Your experience - Down valuations :/

BirchFozz

WittyUserName said:

Are you worried that you might pay more than what the property is ‘worth’ or worried about making up the difference? 

I absolutely agree with @Gavin83 that each party has their own bias: 

- the lender values based on risk 

- the estate agent values based on commission they’d like to earn 

- the seller values based on what ‘profit’ they’d like to make 

- the buyer values based on what the property will mean to their quality of life

I disagree that the lender’s valuation is the true value of a property. It’s just that they hold most of the cards because they are providing the funds. After all a cash buyer could sweep in and buy it for a price way above the bank’s valuation. Does that mean the cash buyer overpaid? No, they paid what it’s worth to them.

To me the lender’s valuation is just one amongst many, I don’t think it’s necessarily the yardstick against which value should be measured. 

Ultimately it depends on whether you consider the property to be worth what you offered, and whether you can make up the difference caused by the down valuation.

Whether the seller will be open to negotiation (in the event of a lender’s down valuation) depends on whether other interested parties have enough of a deposit to step
in and make up the difference if you drop out.

Our lender valued our property at £55k less than what we’d offered but fortunately like @k1irk1978 it didn’t affect our product, and thanks to sufficient equity we were able to make up the difference. 

We didn’t even bother asking the seller for a discount because the property had many others lining up and waving their wallets, all of them with enough equity from their prior properties to make up the difference if we dropped out.

With that sort of competition the seller would’ve laughed us out of the room. We really really liked the property - it’s perfect for our family - so our valuation of it is very different from the lender’s. 

How did you know other interested parties had the money to stump up? 

I only ask as I don’t know this. How did you find this out? 

Whilst the market is competitive and we’re willing to take out a mortgage for this amount -we like most others (not all!) are unlikely to have spare cash to add to the pot. 

Ultimately it’s their decision - I just figured if  it was me and I was told to market my home for 60k above when I bought it two years ago, with no similar properties being sold for that - I might realise that the EA saw commission £ signs - and that most other buyers would face similar issues re: lenders.

secla

If you have offered over valuation you should really have the funds to back it up. If it’s down valued and they have other offers on the table I’d expect them to move elsewhere and not negotiate 

Sarah1Mitty2

secla said:

If you have offered over valuation you should really have the funds to back it up. If it’s down valued and they have other offers on the table I’d expect them to move elsewhere and not negotiate 

You could also argue that the seller should have priced their house correctly in the first place? 

london21

secla said:

If you have offered over valuation you should really have the funds to back it up. If it’s down valued and they have other offers on the table I’d expect them to move elsewhere and not negotiate 

With the market, a lot of buyers are having to offer above asking to be considered.

Lack of enough supply and competition is psuhing price up.

You offer, then the agent comes to you all for full and final offer again.

Gavin83

Sarah1Mitty2 said:

secla said:

If you have offered over valuation you should really have the funds to back it up. If it’s down valued and they have other offers on the table I’d expect them to move elsewhere and not negotiate 

You could also argue that the seller should have priced their house correctly in the first place? 

Maybe they did. Ultimately we've no idea. However that's not what secla meant. If the buyer chooses to offer above the guide price then that's on them. They should be well aware they might be overpaying should they choose to do this. If you don't want to pay over the 'worth' of the house then don't offer above the asking price.

In regards to the thread generally a £60k increase is pretty meaningless and we've no idea if that's fair or not. Prices have definitely gone up considerably over the last two years but if it's £60k on top of a £100k house that's clearly far too much. If the house is worth £2m then not so much. 

lookstraightahead

k1irk1978 said:

The house we're buying was valued at £50k less than the agreed purchase price of £330k. The seller was not willing to renegotiate on the price. We are putting down a large deposit so were still in a position to proceed with the purchase and it didn't affect the mortgage product we had applied for. After much deliberation we decided to proceed with the purchase regardless of the valuation as we felt that the house was worth the price we were willing to pay for it. We did some research and interestingly the price on Zoopla was initially in line with the price on the valuation survey but this has since been increased and is now in line with the price we're paying which seems to be a strange coincidence. Prior to the valuation survey conducted by the building society we did have our own independent level 2 survey undertaken which didn't identify any major structural problems.

Level 2 or do you mean a level 3 structural survey?

lookstraightahead

secla said:

If you have offered over valuation you should really have the funds to back it up. If it’s down valued and they have other offers on the table I’d expect them to move elsewhere and not negotiate 

I can't get my head round why anyone would consider offering over what the professionals are willing to lend. 

I think there will certainly be a lack of other offers now that things are changing, and vendors will be left with no sale. 

BirchFozz

Gavin83 said:

Sarah1Mitty2 said:

secla said:

If you have offered over valuation you should really have the funds to back it up. If it’s down valued and they have other offers on the table I’d expect them to move elsewhere and not negotiate 

You could also argue that the seller should have priced their house correctly in the first place? 

Maybe they did. Ultimately we've no idea. However that's not what secla meant. If the buyer chooses to offer above the guide price then that's on them. They should be well aware they might be overpaying should they choose to do this. If you don't want to pay over the 'worth' of the house then don't offer above the asking price.

In regards to the thread generally a £60k increase is pretty meaningless and we've no idea if that's fair or not. Prices have definitely gone up considerably over the last two years but if it's £60k on top of a £100k house that's clearly far too much. If the house is worth £2m then not so much. 

It’s 60k on top off 220… we only offered ‘over’ by 5k to be competitive. So from 280 listing to 285. I had no idea that they bought initially for 220 two years ago, and naively just assumed that the EA would generally get it right and had no real clue about down valuations etc. and as I’ve mentioned somewhere else, so long as a lender will lend we’re willing to pay. 

I’ll keep you all updated - the wait is agonising! 

BirchFozz

london21 said:

secla said:

If you have offered over valuation you should really have the funds to back it up. If it’s down valued and they have other offers on the table I’d expect them to move elsewhere and not negotiate 

With the market, a lot of buyers are having to offer above asking to be considered.

Lack of enough supply and competition is psuhing price up.

You offer, then the agent comes to you all for full and final offer again.

This exactly! 

We did a search for our budget, found a property, made an offer based on advertised price. And the fact the market is crazy and multiple offers being made and higher offer wins.

I don’t understand some comments on here saying you should pay what you offered…  ultimately the vendor/seller wastes their time asking for more than what they believe it to be worth (though also I feel for sellers too, as they are often just going with EA advice!) most buyers are requiring a lender - so by pricing beyond the expected value they risk wasting their own time.

With any luck they don’t down value - then all are happy! 

london21

BirchFozz said:

london21 said:

secla said:

If you have offered over valuation you should really have the funds to back it up. If it’s down valued and they have other offers on the table I’d expect them to move elsewhere and not negotiate 

With the market, a lot of buyers are having to offer above asking to be considered.

Lack of enough supply and competition is psuhing price up.

You offer, then the agent comes to you all for full and final offer again.

This exactly! 

We did a search for our budget, found a property, made an offer based on advertised price. And the fact the market is crazy and multiple offers being made and higher offer wins.

I don’t understand some comments on here saying you should pay what you offered…  ultimately the vendor/seller wastes their time asking for more than what they believe it to be worth (though also I feel for sellers too, as they are often just going with EA advice!) most buyers are requiring a lender - so by pricing beyond the expected value they risk wasting their own time.

With any luck they don’t down value - then all are happy! 

In theory different to reality.

When you have been declined multiple times due to offer not been high enough and you need somewhere to live, one ends up offering above asking.

The houses are going to the highest bidder.

Been chain free with a large deposit not much of an advantage nowadays. 

Maybe the cost of living crisis and increase in interest rates will slow things down a bit.