Downvaluation (automated) by lender

nuhopper

Hi all. I know there are several hundred of these posts but I am still at a loss. This is a London house we wish to buy that hasn't been sold for over 50 years and is in shabby condition. It went on at 800 and we got it agreed at 815k since they refused to go lower. Negotiated to 812,000 after survey -  vendors (their son) again refused to come any lower.
We chose a mortgage with HSBC and their automated valuation has come in at 790k. Our broker has said this won't affect the application but I am not sure why.

Does this mean the house is over valued? It's difficult to put a price on it, other houses around have sold for much more but jabe been modernised and extended etc. Should we ask for an in person valuation? Note that we had a structural survey and the surveyor was comfortable with the offer price.

nuhopper

Sorry, meant the HSBC valuation was 780k.

mi-key

No it doesn't mean it is over valued. The mortgage lenders valuation is just how much they think it is worth as security for lending against, and is normally quite conservative compared to the market value. They look at it as how much they could sell it for if you defaulted on the mortgage. 

It would only effect the mortgage application if you were having to borrow more than £790K to buy it. I assume you are paying at least 10% deposit, so the amount you are borrowing is comfortably within the lenders value for their security. 

You are only talking about a few percent difference between what you are paying and what they value it at.

If your surveyor has said they think it is worth the money, then there is no reason to get an in person valuation done. 

user1977

Split the difference and it's £796k +/- 2%, which is well within normal margin of error for valuations (or for how much the property market might move during the conveyancing process!). So I wouldn't say it's a problem, unless it actually means you can't borrow enough.

An in-person valuation ought to be more accurate, but could you cope with it coming in even lower?

Sarah1Mitty2

nuhopper said:

Sorry, meant the HSBC valuation was 780k.

Use PropertyLog to see if houses in similar condition are reducing, and make your decision from there.

Sarah1Mitty2

user1977 said:

Split the difference and it's £796k +/- 2%, which is well within normal margin of error for valuations (or for how much the property market might move during the conveyancing process!). So I wouldn't say it's a problem, unless it actually means you can't borrow enough.

An in-person valuation ought to be more accurate, but could you cope with it coming in even lower?

That could help to focus the minds of the sellers and may benefit the OP in negotiations?

GDB2222

If it needs a lot of work, have you been round with a builder to get some idea of how much it's going to cost?

Bear in mind, also, that you may not be able to move in for a while, if there's a lot of work to do. So, you may need to factor in the cost of alternative accommodation. Plus storage for your stuff, etc.

MultiFuelBurner

What other options are there for your budget, then decide if this is the one for you.

lookstraightahead

Op, what you'll have is a lot of people saying lender valuations are not important, and a lot of people thinking they are (I'm one of those).

Really though it's what it's worth to you within your mortgage/affordability parameters, and how you feel about the market. And also how much a particular house is worth to you emotionally as well as financially.

make a list of pros and cons. If you feel uncomfortable with it financially, that's s biggie. If you feel you don't want to walk away, that's a biggie too. How attached are you and what else is available? 

nuhopper

GDB2222 said:

If it needs a lot of work, have you been round with a builder to get some idea of how much it's going to cost?

Bear in mind, also, that you may not be able to move in for a while, if there's a lot of work to do. So, you may need to factor in the cost of alternative accommodation. Plus storage for your stuff, etc.

Yes, all of this has been factored in. Rough builders estimate is £80k excluding significant work to the outdoors. Similar houses in the area have gone for up to a million but this one has not been on the market since the 70s so I am not sure if this is why the automated valuation is so low? In terms of what else is available at this price, well, not too much and certainly not anything in good nick. I've got no emotional attachment (surprised anyone can feel this way about houses the way things are now where it just never feels a fair price), but we need a house to live in after selling ours in December. We could wait and buy something that is more "done up" for more money but this seemed a good deal at the price given how much others have sold for in the area. We walked away from another house a few months ago after realising it was a huge amount of money for what it was simply because it's opposite a park, so really, it would be great to settle on a property soon, but again I am worried about price given that we are paying over asking, and the valuation has come in under asking.

nuhopper

Also to say the house is very much within our affordability with us being able to hold about 100k back for refurbs. I just don't want to pay £30k over the odds. We sold for a fair price after doing a lot of work to our house so I'd like to feel we got our next  house at a fair price too. I don't know if it's just London  but even as a chain free buyer it feels like the vendor/ agent are always out for a few more grand and it gets to this point in the sale and I get confused, uncertain, feel ripped off and want to walk away.