Buying a house which has been down valued

Gavin83

nicmyles said:

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*. 

Exactly. This isn't the value of the house as the lender isn't the definitive resource on what a house is worth. It's just what this particular lender is willing to lend for this house for this buyer. After all, it's not just the house, your own personal circumstances will influence this too. 

Were you not a FTB and had a bigger deposit they'd likely lend more and therefore in your eyes value it higher. A different lender will have different criteria and might value it differently.

Ultimately you can't pay more than you can afford so I don't really see you have much choice than to offer a lot less. However in your vendors shoes I'd almost certainly refuse the revised offer and either go back to the other party of remarket, while being more selective in who I accept an offer from. I'm not your vendor though and yours may react differently so it's worth a go regardless. 

EssexHebridean

lisyloo said:

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.

For someone who is confident in their financial position, perhaps isn't borrowing much if at all against the purchase, and above all is viewing their house purchase as a home, not an investment, then it's just another decision to be made as part of the process. It's like the dreaded negative equity - it's not always a problem for people, although the common perception is that it's a disaster, regardless of circumstance! 

Olinda99

you paid a professional to value your house - you should listen to them

lookstraightahead

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! 

This is how I got into negative equity in my 20s. In fact it's how I used to live my life. Took me years to understand and appreciate the value of money.

lika_86

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! 

Also because they see the potential. We looked at buying a house in an increasingly trendy seaside town just as it was starting to become trendy. It was down valued by £30k on the basis of a desktop valuation, which looks at comparable sold prices in the area (so backwards rather than forwards looking). Ultimately we couldn't bridge the gap with the sellers so pulled out. A few years later and smaller properties were going for more.

user1977

lisyloo said:

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.

But in a rising market, what's the alternative? By definition, the cold-hearted valuation (based on comparables, which are completed and registered purchases so reflect prices being agreed 6+ months previously) isn't going to be what the property is currently going to sell for.

Surveyors will often add helpful comments like "we've heard properties are currently achieving more than valuations..." but they're not likely to increase their figure to match.

EssexHebridean

lookstraightahead said:

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! 

This is how I got into negative equity in my 20s. In fact it's how I used to live my life. Took me years to understand and appreciate the value of money.

What was a poor financial choice for you will not be everyone’s poor financial choice though. On paper we paid over value for the house we are in - but in fact its value is based on it being a standard house of its type where ours has been extended. Did we overpay? yes if you take the mortgage valuation as fact - but not if you look at what it would sell for! 

MobileSaver

Filmlover123 said:

Tbh if they do go for another buyer they will probably end up in the same situation anyways.

That seems a strange thing to say. Are you suggesting there are plenty of similar 3 bed semis in that area on for around £135k so really you already knew it was "overpriced"?

In which case why did you offer more for that particular one? Regardless the obvious solution is to not waste any more time with your deluded sellers and just buy one of the more reasonably priced semis instead...

lisyloo

user1977 said:

lisyloo said:

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.

But in a rising market, what's the alternative? By definition, the cold-hearted valuation (based on comparables, which are completed and registered purchases so reflect prices being agreed 6+ months previously) isn't going to be what the property is currently going to sell for.

Surveyors will often add helpful comments like "we've heard properties are currently achieving more than valuations..." but they're not likely to increase their figure to match.

If there's an issue with that particular property then the alternative is to find another.

If this down valuation is happening across the board (I wasn't aware) then I would agree with you, you'd have to accept it's just how things are. It's just enough for me to ask the question - is there anything wrong with that property.

Are houses being downgraded by this amount across the board? or in certain locations?

Bigphil1474

It could well be the lender though. We've just bought and are getting a small mortgage (16% LTV) as we want to keep some cash on hand. The valuation for the mortgage took all of 5 seconds online. We are having a survey done but unless there are serious problems with the property it doesn't matter what they value it at, we know roughly what houses are worth in that area and we know what we are paying. It could be 10% above or even below the real value, but we intend to stay there a long time, so won't affect us either way.

Obviously, someone who is nearer 90% LTV is a different risk for the lender, so maybe they are just being overly cautious. The mortgage we got agreed last week has gone up by 0.25% this week for new customers and that seems to be happening across the board.