Unmortgageable Flat

BeddyWhippet24

I bought a flat 3 years ago next to a small car repair business in a residential area. I was awarded a mortgage by my bank and the valuation survey was approved. Now coming to sell my flat, I've lost 2 buyers as three separate lenders will not lend based on the valuation survey, and here's the kicker - including the high street bank I currently have my mortgage with who is known for being more flexible with these situations. 

I have spoken to my bank and even the valuation surveyors but both have refused to provide further information. I even tried to commission my own survey directly with the surveyors and they said 'it was a conflict of interest'. So I don't 100% know it is the car repair shop nextdoor as no one will confirm this with me, but I assume it is. 

I am really struggling to get answers from anyone, every estate agent, broker and solicitor I have spoken too are surprised by the situation I'm in.

A broker has posed if local valuation surveyors are advising the property is a risk even the more flexible lenders will decline to lend. It's also difficult to encourage buyers to try fringe flexible lenders as it's a red flag that they are buying a risky property and usually come with higher rates.

The only actionable advice I've had is to sell to cash buyers (on av. 80% of market value) but then I risk losing a lot of money. Only other advice was attempt to get the car repair shop closed which I'd like to avoid as they are not horrible neighbours! It's been there since the 80s when planning permission was more lax.

If I hadn't had the valuation approved in the first place, I wouldn't have purchased but there was no advisement or warning during purchase that I'd be investing in a unmortgageable property. I'm feeling trapped.

Does anyone have any advice on how to proceed other than cash buyers only ? Has anyone else faced this issue and forward solutions ?

Exodi

BeddyWhippet24 said:

The only actionable advice I've had is to sell to cash buyers (on av. 80% of market value) but then I risk losing a lot of money. Only other advice was attempt to get the car repair shop closed which I'd like to avoid as they are not horrible neighbours! It's been there since the 80s when planning permission was more lax.

Who gave you that advice? Satan?

Why are you looking to sell after only 3 years?

Did you have any issues securing a mortgage when you initially purchased the property?

You keep saying 'valuation survey' - I'm not clear if you're referring to the RICS survey a prospective buyer might do, where a surveyor physically inspects the property and prepares a report for the buyer on the property condition OR the (typically) desktop valuation a mortgage lender does to confirm whether it's worth the amount the buyer is trying to finance against it.

If the latter, then this could suggest the lenders believe the house is overvalued, instead of any issue with neighbours., and are refusing to lend the full amount.

What did the 2 buyers who pull out say? Presumably they would have told the EA the reason?

ReadingTim

I'd be surprised if it's completely unmortgageable, but given you mention it's a flat, could it be a cladding issue if a new build block of flats?  If not, then I doubt the garage next door is the sole issue, although it may be a contributory factor.  

In your position, I'd be pressing the EA for the exact reasons the previous buyers fell out, because my suspicion is that it wasn't the case that the mortgage company wouldn't lend at all, rather that they wouldn't lend enough to allow the purchase to complete.  The end result is the same, but the implications are slightly different.  What was your LTV when you bought the place, and do (or your EA) know what the failed buyers' was?  You talk about valuations, but the lenders don't really provide them - they're really deciding how much they want to lend on the place and the chance they can recover that amount if they have to repossess and sell it if for any reason you fall into arrears.  Once that threshold is reached, they're happy as it's your money (ie your deposit) that's being lost, not theirs.  

My feel therefore is that you might have had a lower LTV than your buyers, and/or the lenders may have slightly changed their lending criteria for properties with high LTVs: new build flats, flats next to commercial premises etc.  You may have to drop your asking price to compensate for this, or wait for a buyer with a larger deposit.  Or continue to live in it, or even rent it out, and you move elsewhere.  

Albermarle

Do you know if the two buyers who pulled out only had small deposits? so there would have been a high % Loan to Value. This can make lenders more sensitive to any issues, including low valuations.
If a buyer can put down a decent sized deposit, say > 25%, lenders tend to be pretty relaxed about valuations etc.

user1977

BeddyWhippet24 said:

If I hadn't had the valuation approved in the first place, I wouldn't have purchased but there was no advisement or warning during purchase that I'd be investing in a unmortgageable property.

The valuation is for the bank's benefit, it wasn't advice to you. I presume you didn't get your own survey? And obviously, it was mortgageable at the time, nobody is going to predict what lenders might have issues about in the future.

saajan_12

BeddyWhippet24 said:

I've lost 2 buyers as three separate lenders will not lend based on the valuation survey.
.....
So I don't 100% know it is the car repair shop nextdoor as no one will confirm this with me, but I assume it is. 
I'd be investing in a unmortgageable property. 

How are you jumping to unmortgageable or car repair shop? With a flat it could be a multitude of other things:
- valuing less than those 2 buyers needs given their deposit size, not valuing at £0
- valuing £0 because of cladding / EWS1 certificate
- valuing £0 because of ground rent escalation
- valuing £0 because of structural issues found
- ...

First you need to get more information - ask the agent why the sales fell through. Also potentially get your own survey as if you were buying - doesn't have to be the same surveyor exactly. 

Smalltownhypocrite

Why have you decided the car shop has anything to do with anything?

If it was next to a toxic nuclear waste ground maybe but otherwise being 'unmortgagable' is to do with the house itself not the neighbors.

Is it non standard construction, got any fines on it, on unstable/contaminated ground etc... if not its just probably not worth what your asking for it.

RedFraggle

I think it's quite likely the garage. It's the noise and smells aspect that makes lenders twitchy as it would limit the pool of buyers. There are other threads here and on the likes of Reddit where people have had difficulty. 
Lenders are far more picky than they were historically 

BeddyWhippet24

To provide more context the buyer was told by the lending mortgage advisor it was down to the car repair shop next door which resulted in a nil value. The buyer had 26% deposit.

BeddyWhippet24

Also the flat is not subject to cladding issues. It's a Victorian conversion 

BeddyWhippet24

saajan_12 said:

BeddyWhippet24 said:

I've lost 2 buyers as three separate lenders will not lend based on the valuation survey.
.....
So I don't 100% know it is the car repair shop nextdoor as no one will confirm this with me, but I assume it is. 
I'd be investing in a unmortgageable property. 

How are you jumping to unmortgageable or car repair shop? With a flat it could be a multitude of other things:
- valuing less than those 2 buyers needs given their deposit size, not valuing at £0
- valuing £0 because of cladding / EWS1 certificate
- valuing £0 because of ground rent escalation
- valuing £0 because of structural issues found
- ...

First you need to get more information - ask the agent why the sales fell through. Also potentially get your own survey as if you were buying - doesn't have to be the same surveyor exactly. 

It's share of freehold Victorian conversion flat with no structural issues and cladding. There's not ground rent nor leasehold issues