Your experience - Down valuations :/

Sarah1Mitty2

lookstraightahead 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 

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. 

Foe many it is because they offered high thinking that this would secure them the property and then the bank brings them back to reality, they are then embarrassed to negotiate because that is how we are in the UK. Easier just to make all offers "subject to valuation" or make the seller pay for a valuation before they market the property.

newsgroupmonkey_

BirchFozz said:

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.

We made £70k on ours in 2 years. And not big money property either.

Bought in 2020 for £260. Valued at £330 last month.

We've done some minor improvements - replaced the 1980s wallpaper with light colour / white paint. New cheap bathroom replacing the 1970s chintz. Nothing that would really improve the value.

Sarah1Mitty2

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. 

I don`t agree with this, many buyers are taking it in good faith that the guide price is somewhere near reality, if they then find out that it isn`t, after their lender does a valuation, they are quite withing their rights to come back with a different offer. Sellers should also understand that if their asking price is pitched above achievable levels for the property they are going to get offers withdrawn, it isn`t really rocket science is it?

nicknameless

Sarah1Mitty2 said:

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. 

I don`t agree with this, many buyers are taking it in good faith that the guide price is somewhere near reality, if they then find out that it isn`t, after their lender does a valuation, they are quite withing their rights to come back with a different offer. Sellers should also understand that if their asking price is pitched above achievable levels for the property they are going to get offers withdrawn, it isn`t really rocket science is it?

And the vendor is quite within their rights to laugh them out of town.  Anyone who takes it in good faith that a guide price is anything other than a marketing strategy and doesn't do any research further than that should look for a village missing an idiot and take up that post immediately to supplement their purchase.

Gavin83

Sarah1Mitty2 said:

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. 

I don`t agree with this, many buyers are taking it in good faith that the guide price is somewhere near reality, if they then find out that it isn`t, after their lender does a valuation, they are quite withing their rights to come back with a different offer. Sellers should also understand that if their asking price is pitched above achievable levels for the property they are going to get offers withdrawn, it isn`t really rocket science is it?

Except that isn't what I said. 

I actually agree with most of what you've written. Potential buyers should expect the guide price to reflect the realistic value (although who gets to decide the value?) and therefore should expect surveyor estimates to come back around the guide price. If the buyer chooses to offer above the guide price then they should fully expect the valuation to come in lower and should expect to make up the difference. If for example a house is listed at £300k and the buyer chooses to offer £330k they should really expect the surveyor to value it at £300k and therefore be able to make up that extra £30k. If they can't don't make the offer and certainly don't expect to reduce it later.

If a house is valued at less than the asking price that's a different scenario entirely, although that wasn't what I was talking about.

A buyer is of course legally (but probably not morally) within their rights to reduce the offer right up to exchange. Similarly the vendor is equally as entitled to refuse that revised offer.

Some buyers offer over asking in order to get their foot in the door, knowing full well they'll attempt to negotiate it down later on. This is an underhand tactic and I certainly wouldn't entertain it as a vendor. We've even had people on this forum attempt to do this only for the surveyor to agree with their over asking offer and they still want to reduce it down.

It really is very simple. Offer what you want to pay for the house. Stop playing games.

lookstraightahead

Gavin83 said:

Sarah1Mitty2 said:

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. 

I don`t agree with this, many buyers are taking it in good faith that the guide price is somewhere near reality, if they then find out that it isn`t, after their lender does a valuation, they are quite withing their rights to come back with a different offer. Sellers should also understand that if their asking price is pitched above achievable levels for the property they are going to get offers withdrawn, it isn`t really rocket science is it?

Except that isn't what I said. 

I actually agree with most of what you've written. Potential buyers should expect the guide price to reflect the realistic value (although who gets to decide the value?) and therefore should expect surveyor estimates to come back around the guide price. If the buyer chooses to offer above the guide price then they should fully expect the valuation to come in lower and should expect to make up the difference. If for example a house is listed at £300k and the buyer chooses to offer £330k they should really expect the surveyor to value it at £300k and therefore be able to make up that extra £30k. If they can't don't make the offer and certainly don't expect to reduce it later.

If a house is valued at less than the asking price that's a different scenario entirely, although that wasn't what I was talking about.

A buyer is of course legally (but probably not morally) within their rights to reduce the offer right up to exchange. Similarly the vendor is equally as entitled to refuse that revised offer.

Some buyers offer over asking in order to get their foot in the door, knowing full well they'll attempt to negotiate it down later on. This is an underhand tactic and I certainly wouldn't entertain it as a vendor. We've even had people on this forum attempt to do this only for the surveyor to agree with their over asking offer and they still want to reduce it down.

It really is very simple. Offer what you want to pay for the house. Stop playing games.

Lots of agents don't even bother having a stab at it, and randomly have OIEO as the 'guide price'. A while ago I wasn't even allowed to view a property where my max budget was the 'guide price' for OIEO.

MobileSaver

lookstraightahead 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 

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

Exactly for that reason, it's not rocket science; the "professionals" are valuing the property in the best interests of the lender rather than in the best interests of the buyer.

To the lender it's just a pile of bricks, to most buyers it's going to be their home for the next 5, 10 or 15 years and that usually makes a property worth somewhat more than just a pile of bricks...

lookstraightahead

MobileSaver said:

lookstraightahead 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 

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

Exactly for that reason, it's not rocket science; the "professionals" are valuing the property in the best interests of the lender rather than in the best interests of the buyer.

To the lender it's just a pile of bricks, to most buyers it's going to be their home for the next 5, 10 or 15 years and that usually makes a property worth somewhat more than just a pile of bricks...

Or it becomes a huge financial commitment because you hadn't done your due diligence and got carried away in the dream. But the bank won't care as to them, as you say, it's just a pile of bricks. 

MobileSaver

lookstraightahead said:

MobileSaver said:

lookstraightahead 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 

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

Exactly for that reason, it's not rocket science; the "professionals" are valuing the property in the best interests of the lender rather than in the best interests of the buyer.

To the lender it's just a pile of bricks, to most buyers it's going to be their home for the next 5, 10 or 15 years and that usually makes a property worth somewhat more than just a pile of bricks...

Or it becomes a huge financial commitment because you hadn't done your due diligence and got carried away in the dream. But the bank won't care as to them, as you say, it's just a pile of bricks. 

What is it with the HPC crowd always looking at the worst case scenario that only affects a small minority of home-owners?

Buying a house is always a huge financial commitment anyway. The average UK house is around £280,000 so even if someone pays an extra £20,000 on top of that to secure their dream home then the typical mortgage payments will only be £100 a month more - it's insignificant in the grand scheme of things and all the scaremongering in the world won't change that...

lookstraightahead

MobileSaver said:

lookstraightahead said:

MobileSaver said:

lookstraightahead 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 

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

Exactly for that reason, it's not rocket science; the "professionals" are valuing the property in the best interests of the lender rather than in the best interests of the buyer.

To the lender it's just a pile of bricks, to most buyers it's going to be their home for the next 5, 10 or 15 years and that usually makes a property worth somewhat more than just a pile of bricks...

Or it becomes a huge financial commitment because you hadn't done your due diligence and got carried away in the dream. But the bank won't care as to them, as you say, it's just a pile of bricks. 

What is it with the HPC crowd always looking at the worst case scenario that only affects a small minority of home-owners?

Buying a house is always a huge financial commitment anyway. The average UK house is around £280,000 so even if someone pays an extra £20,000 on top of that to secure their dream home then the typical mortgage payments will only be £100 a month more - it's insignificant in the grand scheme of things and all the scaremongering in the world won't change that...

You always put me in the HPC category when you disagree with my comments.

And I don't even think there will be a crash 🤔  But I do suspect that it's going to be a bit more difficult financially for folk going forwards. £100 a month is a lot to many.