end of May, or June, depending on the length of the chain, solicitors' & clients' motivation etc, it could very well be worth £300k.

By all means, try to negotiate a reduction, but be prepared for the vendor to refuse, and to remarket the property at £280k, or even higher. 

badger09 makes a very good point - and not only will the house have risen in value by the time you have to hand over any money (making "offering on a property that will (almost) inevitably rise quite lots before you have to pay for it" a valid investment method (if not a very honourable one)) but the seller will, equally, be receiving less for it, when they get paid, than it's actually worth. So them putting it back on the market at a suitably higher price would be quite reasonable.

I used the Nationwide's "rough guide" house price calculator to see how much more my house (just a week and a half to completion!!) is worth now than it was when I accepted the offer on it - £3k on a £180k house! Obviously, that's an algorithm doing the calculating and not a valuer, but it does give some idea of how fast property's (still) rising.

I've realised I'm not quite sure what point I was making - other than agreeing with badger09 - LOL!

Good luck, whichever direction it all takes

Mxx

custardly

If it was me then I would try to negotiate the offer down using the valuation survey. Why not? £20k is a lot of money so you might as well try.

You never know, they may meet you in the middle. Or they might not budge at all. But, you won't know until you try.

lookstraightahead

I think that as a cash buyer you need to decide whether to pay over valuation. It's clearer when it's the bank lending money as they either say yep or too risky.

It's whether it rests easy with you. It's easy to see why it's not been valued accordingly as you paid over asking.

 If you had bought already and then in six months time you found out your house was worth £20k less you would probably be ok about it.

you shouldn't buy a house expecting it to go up in value. It's hard when it's your cash though isn't it. It's like real money rather than someone else's.

FTB_Dan

merrygoroundhk said:

Thelane said:

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

Thank you very much for your information. I wonder if a lower valuation in the survey report is a common issue. When I asked some friends, all said they did not have experience before, so I posted here to get advice or information, in case I need the next step.

The valuation  from the surveyor was 5k lower than the estate agents asking price. This really isn't much in the grand scheme of things. 

If you were happy to pay over the asking price previously then why has that changed? All you've done is paid over by an extra 5k on what you thought the house was worth. 

Don't forget, this is only one parties valuation. Get another surveyor in and they could easily give you the same valuation as the estate agent.