Mortgage valuation vs HPI estimate: how different can they be?

zerkalo

I have a question about the difference between my lender’s House Price Index (HPI) estimate and their recent mortgage valuation. I am with Nationwide and in the process of selling my leasehold flat in SE London. I can see what the estimated value of my property is according to the HPI information in my online account. This is a little bit lower than the value quoted by the same lender when I remortgaged with them about 6 months ago and almost bang on my initial asking price.

Since then, I have also extended the lease at a cost of over £10k. The property has been extensively updated to the highest standard, So when my buyer had his mortgage application declined (also with Nationwide) because of a down valuation of about £20k (or ~6% of agreed sale price) this came as a genuine shock. I know however that he had a relatively small deposit which would mean having to get a high LTV mortgage. I understand that there was an in-person valuation carried out by the lender rather than a desktop one (I wasn’t present for that).

The valuation appeal wasn’t successful even though the estate agent was able to provide 3 comparable transactions in the last 6 months within ½ mile radius. As a result, the sale of my property has fallen through and it has already been back on the market since. As this is impacting my onward purchase it is very stressful, but I hope that a new buyer, possibly with a bigger deposit, will be able to secure a mortgage without any issues.

Any thoughts? Are mortgage valuations often so different from HPI estimates, even if this is coming from the same lender? Could another lender, using different surveyor, value the property differently?

Many thanks!

ReadySteadyPop

zerkalo said:

I have a question about the difference between my lender’s House Price Index (HPI) estimate and their recent mortgage valuation. I am with Nationwide and in the process of selling my leasehold flat in SE London. I can see what the estimated value of my property is according to the HPI information in my online account. This is a little bit lower than the value quoted by the same lender when I remortgaged with them about 6 months ago and almost bang on my initial asking price.

Since then, I have also extended the lease at a cost of over £10k. The property has been extensively updated to the highest standard, So when my buyer had his mortgage application declined (also with Nationwide) because of a down valuation of about £20k (or ~6% of agreed sale price) this came as a genuine shock. I know however that he had a relatively small deposit which would mean having to get a high LTV mortgage. I understand that there was an in-person valuation carried out by the lender rather than a desktop one (I wasn’t present for that).

The valuation appeal wasn’t successful even though the estate agent was able to provide 3 comparable transactions in the last 6 months within ½ mile radius. As a result, the sale of my property has fallen through and it has already been back on the market since. As this is impacting my onward purchase it is very stressful, but I hope that a new buyer, possibly with a bigger deposit, will be able to secure a mortgage without any issues.

Any thoughts? Are mortgage valuations often so different from HPI estimates, even if this is coming from the same lender? Could another lender, using different surveyor, value the property differently?

Many thanks!

Possibly but unlikely, wouldn`t the best move have been to accept 20k less and keep your buyer in what is a very challenging market for sellers?

zerkalo

If the gap was smaller than that I would have certainly considered accepting a lower offer and negotiating with my own seller accordingly. But this was just too big of a price difference to accept, particularly given that I had just spent a lot of money extending the lease for which the new owner would entirely benefit from. I am fairly confident I can get a better price than the bank's mortgage valuation, but the question is when and what kind of deposit they will have towards the property. The risk of course is losing out on the property I was planning to buy if this takes much longer.

lincroft1710

HPIs are far from accurate and are usually too generalised. The mortgage valuation will probably be nearer the current value

zerkalo

Thank you, that's what I would have thought too. However, Nationwide's own valuation (from when I recently remortgaged to them) was very different to the one I received for the buyer's mortgage application to the same lender, hence the question. Perhaps an independent RICS surveyor would come to a conclusion somewhere in the middle, however a survey with an opinion on the market value was not requested by the buyer and I know this is not mandatory. 

ReadySteadyPop

zerkalo said:

If the gap was smaller than that I would have certainly considered accepting a lower offer and negotiating with my own seller accordingly. But this was just too big of a price difference to accept, particularly given that I had just spent a lot of money extending the lease for which the new owner would entirely benefit from. I am fairly confident I can get a better price than the bank's mortgage valuation, but the question is when and what kind of deposit they will have towards the property. The risk of course is losing out on the property I was planning to buy if this takes much longer.

Not sure that is a great bet in the current economic climate.