Down Valuation in Survey Report

MobileSaver

Deedoodee said:

a property is only worth what someone is willing to pay for it, so if a buyer changes their mind, doesn’t that by definition change its value?

A vendor who throws a tantrum at the prospect of a negotiation after a professional’s assessment does not sound like a vendor who is serious/ rational about the business transaction of selling.

I think you and others are missing the point. No-one (including the OP) disputes that their offer was more than the fair market value a willing buyer, a willing seller and a professional valuer would agree on but the point was that there were four willing buyers all outbidding each other to secure the property.

In essence this turned into an auction and it's akin to the OP winning an ebay auction with the highest bid but then turning around and arguing they should only have to pay a lesser amount because that's what an expert says it's worth. It would be different if the expert highlighted material defects that were otherwise hidden but that's not what happened here.

Also in this case if the OP buyer changes their mind there were three other buyers waiting in the wings with higher offers/values.

You may call it throwing a tantrum, others will see it as the vendor losing all trust that the buyer won't try to drop the price again 24 hours before exchange - the buyer has already gone back on their word once so what's to stop them doing it again?

The bottom line is if the OP reduces their offer then one of four things will happen:

1. The vendor agrees to the reduction
2. The vendor agrees to a compromise reduction
3. The vendor refuses and asks the OP to honour the original price
4. The vendor refuses and asks the EA to contact the unsuccessful three bidders

If I was the vendor I'd be choosing option (4) but then I can be pig-headed, I try to stick to my word even if not in my best interests and probably most importantly because I could afford to lose the sale; other people may choose a different option.

anselld

merrygoroundhk said:

Deedoodee said:

There are a lot of harsh comments on here directed towards the OP. It’s commonly said that a property is only worth what someone is willing to pay for it, so if a buyer changes their mind, doesn’t that by definition change its value? 

A lot of weight also seems to be placed on the EA’s initial valuation/ asking. But I’ve been to viewings (and partaken in placing offers for some) where the EA said the property has been priced low (I assume for marketing/ getting viewings) and the vendor is expecting much higher than asking. Similarly, I’ve offered asking and been told that the vendors are expecting more. 

it’s not so simple to know what a ‘true valuation’ (for the purpose of defining ‘over valuation’ and ‘down valuation’ should be). There’s a lot of overlap. If truly reliable information were provided upon offering, such as a professional’s assessment (like a surveyor), perhaps this would be an entirely different conversation. A vendor who throws a tantrum at the prospect of a negotiation after a professional’s assessment does not sound like a vendor who is serious/ rational about the business transaction of selling.

My first offer on the house was 267K-it was 2K over the asking price because I knew other people were interested in the property. But the EA commented that though mine was good, it was not good enough, and a 'Best and Final Offer Phase' was then arranged. Among the four offers on the house, all potential buyers were chain free, and three (including me) were cash buyers.

Assuming that is true (and you can never know for sure) then you have to just think that you are paying a premium to exclude others from the buying process.  It may still be true that the survey valuation is technically correct but if there are five bidders at or above that valuation then there has to be a means to select a winner.   That is not necessarily greed on the part of the vendor it is just market forces.

You have to consider that you may or may not get that premium back if you come to sell and you have to want the house enough to pay the premium, but nobody likes a gazunderer so that would not be an option in my book.

propertyhunter

Among the four offers on the house, all potential buyers were chain free, and three (including me) were cash buyers.

I think this might be a problem for you, since it does come down to price, and for the others, they might see no issue with stumping up £20k over asking. If I was the seller I personally would go back to the others and see if they're willing to proceed, especially if you're revising down to asking price. If they were mortgaged offers, the seller has a reason to prefer you, but actually the competition for this property was really high and the offers were of good quality. 

It depends how much you really want the house, and it seems like perhaps you don't want it that much? And that's fine too. 

TheJP

lookstraightahead said:

propertyhunter said:

Morals and principles aside and agreeing with others saying to stick by your offer, let's think about the market environment and the other offers made for the property. 

Given rising inflation, interest rates and energy costs now hitting in April - how many of those who previously offered would stand by the offers they made earlier this year?

A house in a nearby area where I am has fallen from £925k (overvalued) to £850k (realistic value), and the EA thinking I am still looking for a house says to me the vendor will accept £840k. All of the previous viewers didn't even want it at £840k, and he's calling me and I haven't even viewed it. The market peak has been reached in where I am buying. 

All I'm saying is that the OP could reduce their offer slightly because the competition will likely have a different sentiment too BUT of course depends on the local market. I believe no serious seller in this market is going to pull out of a transaction now, you'd just politely decline and say the original agreed price stands. You have to remember the seller wants to get on with their life. 

Great post.

hopefully the days where vendors feel entitled with be corrected. It's very odd to feel you have to keep the vendors sweet it should be the other way round.

Your assumption against the vendor is a little biased. The OP hasn't even mentioned it to the vendor yet. The OP offered more than the asking price to secure the house now he doesn't want to pay what he offered because a surveyor said they think its worth less than that. 

The OP over offered because he knew he could afford it, now he wants to go in less because the other contenders are out of the picture. 

Deedoodee

MobileSaver said:

I think you and others are missing the point. No-one (including the OP) disputes that their offer was more than the fair market value a willing buyer, a willing seller and a professional valuer would agree on but the point was that there were four willing buyers all outbidding each other to secure the property.

Also in this case if the OP buyer changes their mind there were three other buyers waiting in the wings with higher offers/values.

You may call it throwing a tantrum, others will see it as the vendor losing all trust that the buyer won't try to drop the price again 24 hours before exchange - the buyer has already gone back on their word once so what's to stop them doing it again?

The bottom line is if the OP reduces their offer then one of four things will happen:

1. The vendor agrees to the reduction
2. The vendor agrees to a compromise reduction
3. The vendor refuses and asks the OP to honour the original price
4. The vendor refuses and asks the EA to contact the unsuccessful three bidders

If I was the vendor I'd be choosing option (4) but then I can be pig-headed, I try to stick to my word even if not in my best interests and probably most importantly because I could afford to lose the sale; other people may choose a different option.

And there’s no guarantee that those buyers wouldn’t do the same. 

Tantrum was probably the wrong word. I’d say that that choosing (4) is an emotive response, which is not to say that it’s either right or wrong. In the same way that deciding what to offer is an emotive action. There’s a lot in the house buying system in England and Wales that needs reform but right not that’s not helpful to the OP or anyone in a similar situation.

TheJP

Deedoodee said:

MobileSaver said:

I think you and others are missing the point. No-one (including the OP) disputes that their offer was more than the fair market value a willing buyer, a willing seller and a professional valuer would agree on but the point was that there were four willing buyers all outbidding each other to secure the property.

Also in this case if the OP buyer changes their mind there were three other buyers waiting in the wings with higher offers/values.

You may call it throwing a tantrum, others will see it as the vendor losing all trust that the buyer won't try to drop the price again 24 hours before exchange - the buyer has already gone back on their word once so what's to stop them doing it again?

The bottom line is if the OP reduces their offer then one of four things will happen:

1. The vendor agrees to the reduction
2. The vendor agrees to a compromise reduction
3. The vendor refuses and asks the OP to honour the original price
4. The vendor refuses and asks the EA to contact the unsuccessful three bidders

If I was the vendor I'd be choosing option (4) but then I can be pig-headed, I try to stick to my word even if not in my best interests and probably most importantly because I could afford to lose the sale; other people may choose a different option.

And there’s no guarantee that those buyers wouldn’t do the same. 

Tantrum was probably the wrong word. I’d say that that choosing (4) is an emotive response, which is not to say that it’s either right or wrong. In the same way that deciding what to offer is an emotive action. There’s a lot in the house buying system in England and Wales that needs reform but right not that’s not helpful to the OP or anyone in a similar situation.

I would argue that choosing option 4 in this example would be a rational decision rather than emotive from the vendor. You have 4 bidders all cash buyers who were bidding over asking, the OP bid higher and to what he can afford to secure the property knowing fine well they are over paying for the property. They now come back and want the asking price, what else are they going to change throughout the process. Going with another bidder may mean they will stick with the price they offered.

The house will rise in value, in may even be worth more in the market now.

merrygoroundhk

Actually I have never intended to go to the asking price (265K) nor the surveyor’s valuation (260K ). I have said I will still offer over the asking price. 

Deedoodee

TheJP said:

I would argue that choosing option 4 in this example would be a rational decision rather than emotive from the vendor. You have 4 bidders all cash buyers who were bidding over asking, the OP bid higher and to what he can afford to secure the property knowing fine well they are over paying for the property. They now come back and want the asking price, what else are they going to change throughout the process. Going with another bidder may mean they will stick with the price they offered.

The house will rise in value, in may even be worth more in the market now.

But isn’t this based on distrust in the current buyer and (unfounded) confidence in a second buyer, which will be influence by the vendors previous experiences? when there’s so much unknown information the ‘most rational’ decision will still be emotive. 

Anyway, we’re probably drawing into pedantry. In an attempt to go back to the OP and be helpful I’ll add - my survey (and valuation) is scheduled this week. I’d be surprised if the valuation isn’t a little lower than my offer. But I know that I was prepared to pay X% over to get it off the market so my partner and I can move and get on with our lives (viewings 7hrs a week every week is almost like a part-time second job). 

If the valuation comes back as 5k under initial asking, I’d probably swallow it and continue. It’s hard enough to find a house around here, let alone a house that has no major works. And I’ll have already paid approx £1k for survey. And 1 month’s rent is about £1k. 

If I need to move in two years and prices stay the same then I’ll ‘lose’ the premium I paid for the house. But financially, I’d be in no worse a situation than if I had rented for two years. It might not be the best value or cheapest, but if I was always trying to find the best value house I’d never be able to move.

TheJP

merrygoroundhk said:

Actually I have never intended to go to the asking price (265K) nor the surveyor’s valuation (260K ). I have said I will still offer over the asking price. 

Its your original post that i think many don't sit well with, you say you were shocked that the valuation is £20k lower than what you offered yet you offered £15k over the asking price. I think at best you may be able to reduce by £5k but in the grand scheme of things how big is the £5k to you? I hope you find a solution that means you can progress with the sale.

TheJP

Deedoodee said:

TheJP said:

I would argue that choosing option 4 in this example would be a rational decision rather than emotive from the vendor. You have 4 bidders all cash buyers who were bidding over asking, the OP bid higher and to what he can afford to secure the property knowing fine well they are over paying for the property. They now come back and want the asking price, what else are they going to change throughout the process. Going with another bidder may mean they will stick with the price they offered.

The house will rise in value, in may even be worth more in the market now.

But isn’t this based on distrust in the current buyer and (unfounded) confidence in a second buyer, which will be influence by the vendors previous experiences? when there’s so much unknown information the ‘most rational’ decision will still be emotive. 

Anyway, we’re probably drawing into pedantry. In an attempt to go back to the OP and be helpful I’ll add - my survey (and valuation) is scheduled this week. I’d be surprised if the valuation isn’t a little lower than my offer. But I know that I was prepared to pay X% over to get it off the market so my partner and I can move and get on with our lives (viewings 7hrs a week every week is almost like a part-time second job). 

If the valuation comes back as 5k under initial asking, I’d probably swallow it and continue. It’s hard enough to find a house around here, let alone a house that has no major works. And I’ll have already paid approx £1k for survey. And 1 month’s rent is about £1k. 

If I need to move in two years and prices stay the same then I’ll ‘lose’ the premium I paid for the house. But financially, I’d be in no worse a situation than if I had rented for two years. It might not be the best value or cheapest, but if I was always trying to find the best value house I’d never be able to move.

There is rational emotive and irrational emotive. If the seller decides to contact a previous bidder because the winning bidder now wants to reduce their offer knowingly bidding over the asking then that for me is rational, based on behaviours of the other party. The OP bid emotively because they wanted the house and knew others were prepared to pay over the asking, that could be construed as irrational emotive behaviour as they didn't rationally think about the detail i.e. will we get the return of over paying in X years etc.

The down valuation was minimal but the OP is factoring in the amount that they over bid in the valuation, at best offer a £5k reduction but be prepared for a hard no or it being offered up to another bidder. Either way has its risks.