Buying Section 106 Discounted Market Value Home - valuation issue

choppyhelpseeker

I'm a first time buyer trying to buy a discounted Market Value section 106 property and I'm having issues because of the valuation. The house is supposed to be sold at 65% of its market value but I've approached two lenders via my broker, Nationwide and Atom Bank, and both have sent back a valuation that is £30k lower than the supposed 65% value that I've put my offer in at. I think there are issues with the valuation because there's another house on the same estate that's the literal mirror image, also a S106 property that's also up for sale and that one's been valued at the amount I've offered and not a single one of the other DMV S106 properties currently for sale on the estate are up for as low as the lenders have said the one I'm looking at is valued at, and meanwhile the full price properties don't seem to have been selling that low for the valuation to be 65% of their price. Is there any guidance on how lenders are supposed to value DMV S106 properties? For example are they supposed to give the valuation as the 65% amount or as the 100% value? And is there a way I can go about challenging their valuation? (For info the development was finished 2020 so it's buying from the person who bought it as a fresh new build not from the developer.)

DE_612183

it could be that the properties are not worth the amount that's being asked - are there any properties on the estate that have SOLD at the valuation you are looking for?

daveyjp

This is a real issue if you get valuers who think they need to assess the DMV.  They shouldn't, the valuation should always be an open market value (and that's in the valuers 'bible' - the Red Book) to which the discount is then applied by the solicitors to arrive at the purchase price (this price may need local authority sign off).

The problem is in sales records there is no indication that sold prices are at DMV.  If an inexperienced valuer goes on any number of sold prices websites and sees a value which they believe to be correct as OMV this can then be further discounted.

So as an example.  OMV is £200k, DMV is £130k and this will be recorded as a sale price.  If a valuer sees this £130k figure on a website and enters it into the OMV on the valuation report, this is then further discounted to £84,500.

What is the OMV in the report?  Is it close to any of the non s106 prices achieved?  Does it look to be a 65% figure?

housebuyer143

What are the non DMV houses selling at recently - and I mean sold, not listed at?
What is your offer on the property you have accepted? 

It definitely sounds like an error though if they are valuing it £30k less than what you offered at 65% discount. It might be worth getting your own comps of non DMV houses on the estate that have sold and disputing the valuation 

choppyhelpseeker

DE_612183 said:

it could be that the properties are not worth the amount that's being asked - are there any properties on the estate that have SOLD at the valuation you are looking for?

So the estate agent who is selling the property I'm looking at sold one for full value at £260k in 2024 and seems to have based their valuation of £179k DMV on that and a couple of other 2024 sales ranging £240k to £270k for similar properties on the estate but the lenders are saying the valuation is £150k which seems to be based on 2 properties that are currently under offer for at least £230k.

housebuyer143

choppyhelpseeker said:

DE_612183 said:

it could be that the properties are not worth the amount that's being asked - are there any properties on the estate that have SOLD at the valuation you are looking for?

So the estate agent who is selling the property I'm looking at sold one for full value at £260k in 2024 and seems to have based their valuation of £179k DMV on that and a couple of other 2024 sales ranging £240k to £270k for similar properties on the estate but the lenders are saying the valuation is £150k which seems to be based on 2 properties that are currently under offer for at least £230k.

If they surveyors are basing their value on current properties under offer and looking at the full market value, it might be that they just don't think £260k is achievable for it, meaning your DMV is too high. 

If 2 valuers have done the same and they are from different companies then it's probably going to be similar from somewhere else.

choppyhelpseeker

housebuyer143 said:

choppyhelpseeker said:

DE_612183 said:

it could be that the properties are not worth the amount that's being asked - are there any properties on the estate that have SOLD at the valuation you are looking for?

So the estate agent who is selling the property I'm looking at sold one for full value at £260k in 2024 and seems to have based their valuation of £179k DMV on that and a couple of other 2024 sales ranging £240k to £270k for similar properties on the estate but the lenders are saying the valuation is £150k which seems to be based on 2 properties that are currently under offer for at least £230k.

If they surveyors are basing their value on current properties under offer and looking at the full market value, it might be that they just don't think £260k is achievable for it, meaning your DMV is too high. 

If 2 valuers have done the same and they are from different companies then it's probably going to be similar from somewhere else.

Would there be a reason other S106 properties on the estate aren't having the same issue, something in particular I should check for? There's a property under offer around the corner that's the exact mirror image of the house I'm looking for and when I asked them they didn't give too many details but did say their buyer hasn't had any issues and they're under offer for the same amount I've offered

housebuyer143

choppyhelpseeker said:

housebuyer143 said:

choppyhelpseeker said:

DE_612183 said:

it could be that the properties are not worth the amount that's being asked - are there any properties on the estate that have SOLD at the valuation you are looking for?

So the estate agent who is selling the property I'm looking at sold one for full value at £260k in 2024 and seems to have based their valuation of £179k DMV on that and a couple of other 2024 sales ranging £240k to £270k for similar properties on the estate but the lenders are saying the valuation is £150k which seems to be based on 2 properties that are currently under offer for at least £230k.

If they surveyors are basing their value on current properties under offer and looking at the full market value, it might be that they just don't think £260k is achievable for it, meaning your DMV is too high. 

If 2 valuers have done the same and they are from different companies then it's probably going to be similar from somewhere else.

Would there be a reason other S106 properties on the estate aren't having the same issue, something in particular I should check for? There's a property under offer around the corner that's the exact mirror image of the house I'm looking for and when I asked them they didn't give too many details but did say their buyer hasn't had any issues and they're under offer for the same amount I've offered

Assuming they are correct in what they have said about the buyer having no issues, you can ask them who they are going with and see if they use a different surveyors firm.
It might be it was also undervalued but the buyers have the money to make up your shortfall so it didn't affect the sale. 

daveyjp

housebuyer143 said:

choppyhelpseeker said:

DE_612183 said:

it could be that the properties are not worth the amount that's being asked - are there any properties on the estate that have SOLD at the valuation you are looking for?

So the estate agent who is selling the property I'm looking at sold one for full value at £260k in 2024 and seems to have based their valuation of £179k DMV on that and a couple of other 2024 sales ranging £240k to £270k for similar properties on the estate but the lenders are saying the valuation is £150k which seems to be based on 2 properties that are currently under offer for at least £230k.

If they surveyors are basing their value on current properties under offer and looking at the full market value, it might be that they just don't think £260k is achievable for it, meaning your DMV is too high. 

If 2 valuers have done the same and they are from different companies then it's probably going to be similar from somewhere else.

Agree.  The valuers appear to have done the valuation correctly.  If £230k is based on current offers it is difficult to argue that isn't a realistic OMV for lending purposes.