Your experience - Down valuations :/

MobileSaver

lookstraightahead said:

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...

 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.

£100 a month is a lot to many but very, very few (if any) of those many are the sort of people who are currently buying a £280,000 house - to suggest otherwise is nothing more than scaremongering; a common HPC trait.

lookstraightahead

MobileSaver said:

lookstraightahead said:

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...

 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.

£100 a month is a lot to many but very, very few (if any) of those many are the sort of people who are currently buying a £280,000 house - to suggest otherwise is nothing more than scaremongering; a common HPC trait.

Okay then 😬

jenni_fer

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.

This. Exactly this. We recently offered £100k over asking on a property (and were outbid!) If the valuation was at asking fine,  over asking would have been useful, under asking we'd have probably asked them to renegotiate a little. 

Sarah1Mitty2

nicknameless 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?

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.

If it is just a marketing strategy why would the vendor laugh them out of town, presumably they would know that the next buyer will get a similar valuation? Not knowing that would make them the village idiot.

WittyUserName

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.

Just seen this. I’m sure the OP has moved on but I thought I’d answer the question all the same (even though it was asked two Prime Ministers ago!) 

I knew that other bidders could make up the difference because:

a) the property is not likely to be an FTB purchase where there’s often not much wiggle room. The price point meant it’s a ‘third rung of the ladder’ type of property, where potential buyers would’ve had more flexibility to withstand down valuations because of equity from their previous properties (as I mentioned in my post) 

b) we saw some of the other interested parties at the open house viewing and when I asked the EA about them, their careers / professions indicated that they’re high income earners, with a couple of them even working in the City = generous cash bonuses 

lookstraightahead

This makes for interesting reading now - and this was only a couple of months ago. 

BikingBud

WittyUserName said:

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.

Just seen this. I’m sure the OP has moved on but I thought I’d answer the question all the same (even though it was asked two Prime Ministers ago!) 

I knew that other bidders could make up the difference because:

a) the property is not likely to be an FTB purchase where there’s often not much wiggle room. The price point meant it’s a ‘third rung of the ladder’ type of property, where potential buyers would’ve had more flexibility to withstand down valuations because of equity from their previous properties (as I mentioned in my post) 

b) we saw some of the other interested parties at the open house viewing and when I asked the EA about them, their careers / professions indicated that they’re high income earners, with a couple of them even working in the City = generous cash bonuses 

I would suggest that you suspected rather than knew, and that your fear of missing out drove you to pay out £55k over asking

Please could you explain the concept of the "third rung" and the way that the steps are managed?

As I understand having cash in hand may provide some benefits but the gaps between the rungs have been increasing for some time.

Looking at the difference between £500k and £550k, over 15 years with £300K equity brought forward gives nearly £18K difference in interest over the period and £400 per month difference in payments. 


And if you push that out to 25 years then you might end up paying £181k in interest, £110k more.



At the end of the day that's entirely your decision but with actions like this it is no wonder that house prices have inflated so significantly and people are now having difficulty meeting mortgage payments.

Still cannot grasp why everybody thinks this is good.

lookstraightahead

WittyUserName said:

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.

Just seen this. I’m sure the OP has moved on but I thought I’d answer the question all the same (even though it was asked two Prime Ministers ago!) 

I knew that other bidders could make up the difference because:

a) the property is not likely to be an FTB purchase where there’s often not much wiggle room. The price point meant it’s a ‘third rung of the ladder’ type of property, where potential buyers would’ve had more flexibility to withstand down valuations because of equity from their previous properties (as I mentioned in my post) 

b) we saw some of the other interested parties at the open house viewing and when I asked the EA about them, their careers / professions indicated that they’re high income earners, with a couple of them even working in the City = generous cash bonuses 

So many assumptions. Peoples lives rarely go in a straight line. I don't understand third rung and I'm unsure what you think happens in rung one and two.
lots of professionals have no money. Lots of first time buyers have a big deposit. Lots of city people have huge debts.

Why is an estate agent telling you this information anyway? 

Sarah1Mitty2

lookstraightahead said:

This makes for interesting reading now - and this was only a couple of months ago. 

Certainly does, wonder what people who bid well over asking are thinking now, hope they took long fixes at least that might offset the fall in value they are now looking at.

RM_2013

I know this is an old thread.  We offered over asking (august) to secure the property we wanted but we knew we’d have wiggle room for deposit.  

Lender downvalued £10k which was what we had offered over asking.  Vendor wouldn’t reduce but we knew this was a risk and we factored this into our calculations and were prepared. 

 We have a 5 year fix mortgage offer at far less than current rates and a large deposit so as we intend to make this a long term family home we weren’t worried about immediate market falls or negative equity.

i know some wouldn’t offered over asking but this was the only place we’d seen that ticked all the boxes for less than what we had initially anticipated we’d need to pay so fits better in our budget