Negotiating when valuation is below asking price

bassplayerchris

Hi - 

Currently looking for somewhere to buy and have found a possible house.  The location is okay, but it's in need of a fair amount of work to modernise it. When I arranged the first viewing the estate agent indicated over the phone the price was a little 'soft'.  On my second viewing, the estate agent representing the property showed up to show me around and straight away mentioned 'My valuation was not the same as the asking price', as I was leaving after taking a look around I mentioned that it would be hard to get a mortgage if the mortgage company valuation came back as lower than the asking price, at which point she told me a valuation figure of around £20K less than the asking price, she said the seller lived in a much more expensive town and overestimated the sale price.  

My question really is where I go to from there in terms of negotiation, put in an offer at what I was told was the valuation figure (obviously factoring in that I might not have been told  the truth) ?, make an offer a few K above the figure on the basis that maybe the seller accepts?  I don't want to be in the position that I overpay for the house given the amount of work I'd need to do on it (kitchen/bathroom and recarpet most rooms) and/or experience difficulty because the mortgage companies valuation ends up being lower.

eddddy

Based on what you say, I'd guess the estate agent was saying...

• There was a previous buyer for the house - maybe they offered the asking price (and needed a high LTV mortgage. e.g. 90%)

• The mortgage valuer valued the house at £20k below the asking price

• The seller wouldn't agree to reduce the price by £20k - and the buyer didn't have a spare £20k cash to plug the gap

• So the sale fell through

So, if you get an offer accepted...

• The mortgage valuer will probably value the house at £20k below the asking price again

• If you have offered more than that, the seller probably won't reduce the price - and you probably won't have the cash to plug the gap

• So don't offer more than £20k below the asking price (unless you've got extra cash to make up the difference).

• Because the estate agent doesn't want to waste their time and everyone else's time with another sale that falls through

Does that make sense?

So perhaps start by offering £25k to £30k below asking price, and maybe be prepared to go up to £20k below asking.

And if the seller doesn't accept - I guess it's a case of waiting until they do (or finding another property).

bassplayerchris

eddddy said:

Based on what you say, I'd guess the estate agent was saying...

My impression was that the estate agent was saying that she had valued the house at 20K less than its asking price when asked to give an opinion by the current owner, and the owner had plumped for listing it for a higher price anyway.

bassplayerchris

So, if you get an offer accepted...

• The mortgage valuer will probably value the house at £20k below the asking price again

• If you have offered more than that, the seller probably won't reduce the price - and you probably won't have the cash to plug the gap

• So don't offer more than £20k below the asking price (unless you've got extra cash to make up the difference).

• Because the estate agent doesn't want to waste their time and everyone else's time with another sale that falls through

Does that make sense?

So perhaps start by offering £25k to £30k below asking price, and maybe be prepared to go up to £20k below asking.

And if the seller doesn't accept - I guess it's a case of waiting until they do (or finding another property).

And thanks for this, that makes sense.

TheJP

bassplayerchris said:

eddddy said:

Based on what you say, I'd guess the estate agent was saying...

My impression was that the estate agent was saying that she had valued the house at 20K less than its asking price when asked to give an opinion by the current owner, and the owner had plumped for listing it for a higher price anyway.

If that is correct i would consider the validity of the EAs valuation. When i sold my EA wanted to list about £10k lower than what i had valued my property, considering recent similar sales and the additional benefits my house had (parking off road for 4 cars, corner plot etc). My house sold over my asking and was valued at what the buyer paid.

Offer what you feel a) you think the house is worth and b) what you can afford if you really want the house.

CSI_Yorkshire

TheJP said:

bassplayerchris said:

eddddy said:

Based on what you say, I'd guess the estate agent was saying...

My impression was that the estate agent was saying that she had valued the house at 20K less than its asking price when asked to give an opinion by the current owner, and the owner had plumped for listing it for a higher price anyway.

If that is correct i would consider the validity of the EAs valuation. When i sold my EA wanted to list about £10k lower than what i had valued my property, considering recent similar sales and the additional benefits my house had (parking off road for 4 cars, corner plot etc). My house sold over my asking and was valued at what the buyer paid.

Offer what you feel a) you think the house is worth and b) what you can afford if you really want the house.

That is the only valid answer.

bassplayerchris

TheJP said:

If that is correct i would consider the validity of the EAs valuation. When i sold my EA wanted to list about £10k lower than what i had valued my property, considering recent similar sales and the additional benefits my house had (parking off road for 4 cars, corner plot etc). My house sold over my asking and was valued at what the buyer paid.

Offer what you feel a) you think the house is worth and b) what you can afford if you really want the house.

The EA has sold multiple houses in the same road so I give them a certain amount of weighting, though bearing in mind the scenarios you are outlining. 

That said I'm trying to deal with the possibility that if I doing a&b upfront the seller has already priced in the fact that they can ask for an increase up to the value they've placed the house at, and unless I offer that straight away (and risk overpaying - from the pov of my mortgage company rather than myself) they are primed to reject the initial offer.

[Deleted User]

If they say no you can always just wait a few months to see if it sells, and then try again. A dose of reality might help the vendor be more realistic.

Sarah1Mitty2

[Deleted User] said:

If they say no you can always just wait a few months to see if it sells, and then try again. A dose of reality might help the vendor be more realistic.

Yes, time is a teacher in falling markets.

Sarah1Mitty2

bassplayerchris said:

TheJP said:

If that is correct i would consider the validity of the EAs valuation. When i sold my EA wanted to list about £10k lower than what i had valued my property, considering recent similar sales and the additional benefits my house had (parking off road for 4 cars, corner plot etc). My house sold over my asking and was valued at what the buyer paid.

Offer what you feel a) you think the house is worth and b) what you can afford if you really want the house.

The EA has sold multiple houses in the same road so I give them a certain amount of weighting, though bearing in mind the scenarios you are outlining. 

That said I'm trying to deal with the possibility that if I doing a&b upfront the seller has already priced in the fact that they can ask for an increase up to the value they've placed the house at, and unless I offer that straight away (and risk overpaying - from the pov of my mortgage company rather than myself) they are primed to reject the initial offer.

If you are buying with a mortgage all that really counts is your lender`s valuation, you have said you don`t want to overpay so presumably you won`t be " making up the difference" when they undervalue ( or more correctly - Value for the current market) Depending on how far in the future this valuation takes place the lender might say that more than 20k has to come off the price, so be ready for this and know what you will say to the seller.

theoretica

If the vendor says no, your offer is too low, you haven't lost anything except if you were actually happy to pay more.