Buying a house which has been down valued

Filmlover123

FTB here, we started the process of buying a house. 3 bed semi, offered the asking price of £160K as another couple had put in an offer of £158K. Our offer was accepted and yesterday our mortgage advisor rang to tell us the lender (Santander) has down valued the house at £135k (£25k difference).

There is no chain as the buyers have a new build property lined up and seemed eager to move quickly. We don't have the spare cash to make up the difference, nor do we want to when we would potentially end up in negative equity. We basically have two options. Be cheeky and offer £140K at the risk that they will go back to the original buyers or simply walk away. I'm not sure it's worth trying another mortgage lender either. Tbh if they do go for another buyer they will probably end up in the same situation anyways.

Any thoughts or suggestions welcomed please. Thanks in advance 

kimwp

I don't think it's cheeky to tell them - "our lender has valued the house as £135k and while we really like the house, we don't have cash to add to this."

You don't want to pay more than it's valued, so either they sell the house to you at what it is valued or you walk away. It's pretty unusual for a lender to down value the house from what people are willing to pay (as that defines the value), so they clearly have some concerns.

DE_612183

you could try an offer - let the EAs know the reason why.

of course the seller could be willing to accept, but they may hang out for a cash buyer who wont care what the value of the property is.

I'd approach the EA first.

Mark_d

If the bank says the property is only worth £135k then I wouldn't pay more than this.  It is very likely that other mortgage lenders would put a similar valuation on the property.

I suggest you revise your offer down to £135k citing your mortgage lender's valuation.  Anyone who buys that property for more than £135k will regret it for many years to come.

Mr.Generous

DE_612183 said:

you could try an offer - let the EAs know the reason why.

of course the seller could be willing to accept, but they may hang out for a cash buyer who wont care what the value of the property is.

I'd approach the EA first.

Or a buyer with 50% LTV where the valuation won't matter.

My view is the valuer is trying to save you overpaying for a house, take notice of it. They don't always get it right but that's a 15% difference if my maths is right. Probably take 3 years to reach that value and your mortgage will cost you more as equity will be low.

lisyloo

Why would anyone in their right mind want to overpay £25K for something? just because they can?

nicmyles

These threads come up a lot and always contain advice I fundamentally disagree with, i.e. "never pay more than a lender's valuation". I think people see this as "overpaying". But it's not. It is *how much the lender will lend*. There is no single determinant of a property's 'value'. The valuation helps the lender manage their risk. If you want to live in that property for many years, and it fits your needs exactly, and you're confident in the market, and your deposit is large enough to make negative equity unlikely, and you have the funds, you should 100% pay what you need to pay. You were happy to pay it prior to the valuation, based on your own assessment of the property's value. You just have to assess and manage your own risk, as the lender is doing. 

If I had taken this advice when buying my first flat (which I 'overpaid' for by this metric), I would have missed out on a property that by the time we came to sell a few years later had increased in value by 50%. It would have been madness to end up in that position over £10k.

It is also not always the case that they will have no luck with another buyer/lender.

It is definitely not 'cheeky' to lower your offer to the valuation, however, particularly if you don't have the funds to do more.

EssexHebridean

lisyloo said:

Why would anyone in their right mind want to overpay £25K for something? just because they can?

Because they love the house.
Because it ticks all their boxes.
Because it is worth the extra amount to them. 

There are probably more reasons too,  but those are a few! 

RHemmings

lisyloo said:

Why would anyone in their right mind want to overpay £25K for something? just because they can?

Because they want the house and are concerned that they will lose it if they don't pay something closer to the asking price. 

EDIT: Beaten to it. 

Hoenir

Have you rung the EA yet ?  Suspect the sellers will need the money to fund their purchase. The reason for the down valuatiion needs to be ascertained. 

Meanwhile continue to look for a property. 

lisyloo

EssexHebridean said:

lisyloo said:

Why would anyone in their right mind want to overpay £25K for something? just because they can?

Because they love the house.
Because it ticks all their boxes.
Because it is worth the extra amount to them. 

There are probably more reasons too,  but those are a few! 

It just seems like a lot that would ring alarm bells for most people.