Lender desktop valuation lower than offer price

jelajelavic

Hi all

We have finally had an offer accepted on a property (after searching for more than a year!). We have started the mortgage application process and the desktop valuation the lender did was £35k lower (£780k vs £815k) than our successful offer price. Now, there's no issue with providing the mortgage as our LTV isn't super high. However, its obviously a bit of a red (or amber) flag.

The area we have been searching in isn't seeing prices come down as you might expect with the higher interest rates and we know a 4 bed house on the same street went for c. £915k (we were bidding but didn't win) a few weeks ago, although obviously not completed yet. So we are quite clued up on the local market and that's a good data point (ours is a 3 bed) to support our price and were were also bidding with several others on the one we have been accepted on so it was a competitive process. I presume the desktop valuation isn't up to date enough or localised enough? Or maybe even misses nuance with period property vs general (ours is a nice Victorian with some original features)

Ultimately, we still want the house and I think a house its worth what others are willing to pay, which is surely more accurate than the desk based valuation. But given its a fairly big difference I'm just wondering what other peoples views are and what they would do in the same situation?

I suspect if we tried to renegotiate the vendors or estate agent would just tell us to get lost or even go to one of the other bidders so not suggesting we do that just yet, but would like to hear what others think.

Thanks in advance!

user1977

It's well within normal margin of error for valuations (split the difference and it's £797,500 +/- 2.2%), so I'm not sure it's even "amber" on the scale of things.

mashmash90

When we were selling our flat, we had Countrywide value it at 465K (way below what exactly the same flats in our building had just sold for, no difference in condition), an independent RICS surveyor valued it at 490K and e.surv valued it at 485K. We sold it for 480K. It's just one surveyors opinion.

MultiFuelBurner

Not uncommon in a competitive bid process to end up paying a little.ovee the market value. You appear to be about 4% over on a desktop valuation.

What do you feel was the next bid from the competition because if you start messing the sellers about be sure you want to lose the property over the reduction you want.

jelajelavic

MultiFuelBurner said:

Not uncommon in a competitive bid process to end up paying a little.ovee the market value. You appear to be about 4% over on a desktop valuation.

What do you feel was the next bid from the competition because if you start messing the sellers about be sure you want to lose the property over the reduction you want.

There was another bid at the same price as ours but they chose us due to our position (chain free and decent deposit). So based on that and the 4 bed that went for £100k higher (which we lost out on) I think that’s probably more reflective of market value than the desktop valuation, or this area is having a bit of a bubble!

jimbog

jelajelavic said:

So we are quite clued up on the local market and that's a good data point (ours is a 3 bed) to support our price and were were also bidding with several others on the one we have been accepted on so it was a competitive process. 

Whatever the 'true' market price you and other bidders went above it which would account  for the valuation difference so that wouldn't concern me (it isn't substantial).
It's obviously a house that will 'hold it's own' and when it came to selling you will benefit from that too and in the meantime you can enjoy living in a lovely home

Exodi

jelajelavic said:

But given its a fairly big difference I'm just wondering what other peoples views are and what they would do in the same situation?

I suspect if we tried to renegotiate the vendors or estate agent would just tell us to get lost or even go to one of the other bidders so not suggesting we do that just yet, but would like to hear what others think.

In my opinion, a difference of ~4.45% is relatively small between bid and desktop valuation, especially as it sounds as if you were making competing offers and knowingly offered over asking price. You can understand why their estimates would be conservative given that it's what they base their risk on. It would be interesting to see if the surveyor finds your offer to a reasonable proposition for the house.

Yeah I agree with your thinking in the second paragraph, especially if you were bidding against others. If you thought this was an 'amber flag', I think a buyer seeking to renegotiate the bid they made ten minutes ago because of an automatic desktop valuation, is about as big of a red of a flag as you can get. If I were the seller I'd start worrying "will they start asking for money off when the survey comes back saying 'the boiler is old and may need replacing soon' or 'consider upgrading to triple glazing'.

The area may or may not be in a bubble, the price may be higher than indexes suggest it should be.

But houses are worth exactly what people are willing to pay for them, and it seems there are other bidders in the wings.

pretamang

Ours was about 25% lower than what we offered (full asking price). We applied again with a different lender and they agreed the full value.
Obviously this is a risk as it could come out lower, or a different lender may use the same valuer and get the same result.

Exodi

pretamang said:

Ours was about 25% lower than what we offered (full asking price). We applied again with a different lender and they agreed the full value.
Obviously this is a risk as it could come out lower, or a different lender may use the same valuer and get the same result.

The down-valuation doesn't prevent the OP from proceeding, they're just having doubts.

jelajelavic

Thanks for all for the comments so far. It seems most are thinking along the same lines, since others were bidding that is the value as what others willing to pay, plus any attempted re-negotiation is likely to result in the vendors going elsewhere. 

It doesn't prevent us proceeding as our LTV is still good, and doesn't change the bracket were in in terms of the rate.

I'm minded to not  mention it to the vendors now as see more downside that any upside from a discussion. Would people at least discuss it with the estate agent just to hear their view? 

Exodi

jelajelavic said:

I'm minded to not  mention it to the vendors now as see more downside that any upside from a discussion. Would people at least discuss it with the estate agent just to hear their view? 

I wouldn't as I don't personally see any benefit whatsoever for doing so (except introducing the possibility the EA speaks to the buyer and mentions that you might be getting cold feet). But this is just my opinion, some people are more bolshie and there's no guarantee which approach would work out better in the end as you don't know the sellers circumstances.

But put yourself in the sellers shoes for a minute: You list your house, it gets a lot of interest, you get multiple offers and you accept one. You've barely finished boiling the kettle after accepting the offer to learn the new buyer is already mumbling about you needing to reduce the price.

Out of interest, was your accepted offer over the asking price?