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Confusing lender valuation on flat

Hi everyone! We are looking for some advice/insight/thoughts on a confusing situation we have ended up in with regards to the purchase of our first flat.

We are two FTBs in a lucky situation to have a large deposit (£160k) coming from inheritance from late family.

We recently viewed a flat we really liked and got an offer accepted, the details of which are below:

Asking price: £375k (reduced from £395k after a month on the market)
Accepted offer: £367.5k

We then applied for a mortgage with Barclays (through a broker), however we got an extremely concerning phone call from our broker one evening stating that the underwriter had emailed him directly with a valuation of £318k, so very nearly £50k below our offer price! We were shocked and spent most of the evening worrying about this. Our broker says the underwriter supplied almost no supporting information or context with this figure. The flat was a bit out of the search area we had been targeting with our property search so far, so thought we may have completely misunderstood the local market and offered way over the odds for it.

However, when we got our mortgage offer through the next day, the offer document simply states that the value of the property is at the offer price (£367.5k), and also have not altered the mortgage rate in line with a higher LTV, which we would have expected with the downgrade in valuation from the underwriter.

We are now really confused about whether or not we are massively overpaying for this flat, or if the figure supplied by the underwriter was simply a lower bound, a typo, or a result of some other strange happening. Our mortgage advisor has suggested the former two reasons and has said we should have nothing to worry about if the lender has put the offer price on the paperwork and not changed the LTV. But we are concerned that the lender has accepted the mortgage because they could easily recoup their loaned amount (£207.5k) if they can sell the flat for their valuation of £318k.

We really like the flat, but it is not a forever home and we expect we would want to move out in 5-7 years, at which point we might have lost money on the purchase if the market does stagnate a bit and this valuation turns out to be accurate for today. We aren't looking to make money hand over fist in any way on this purchase, we just want to avoid making a poor financial decision for our first home when so much money is on the line. We are considering choosing a much less preferred surveyor because they offer a valuation as part of their service. This would give us either a bit of peace of mind or maybe allow for a little negotiation with the seller if they also consider the value to be lower than we have offered.

Does anyone have any experience on why the underwriter figure may have come out so differently to the figure on the mortgage offer? Or seen a low valuation come back while the accepted value is much higher? Does anyone have advice on how we should proceed?

Thanks for taking the time to read this, we'd appreciate any and all advice.

Comments

  • user1977
    user1977 Posts: 13,258
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    Well, what research had you done about the local market?

    Also, what surveyors don't offer a valuation? It seems a fairly fundamental part of the job to me...
  • Bank won't be that concerned as the LTV is fairly low.
    Impossible to know whether it is over valued, current market for flats isn't great though, there's quite a glut of them some areas.
    As you have a large deposit and don't plan on staying in the flat that long I wonder if a house would be more suitable, you can possibly stretch a bit further on budget too as you won't have service charges on a house if it's freehold. Many flats have monthly service charges of £250 or more, which is effectively dead money like rent and could be going to a mortgage on more expensive house.
    It's generally a lot easier to sell a 2 or 3 bed house in pretty much any market (at the right price of course) Vs a flat.
    I've never been a fan of flats due to leasehold situation, parking etc and the fact you have far more neighbours so more chance of getting a terrible one!

  • user1977 said:
    Well, what research had you done about the local market?

    Also, what surveyors don't offer a valuation? It seems a fairly fundamental part of the job to me...

    The flat is in a recently done (<5 years) conversion of an older building, and not many in that building have sold since the original conversion to compare with. There's also different sizes of flats within the building, different numbers of bedrooms, bathrooms, some with mezzannines, some with balconies, so it was difficult to tell what might affect the price without full listings of the flats. Surrounding housing in local area is completely different in style (Victorian houses, new build flats), so again it was difficult to use as a comparison when it was so totally different. To be honest, we were mostly using the asking price as an upper bound along with our experience from similar quality properties in different nearby areas. It's not too far or different from other areas we were looking at, a few miles away, so didn't think the prices would be drastically different. We did get slightly haggled up to £367,500 from our initial offer.
    The two main local surveyors we had approached both advised they have stopped valuations lately for insurance/legal purposes. They said that recently a lot of surveyors have stopped doing this as part of their standard service.
    Our main concern is the discrepancy between the two figures, not the low figure in particular. We are OK to accept the fact we might have over-offered if the valuation had come through clearly, but we are just confused by the difference.
  • kingstreet
    kingstreet Posts: 38,596
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    If this was an automated valuation, can your broker ask Barclays for a physical inspection so you can ensure the valuation on the offer is correct? FWIW Barclays does undisclosed valuations, so either way you won't get a copy!
    I am a mortgage broker. You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice. Please do not send PMs asking for one-to-one-advice, or representation.
  • Brie
    Brie Posts: 9,208
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    We had a similar situation when trying to sell MiL's flat that was in a converted Victorian vicarage.  The individual who actually came and physically surveyed the flat mentioned to my OH that she thought it wasn't in very good shape considering her survey software stated it was 1 of 12 in a block of new builds.  My OH pointed out that the software was actually referring to the building next door as MiL's flat was in what was blatantly an 100+ year old building and that there were only 3 flats, not 12.    The surveyer refused to budge and the bank rejected the mortgage application as a result.  We tried to complain to the bank but got no where due to the fact that we were not the bank's customers.  

    So I wonder if it's something similar for you - obviously Barclays wouldn't want to admit that they had made a mistake on the initial info from the underwriter working on incorrect info that was later corrected.  
    "Never retract, never explain, never apologise; get things done and let them howl.”
  • Martico
    Martico Posts: 907
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    SadFTBs said:
    user1977 said:
    Well, what research had you done about the local market?

    Also, what surveyors don't offer a valuation? It seems a fairly fundamental part of the job to me...

    The flat is in a recently done (<5 years) conversion of an older building, and not many in that building have sold since the original conversion to compare with. There's also different sizes of flats within the building, different numbers of bedrooms, bathrooms, some with mezzannines, some with balconies, so it was difficult to tell what might affect the price without full listings of the flats. Surrounding housing in local area is completely different in style (Victorian houses, new build flats), so again it was difficult to use as a comparison when it was so totally different. To be honest, we were mostly using the asking price as an upper bound along with our experience from similar quality properties in different nearby areas. It's not too far or different from other areas we were looking at, a few miles away, so didn't think the prices would be drastically different. We did get slightly haggled up to £367,500 from our initial offer.
    The two main local surveyors we had approached both advised they have stopped valuations lately for insurance/legal purposes. They said that recently a lot of surveyors have stopped doing this as part of their standard service.
    Our main concern is the discrepancy between the two figures, not the low figure in particular. We are OK to accept the fact we might have over-offered if the valuation had come through clearly, but we are just confused by the difference.
    How does the sold price from when it was converted compare? Allowing for av flat increases in the area over that period
  • tacpot12
    tacpot12 Posts: 7,830
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    How does the EPC compare to other flats, and how does the lease compare? If it is going to be costly to heat, or the ground rent or service charges are going to go up massively in future, this might make the flat harder to sell for what you pay for it.
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.
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