Mortgage Retention Scotland

Ianafc

Hi all,

Just looking for some advice on how mortgage retention works.

We have seen a property which is currently valued on home report as £165k and is on market for offers over £165k.

We have received the home report which values the property at £165k but will be valued at 177k on completion of essential repairs (Damp readings, deterioration to sub floor timbers and electrical wiring). It states the estimated cost of repairs is £12k which obviously is the difference and recommends a retention of £12k

We are unsure how the retention will work.  Will it be case the retention will only come in to play if we make an offer over the £165k due to the home report currently valuing it as this before repairs or will it just be a full retention on £12k no matter the offer we put in.

Our first property was new build so had no issues like this whereas this property is around 100 years old.

We will be looking to get an independent survey carried out but wanted to get some details before paying for the survey then finding out we will still be short by £12k

Thanks in advance

fergie_

Does the Home Report actually state the value would be £177k once repairs carried out? Usually the reports state value in current condition and estimated cost to remedy particular issues. After doing this, the value could be the same, a wee bit more, or a lot more.

Banks will usually lend on the Home Report valuation, but they may make conditions - such as XYZ done either before or straight after exchange.

A broker might be able to advise which lenders (if any) would agree to either a valuation based on planned works or an agreed revaluation.

Are you able to afford the essential repairs if the bank will not lend more?

Ianafc

Thanks for replying. 

Yes I does actually state this which I am finding out is unusual as unable to find much information on this specific issue.

Wording below which shows on Home Report it also advises the estimated cost of repairs on another page which is the difference between the 2 figures:

Market value in present condition       £165,000

Market value on completion of essential repairs      £177,000

It is something that we have considered and there is money to cover but ideally we will be using this to make actual improvements (eg extension etc.)

We are aware providing conditions are met that they will release the funds but were hoping to go through that and were hoping the market value in present condition would be enough for the lender sa this would be around what we would be paying for it.

As I said it just seems that Market value on completion of essential repairs doesn't seem to often be on a Home Report.

fergie_

I've not looked at hundreds, but its definitely unusual. Are they 3s by any chance?

The question to the lender then would be would they accept the 177k if the work is done after completion?

Another option you might not have thought of is you might be willing to offer X, on the basis the seller gets the works done as a condition for completion. My current house had a cracked window and the seller agreed they would repair it as part of the sale - which they did.

A lot may come down to what the seller is like and what other interest there is in the property.

kingstreet

I can't speak for Scotland but down here a lender will totally ignore the post-work valuation and will base its lending decision purely on current value. It will hold a retention of the amount considered by the surveyor necessary for the repairs unless estimates and reports are submitted for less.

The purchaser will then have to increase their deposit by the amount of the retention, get the work done after completion and request the retention funds be released by evidencing the completion of the repairs.

Ianafc

Thanks all

Yeah a number of 3’s on report. I think it is going to be too much work and risk

tHank’s for the reply’s.