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Offers in excess of - will it affect amount mortgage co will lend?

We have found a house we love round the corner from where we live (currently in a private rental). We've had a mortgage agreed in principle and are ready to move ASAP. All good.


Problem is the house is listed as 'offers in excess of'. Most houses in this area are up with that on the adverts as prices are starting to skyrocket. We've budgeted for this and are prepared to offer considerably more than the listed base price. We've done our homework on similar properties and think we have a good feel for what it is actually worth.


Now we've spoken to three mortgage brokers - two of whom said it is fine to offer in excess. But the third has said a mortgage company will only lend up to the listed base price. Anything over that we will have to pay (in addition to our deposit). I find it difficult to believe that this is the case when a list price is just a starting point (to go up or down). We're in a bit of a state of panic now as we need to put in our final and best offer this week (they have already had other offers so it will go to the highest). Do we risk putting in what we think is a reasonable price? Do mortgage lenders really not accept that properties with offers in excess of are actually worth more?


Thanks.
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  • AdrianC
    AdrianC Posts: 42,189
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    edited 19 June 2018 at 9:08AM
    No, the way the asking price is marketed won't affect the lender's valuation. The valuer/surveyor simply asks "Is this property good security at the agreed sale price?"


    Even if the surveyor downvalues the property, it's only the LtV that'll vary.

    If you put in a £250k offer, needing a £200k mortgage, and the surveyor agrees £250k is fair, then that's 80% LtV.


    If the surveyor thinks £250k is excessive, but £225k is right, then that'll be seen as just under 90% LtV, but they'll still lend £200k (if they think you're good for a 90% mortgage).

    It won't make any difference how the ad worded the asking price.
  • hazyjo
    hazyjo Posts: 15,468
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    Make sure you're comparing against sold prices, and see how long it's been on the market for. Something that's sat there for 3 months with an offers over price-tag is unlikely to get anything over and I'd be offering under.


    If it's just come on the market, fair enough, offer over. But don't go too mad. "Considerably over" sounds like a lot to me. Don't bid against yourselves lol!


    Of course the EA will tell you there's tonnes of interest and prices are rocketing, so make sure it's your own research your trusting, not what they're telling you.
    2023 wins: *must start comping again!*
  • eddddy
    eddddy Posts: 16,293
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    I guess that you have chosen the type of mortgage product you want, and it will have a max LTV - perhaps 90%.

    Assuming it's 90%, that means you can borrow up to 90% of either...
    • a) The price you're paying
    • b) The valuation of of the property done by the mortgage lender

    ... whichever is lower.

    I suspect that the mortgage broker is warning you that if you offer too high, the mortgage lender's valuation might be lower than what you are offering.

    So you won't be able to borrow 90% of what you are paying. Instead you can only borrow 90% of what the mortgage lender think it's worth.
  • need_an_answer
    need_an_answer Posts: 2,812
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    My view on offers over prices is if the vendor wanted a higher amount then list it at the higher amount!

    I've just had an offer accepted at the base price of an offers over price within a week of it being listed and first to view,so it is possible that some people don't always expect you to go significantly higher than the base price

    Whatever you feel about the property, set you limits and don't be swayed into a bidding war!
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  • SRH_2
    SRH_2 Posts: 134
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    This is really helpful, thanks. The property is up for OIEO 230k and we are thinking of around 248k. It seems fair for sold prices nearby. We have 90% LTV. As for interest, we rang the agent within 30 mins of it being advertised and there was just one viewing slot left for this week. There were people coming out as we went into the house and more waiting outside as we left. We've lost out on two properties on the street where we live recently as our offers weren't high enough (although we didn't love them like this one, so weren't too fussed). But, I agree, I wish they would just put a realistic price on without all this guesswork :/
  • AdrianC
    AdrianC Posts: 42,189
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    SRH wrote: »
    The property is up for OIEO 230k and we are thinking of around 248k. It seems fair for sold prices nearby. We have 90% LTV.
    90% LtV at £248k, so about £223k mortgage? If the valuer does down-value it, then you're going to find yourself very quickly getting into higher interest rates, or even butting up against 95% LtV (£235k valuation).
  • TamsinC
    TamsinC Posts: 625 Forumite
    I'd start low and get higher if necessary - try £235K first

    We sold with OIEO; priced at £200K accepted £203K first day of viewing. Basically, we wanted £200K. Anything over and above was an added bonus.
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  • theGrinch
    theGrinch Posts: 3,122
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    Ask the agent to work with you and to amend the list price to the agreed price
    "enough is a feast"...old Buddist proverb
  • pink_pirlie
    pink_pirlie Posts: 238
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    It seems it's a tactic some agents are using around by me too.

    Listing well below market value, getting lots of viewings (due to the appearance of low asking price) and then creating a bidding war as people see lots of people interested and think they need to offer more to get the house.

    I had a couple of agents pitch it to me when I was selling mine.
    It didn't feel very ethical to me and didn't go for it (even if I lost out financially I didn't want to rip someone off).

    Haven't got much more to say that others haven't already covered. But Good luck finding your new home.
  • Thrugelmir
    Thrugelmir Posts: 89,546
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    SRH wrote: »
    But, I agree, I wish they would just put a realistic price on without all this guesswork :/

    Location location location. Some people will happily pay a premium to purchase a property. If you are going to live somewhere for potentially decades. The money isn't so important.

    Desirable property. Let the market decide.
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