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  • FIRST POST
    Shadowplay
    Mortgage Company valuation less than purchase price - what can we do?
    • #1
    • 13th Aug 07, 7:34 PM
    Mortgage Company valuation less than purchase price - what can we do? 13th Aug 07 at 7:34 PM
    Hi, we really need some advice.

    I’ll give a brief outline of the situation:

    We have found a new build two bedroom flat (persimmon homes) for sale at £168,000. Persimmons have offered the following deal on the property:

    They pay - the 5% deposit, stamp duty, solicitor’s fees, fitted carpets, all appliances and a free upgraded kitchen. We pay just a £250 deposit.

    Now we are aware that they have over valued the property to recoup some of the above but we love the flat and felt the deal was right for us.

    I visited an independent mortgage adviser and secured a mortgage in principal from Nationwide (6.23% fixed for 2 years) dependant on valuation survey.

    Today I received a call from Nationwide (our IMA is currently on holiday) basically saying that their independent valuation came to just £150,000 – and so they will not be offering us a mortgage.

    So what do we do?

    I visited Persimmon homes and told them the situation and they said ‘oh you are the first buyer that this has happened too’ and gave us the details for their mortgage adviser (who has secured the mortgages for the other 12 flats which have already been sold).

    I feel that we should ask for at least £5,000 off the purchase price or pull out (based on acquiring a similar fixed rate as Nationwide offered from their IMAer).

    Any advice would be greatly appreciated

    S.
    Classically it is said that money acts as a unit of account, a store of value, and a medium of exchange.

    In fact, other goods are often better than money at being intertemporal stores of value, since most monies degrade in value over time through inflation or the overthrow of governments.

    :confused:
Page 1
    • ixwood
    • By ixwood 13th Aug 07, 7:39 PM
    • 2,512 Posts
    • 1,987 Thanks
    ixwood
    • #2
    • 13th Aug 07, 7:39 PM
    • #2
    • 13th Aug 07, 7:39 PM
    I'd run for the hills.
    • Doozergirl
    • By Doozergirl 13th Aug 07, 7:44 PM
    • 26,604 Posts
    • 71,429 Thanks
    Doozergirl
    • #3
    • 13th Aug 07, 7:44 PM
    • #3
    • 13th Aug 07, 7:44 PM
    RUN! Don't do it. Just thank God for the get out of jail free card.

    Go and look at older apartments instead. You will be paying a massive premium for nothing with Persimmon. People still buying flats sold for £150k brand new across the road from me. Second hand they are £130k. What's the point?

    Prices are not falling here, it's just that you could buy a nice two bed terrace for the same price :confused:


    Whatever you do, do not use their mortgage advisors. You are being fleeced. You either renegotiate down to £150k if you must, or you simply walk away.

    There is a thread here by someone who ignored the valuation and a year or so later, now they want to sell, the EAs have valued it at even less that their surveyor did. It is happening everywhere.
    Everything that is supposed to be in heaven is already here on earth.
  • cats!
    • #4
    • 13th Aug 07, 7:52 PM
    • #4
    • 13th Aug 07, 7:52 PM
    Hi Shadowplay!

    You are describing a common scenario here. My views on new-builds are well documented on MSE, but I speak out in the hope of saving people like yourself from being seduced by the sales people!

    I really think the big clue is in the sales bods comment about "their own" mortgage advisor securing so many mortgages on the other flats. I but there's some trickery in the figures somewhere along the line!!

    Why are you not listening to Nationwide?? Alarm bells should be ringing so loud. They have valued the flat at a significantly lower figure - take heed of this!

    Have you had an independant survey commissioned in order to check the build quality and sort out any snagging items?? Are the other flats private occupations or BTL???? Chav scum tenants DO NOT make considerate neighbours!

    Have you checked to see how the lease issue is managed if you want to become your own managing agents after x number of years? Many have clauses stating that all flat owners have to agree or an outside company has to be used for the blocks management. This can prove contenious and costly! Many BTL landlords don't give a stuff about maintaining common parts when they are also funding a proportion of the tenants rent towards their mortgage as well!

    I would also suggest getting a longer fixed deal if you can. Two years is not long really and remortgaging fees are expensive now. Also, is that the best interest rate you could secure? A longer fixed rate deal might give you a better rate. Just a thought ....

    My impartial advice - get a survey & independant financial/legal advice, do more research, and lower your price! Or walk away, you will be glad you did in the long run. Depreciation on new builds is high for flats.

    Check out inspectorahome.co.uk for stats on developers customer service too!

    Good Luck!
  • CYBERCIDERSAVER
    • #5
    • 13th Aug 07, 9:26 PM
    • #5
    • 13th Aug 07, 9:26 PM
    I would walk away too.

    From my friends experience, Nationwide are fairly straight down the line and more likely to give you fair advice than many Mortgage providers. Especially one linked to the developper.

    I don't think i'd ever buy brand new... There were some "affordable housing built near to me and the "discount" seemed to be simply the developpers premium so weren't actually affordable at all!!

    Same story with my computer that I bought through work....
    "A goldfish left Lincoln logs in me sock drawer!"

    "That's the story of JESUS."
  • homer_j
    • #6
    • 13th Aug 07, 9:33 PM
    • #6
    • 13th Aug 07, 9:33 PM
    Nationwide will allow cashback/deposit paid by the builder up to 5% of the purchase price and other incentives. Therefore, where a builder pays, for example: stamp duty, a mortgage subsidy and legal fees, we will allow these incentives and the case may proceed using the sale price.

    Where a builder offers a cashback/deposit paid in excess of 5% the amount of cashback/deposit paid in excess 5% will be taken into consideration. This amount will be deducted from the sale price to produce a reduced purchase price. We will base our lending on the new reduced purchase price. This does not mean we will not be able to assist with mortgage facilities. Any other incentives (stamp duty paid, mortgage subsidy, etc) are allowed and we do not deduct these from the purchase price even where the cashback or deposit paid is in excess of 5%.

    Please note you must notify us of all incentives offered by the builder at the time of application.

    Where a builder offers a white goods/furniture package at a price if the applicants wish to purchase it they must pay for this separately. The costs of the package must not be added to the purchase price. If the package is supplied free as an incentive it is allowed in the same way as described above, (see stamp duty paid, mortgage subsidy). However, you must advice us on application if a package is provided by the builder as an incentive.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
    • franklee
    • By franklee 14th Aug 07, 1:39 AM
    • 3,771 Posts
    • 4,080 Thanks
    franklee
    • #7
    • 14th Aug 07, 1:39 AM
    • #7
    • 14th Aug 07, 1:39 AM
    There is a thread here by someone who ignored the valuation and a year or so later, now they want to sell, the EAs have valued it at even less that their surveyor did. It is happening everywhere.
    Originally posted by Doozergirl
    Do you mean this thread:

    New Build Disaster - help needed!
    http://forums.moneysavingexpert.com/showthread.html?t=498427

    However, I did get some warning bells when the mortgage valuation came back at £230,000. I spoke to our financial advisor (one of Barratts agreed advisors) about my concern at paying £15,000 over the valuation and he said "it happens all the time with new builds, don't worry about it". So, we didn't worry and went ahead.
    Originally posted by haymans74
    PS RUN!
    • Richard Webster
    • By Richard Webster 14th Aug 07, 9:05 AM
    • 7,480 Posts
    • 7,202 Thanks
    Richard Webster
    • #8
    • 14th Aug 07, 9:05 AM
    • #8
    • 14th Aug 07, 9:05 AM
    RUN! Don't do it. Just thank God for the get out of jail free card.

    Go and look at older apartments instead. You will be paying a massive premium for nothing with Persimmon. People still buying flats sold for £150k brand new across the road from me. Second hand they are £130k. What's the point?

    Prices are not falling here, it's just that you could buy a nice two bed terrace for the same price :confused:


    Whatever you do, do not use their mortgage advisors. You are being fleeced. You either renegotiate down to £150k if you must, or you simply walk away.

    There is a thread here by someone who ignored the valuation and a year or so later, now they want to sell, the EAs have valued it at even less that their surveyor did. It is happening everywhere.
    - Doozergirl.

    I agree. In fact I'm surprised how often mortgage lender's valuers do value new flats at the builder's price.


    As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients
  • telfordwhite
    • #9
    • 14th Aug 07, 9:32 AM
    • #9
    • 14th Aug 07, 9:32 AM
    I agree, walk away. House prices are sky high atm and will very likely plateau out. A new build will almost certainly lose value over the next couple of years and more.

    12 months/2 years down the line you will most likely want to move on (when you realise how tight the parking is and how much smaller the property is than you though it was etc) but you will be in thousands of quid negative equity and stuck.

    DO NOT USE THEIR MORTGAGE PEOPLE IT IS A MUTUALLY BENEFICIAL ARRANGEMENT FOR THEM WHERE YOUR WELFARE IS NOT CONSIDERED IMPORTANT.
    • Debt_Free_Chick
    • By Debt_Free_Chick 14th Aug 07, 9:45 AM
    • 13,149 Posts
    • 9,492 Thanks
    Debt_Free_Chick
    The price the developer wants for the property includes the face value of brand new fixtures, fittings, carpets & appliances.

    However, a lender will only ever place a nominal second-hand value on these items.

    The difference, at approx 10% of the developer's price, is typical IMO i.e. the lender will often value a brand new house at approx 10% less than the price the developer wants.
  • Guy_Montag
    Make them an offer of £150k for the place (inc. all the goodies already offered), if they turn it down walk away or just walk away now.
    "Mrs. Pench, you've won the car contest, would you like a triumph spitfire or 3000 in cash?" He smiled.
    Mrs. Pench took the money. "What will you do with it all? Not that it's any of my business," he giggled.
    "I think I'll become an alcoholic," said Betty.
  • Shadowplay
    Thank you for all the replies.

    We like the property, the area, the network links, (not the chavs) and intend to stay for a number of years (2-5). We previously applied for the mortgage (Nationwide) via a broker so they should have been well aware of the deal and mention it on the phone.

    Obviously the property is not worth the price.

    After discussion and taking into consideration advice i think that unless persiommons sell us the property for £157,995 (not a penny above) we are going to walk away (TBH i doubt they will sell at the above price).

    Thank you again for taking the time to help

    S.
    Classically it is said that money acts as a unit of account, a store of value, and a medium of exchange.

    In fact, other goods are often better than money at being intertemporal stores of value, since most monies degrade in value over time through inflation or the overthrow of governments.

    :confused:
    • lynzpower
    • By lynzpower 14th Aug 07, 10:13 AM
    • 24,745 Posts
    • 39,940 Thanks
    lynzpower
    why would you choose to pay 7k over what its worth.

    id offer them 150, if you offer 157 you are already in 7k negative equity before you start.
    Well aint funny how its the little things in life that mean the most? Not where you live, the car you drive or the price tag on your clothes.
    Theres no dollar sign on piece of mind
    This Ive come to know...
    So if you agree have a drink with me, raise your glasses for a toast
  • Libra1975
    It sounds like you have already made the (right) decision but I just want to put my vote with the walkaways!!
  • Guy_Montag
    Thank you for all the replies.

    We like the property, the area, the network links, (not the chavs) and intend to stay for a number of years (2-5). We previously applied for the mortgage (Nationwide) via a broker so they should have been well aware of the deal and mention it on the phone.

    Obviously the property is not worth the price.

    After discussion and taking into consideration advice i think that unless persiommons sell us the property for £157,995 (not a penny above) we are going to walk away (TBH i doubt they will sell at the above price).

    Thank you again for taking the time to help

    S.
    Originally posted by Shadowplay
    2-5 years is just enough to take the shine off the place & make it very second hand - you'll not see a rise in price in less than three years, even if general prices keep rising. As Lynz says, you'll be owing more than it's worth from the outset.
    "Mrs. Pench, you've won the car contest, would you like a triumph spitfire or 3000 in cash?" He smiled.
    Mrs. Pench took the money. "What will you do with it all? Not that it's any of my business," he giggled.
    "I think I'll become an alcoholic," said Betty.
    • Doozergirl
    • By Doozergirl 14th Aug 07, 11:11 AM
    • 26,604 Posts
    • 71,429 Thanks
    Doozergirl
    The price the developer wants for the property includes the face value of brand new fixtures, fittings, carpets & appliances.

    However, a lender will only ever place a nominal second-hand value on these items.

    The difference, at approx 10% of the developer's price, is typical IMO i.e. the lender will often value a brand new house at approx 10% less than the price the developer wants.
    Originally posted by Debt_Free_Chick
    I'm not arguing with that but the houses that I sell also come with brand new fixtures and fittings, carpets, blinds etc and I have never have a property downvalued. I don't ask for a premium particularly either though mine will obviously be more expensive than an equivalent unmodernised house. Why don't surveyors take issue with that? Isn't the same principle? it's the same house :confused:

    I don't get it. The f&f's argument must be the developers argument and the mortgage company's excuse for downvaluing. Am I talking rubbish?
    Everything that is supposed to be in heaven is already here on earth.
  • irnbru
    you'll not see a rise in price in less than three years, even if general prices keep rising.
    Originally posted by Guy_Montag
    Here's another example.

    This forum needs a sticky: New build. New debt.
    • Doozergirl
    • By Doozergirl 14th Aug 07, 11:17 AM
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    Doozergirl
    There's more than that!

    There was one that was a converted mill in (Lancashire?) and there was vodkagirl who couldn't believe that her flat might only be worth what she paid for it when new new ones were selling for £40k more

    Those ones spring to mind.
    Last edited by Doozergirl; 14-08-2007 at 11:19 AM.
    Everything that is supposed to be in heaven is already here on earth.
    • Debt_Free_Chick
    • By Debt_Free_Chick 14th Aug 07, 11:25 AM
    • 13,149 Posts
    • 9,492 Thanks
    Debt_Free_Chick
    I'm not arguing with that but the houses that I sell also come with brand new fixtures and fittings, carpets, blinds etc and I have never have a property downvalued. I don't ask for a premium particularly either though mine will obviously be more expensive than an equivalent unmodernised house. Why don't surveyors take issue with that? Isn't the same principle? it's the same house :confused:

    I don't get it. The f&f's argument must be the developers argument and the mortgage company's excuse for downvaluing. Am I talking rubbish?
    Originally posted by Doozergirl
    I don't think so

    It's complex - the professional developers are probably more greedy. And, for a new build, there's no benchmark. For a modernised existing property, the benchmark is a similar property, not modernised.

    In short, the lender is basically only valuing the bricks & mortar, with only a token increase for the F&Fs.

    Perhaps you're too honest - are you a millionaire yet?
    • Doozergirl
    • By Doozergirl 14th Aug 07, 11:32 AM
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    • 71,429 Thanks
    Doozergirl
    If I was a rich girl, nanananananananananananananana (did i get that right)
    See, I'd have all the money in the world, if I was a wealthy girl
    No man could test me, impress me, my cash flow would never ever end
    Cause I'd have all the money in the world, if I was a wealthy girl
    Think what that money could bring
    I'd buy everything
    Clean out Vivienne Westwood
    In my Galliano gown...

    Not yet, no. I keep spending it. Life just gets in the way.
    Everything that is supposed to be in heaven is already here on earth.
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