Valuation lower than purchase price

[EatSleepLove]

We have just had a huge shock, as our dream house has just been valued at 25% lower than the purchase price. We've no idea what we should do as the EA have made it clear throughout that the vendors won't accept any less. Does this mean we go back to the drawing board (and probably lose our buyers too). Help and advice please!

[Spanglecrab]

What was the down valuation based on? 25% seems a huge amount

[escape]

It depends on the details - so therefore you won't get the required mortgage amount? If this is not an issue and you want the house so much?
Obviously this is negated if the valuation is because of structural issues etc..

[EatSleepLove]

Comparable prices in the area. And a perceived ceiling for the area, apparently. Although the EA says there is one house nearby that went for the same price (although bigger but in need of structural work)

[KirstyJC]

What did the report say? Was it because it needs a lot of work? If so you might be able to get them to do some of it as a condition of the sale perhaps.

25% is a really large amount!

[EatSleepLove]

No structural issues. Survey was immaculate. 25% is just too much!

[Mintyy]

What makes you think that the house IS worth the purchase price? What comparables do you have?

I know building society surveyors often get their valuations wrong ... but by 25% ??

That would suggest to me that the house is overpriced. I would do my research but probably pull out if I couldn't find convincing evidence that the property is worth what the vendor and EA think it is.

[EatSleepLove]

We haven't found a house that suits us as well as this one. Aside from a longer commute it really is perfect, and the alternatives are so much smaller (but more convenient). But with London prices being what they are I can't really understand the valuation

[Mintyy]

Ok, so what is your question again?

[KirstyJC]

If you love it and can afford it and won't need to sell it again, ever, then go for it.

Otherwise I wouldn't. But then I wouldn't be in London housing market anyway so what do I know?

[RJnomore]

Ok so - what percentage of the purchase price do you need to borrow?

Can you stand living with the potential of negative equity?

Are you able to borrow enough to make up the shortfall?

We need some figures to be of help...

[EatSleepLove]

We are stretching to the purchase price, although I don't think the valuation will impact our mortgage. It's more a psychological thing, how can we justify spending so much with that value vs price differential....

[pilates]

I think you need to go back to the agents and show them the valuation and ask them to renegotiate the price, may be they could meet you half way if you love it that much? Another purchaser is going to have the same situation as you. If not, I think you need to prepare yourself to walk away. You never know it could be an omen and there is something better out there for you. Good luck.

[43percentburnt]

Sorry if I am asking a daft question. Are you by any chance confusing the rebuild cost with the valuation figure? You probably are fully aware the rebuild cost can easily be 25% lower. And sorry if I am being patronising asking this.

It's just a down valuation of 25% is likely to affect a mortgage application in the current climate.

Was it a basic report or a homebuyers? Has the lender responded yet? What did your broker say? Has the agent provided sold comparables, generally have to have completed in the last 3 months. Surveyors are being tight at present, remortgages especially. But 25%...

[EatSleepLove]

I spoke to the surveyor directly and it's definitely the valuation. He did a full building survey and found no structural issues and was generally impressed with the house. There aren't many comparables in the area and with london prices moving 20% in a year the houses sold 12 months ago were a lot cheaper.

[lessonsintightropes]

I take it you are in London. On the advice of our agents, a property we bought at £220k in December 2011, we took to market at £350 in November 2013. We had two asking price offers, and accepted a knock down at survey to £330k, now selling after some delay in July 2014.

We took the knockdown as we thought it was reasonable to be honest. Similar property on the same street is now being marketed at £415k.

We took the lower price and didn't feel like we'd been diddled - in fact we suspect our buyers may flip this property. But it enabled us to buy the place we did want to buy, and we didn't want to screw our buyers around.

So I'd suggest having a discussion with your vendors either directly or via solicitors/estate agents, just to see where they are at, as you have nothing to lose at this point.

[ThePerfectNegroni]

We had this last year. The sellers refused to negotiate and the deal was called off. It took them another 8 months to sell and they only got an extra £5k, which probably didn't even cover their extra mortgage payments and the headache of it all.

You have a couple of options. I know somebody at work who had this and paid for two more valuations and presented them to the mortgage company. In the end they offered a bit more than the original valuations and the mortgage company agreed.

You can try negotiate with the estate agents and see of they will knock anything off.

I refused to do this with ours as I wasn't prepared to throw more money at a house that I felt had too many compromises for us.

[EatSleepLove]

That's a good idea. We can arrange another valuation and see what that comes up with. Then at least we will be able to assess whether this surveyor is crazy or whether the house is actually overpriced. Then we can negotiate with our vendors and the bank. Good plan

[SquinkiesRule]

That happened to us last summer, ours was valued at 12,000 less than the asking price and we had an offer over asking at the time. We dropped the price to the valuation price and the sale went ahead.
The surveyor who did it was lovely, he added as much value as he could for every little thing, putting down top valuations for the land and everything. He just couldn't get it any higher, no matter what he tried. He and the EA went through it all and tried to add more value even.

[RJnomore]

Look, I totally get the psychological bit and to be honest I wouldn't and couldn't buy at that sort of differential, even if I did expect the value to go up and make up the difference, but

-if you can still afford it and still get enough mortgage for it, there is no actual difference to you.

You are still getting the house you want and paying the amount you were prepared to pay for it.

Nothing has actually changed in that.

If you reall want THIS house it's up to you to decide if you suck it up and go for it. Houses are like any other commodity - you can put any valuation you want on them but they are only actually worth whatever someone is willing to pay for it at that precise moment.

[grobagsforever]

I had a house down valued from 260 to 248. Managed to get it revalued to 260 and mortgage agreed. But we pulled out in the end as we felt we were over paying. House sold for 250 in the end.

FWIW I think you'd be insane to pay 25 percent over a professional valuation. At least negotiate with sellers! If they've any awareness of the imminent issues in the housing market they'll discount the price.

[Lelivre]

My thought is to share this with the EA/vendor. It may not be a deal breaker for you; for most purchasers it would be. I'm not very experienced I hasten to add, but if this had happened to us I would have had no choice but to go back to the EA and share the expert documentation and advise that this development threatens to jeopardise the sale due to the financial and mortgage implications.

You could say that you have received a blow from the survey, and are yet to talk to your lender or partner to take a firm decision but request a response from the vendor.

[EatSleepLove]

UPDATE
We reduced our offer, which was unsurprisingly rejected. So now we are back at square one and have to start looking all over again. I feel so depressed about this - especially as my children were so excited. I feel like I've let them down.

[Mintyy]

Oh, I'm sorry! Its a terrible feeling but you absolutely have NOT let your children down.

It will be difficult explaining to them, but you will find another new house to move to and this time it will be the right one.

[iseenodust]

You're only back at square one if you are not prepared to go back with a bit more. Friends had this in London a year ago the house was valued by bank at 100k less than price agreed (not 25% though). They managed to meet in the middle.
Keep looking but maybe don't shut the door on that one completely?

[EatSleepLove]

The vendor got in touch as the house they are buying has been down valued too.... Not by as much but there may be a glimmer of hope.... Perhaps there is a surveyor conspiracy to burst the house bubble! Fingers crossed we resolve this.