House we are Buying has been priced £5,000 lower by the lender

BladeSince98

Thank you all in advance for your responses. 

We are first time buyers and have just had the valuation back from our mortgage lender. They value the property at £5,000 less than the agreed sale price. We haven't exchanged contracts so we are in a position to re-negotiate price but I'm unsure if this is the best thing to do. The seller are also looking to buy but we haven't had confirmation from their estate agent if they have found a property or instructed solicitors. On one hand we are FTB so don't know how much this will rock the boat to ask the seller to reduce the property by £5000 but on the other hand we don't want to be £5000 down in equity for the future. 

I'm looking for peoples advice/opinions on what is best to do going forward?

Isthisforreal99

Fairly common scenario, your buyer either accepts a reduction or you increase your deposit (assuming you need to to get the mortgage).....or you meet in the middle. House buying is negotiation so treat it as such.

user1977

We don't know what £5000 is in relation to the price - what are the other figures?

BladeSince98

user1977 said:

We don't know what £5000 is in relation to the price - what are the other figures?

Agreed sale price is £200,00 lender has valued it at £195,000 are you wanting any other figures ?

TheJP

You were happy to pay £200,000 before so just increase your deposit amount to cover the lender shortfall.

LightFlare

TheJP said:

You were happy to pay £200,000 before so just increase your deposit amount to cover the lender shortfall.

easier said than done I suspect - people don't just have 5k hanging around unless the OP had money saved for furnishings/other work that they could delay

Albermarle

The seller are also looking to buy but we haven't had confirmation from their estate agent if they have found a property or instructed solicitors. 

It seems a bit unusual that you are progressing your purchase ( mortgage valuations etc) when your seller has not found anywhere. Could be months before they find somewhere, or they might just give up/change their mind at some point.

Otherwise regarding the under valuation, I would for sure pass this info on to the sellers estate agent and say something like ' clearly we will have to reconsider our offer', without actually naming a figure.
To be honest until your seller has an offer accepted on a property and you have had a survey, there is probably no real need to get into detail about a revised price, as long as they know that it was on the table.

BikingBud

BladeSince98 said:

user1977 said:

We don't know what £5000 is in relation to the price - what are the other figures?

Agreed sale price is £200,00 lender has valued it at £195,000 are you wanting any other figures ?

2.5 % is just noise in considering the house value but might cover some of your costs or allow you to do something once you move in. Are there any works that you observed might need doing, boiler, kitchen, bathroom etc as it might cover those?

You can only decide based upon what difference it makes to your overall plan, eg purchase price> LTV, SDLT (if applicable), Surveys, Solicitors Fees, ID checks, Searches, Indemnities etc, required building changes.

RelievedSheff

We have just had the same. We are buying a house for £402,500 the lenders automated valuation came back at £392,500. 

It has kept us in the same LTV bracket so we are not going to make an issue of it. It doesn't really make a difference, we are happy with the price we have offered.

theartfullodger

The valuers price is what it's worth.  If you want to pay over the odds that's for you to decide & fund.  

What vendor & purch\ser agree to buy/sell at is what they agree, not what anyone else thinks.  Value & price are frequently different. 

About 20 years ago I offered about 20% less than "offers over" price.  Got the rudest & bluntest rejection ever. I thanked agent & seller politely for their comments.  A week later I made exact same offer, in writing, via solicitors.  It was agreed and happened.  Owned for more than 20 years until sold recently.

Best regards.

Bigphil1474

The lenders valuation is what they think it's worth, not necessarily what it's worth. They are trying to ensure they won't lose anything if you can't pay the mortgage. Only option really is to adjust the purchase price through agreement with the vendors, or put some of your own cash in. If they are only willing to lend you £185k then you are pretty stuck. You could try a different lender as they don't all have the same criteria.

It's perfectly normal to be getting your mortgage in place at this time.