Valuation less than offer price?(28 Posts)
Need a bit of help and advice on this one...
We recently had our offer of £265k accepted on a house that was on the market at £280k. In light of the stamp duty issue we did offer £250k initially but it was turned down and after a bit of negotiating decided that the house was worth paying a little bit more for.
The valuation for the mortgage came back the other week at £250k. The report itself said that the house was in average condition and the extension to the kitchen did not comply with building regs and it was likely that the flat roof could fail at any time. When I spoke to the surveyor he said the house was really worth no more than £250k.
We went back to the estate agent and lowered our offer to £250k. After a week of pratting about the vendor has not accepted our offer nor have they made any attempt to negotiate.
The house needs quite a bit of work (new bathroom, new kitchen, decorating, carpets, etc.) which we were prepared to do and had set a certain amount of money aside for. Our bank are now only prepared to offer us a mortgage of £250k so we would need to find the extra money as hard cash which we really don't think we can manage especially if we would need to spend money on a failing extension.
I'm all for pulling the plug at the moment but what I really what to know, does the vendor really think it's worth holding out for £15k? We are renting, chain free and are putting down a 25% deposit. Does he really think he is going to find a better buyer on the off chance that the next surveyor will value the house at more £250k? The house is a probate sale so they are not dependent on getting a certain amount of money to buy their next house.
I'm a bit bewildered at the moment. Any sound advice from anyone out there would be appreciated.
pull the plug
who knows what the vendor is thinkigns
They sound silly and greedy. I wonder if surveyors talk to each other as well since they (vendors) will surely encounter teh same problem when next surveyed.
DH suggested offering £250k plus £5k for fixtures and fittings but I don't even want to offer them that.
My gut feeling is that the vendor is just being greedy. We could potentially complete in a few weeks but he seems to be intent on drawing the process out for some reason.
"Our bank are now only prepared to offer us a mortgage of £250k"
Walk away. You can't do the £250k plus extra for f&f - will be viewed as the stamp duty avoidance it is.
on the other hand - you offered £265k and are only now questioning it because of the survey. So why would the vendor not think that others would offer than amount?
Do not offer £5k for fixtures and fititngs you will have to pay the extra stamp duty.
Your vendor wil not get another buyer at anything above £250k because of th stamp duty threshold.
The surveyors are a down valuing in order to avoid being sued by the mortgage lenders. It is a major problem. The banks do not want to be left with property worth less than the mortgage if they have to repossess and do a fire sale. The seller needs to realise the game has changed. It is all about what the banks will lend and that is a lot less than it used to be.
Talking to a senior manager in a large industrial firm yesterday said it happened to him on a factory site they bought.
Totally credit worthy company he works for but the bank called its surveyor and he downvalued the site and they had to put up more the firm's money to buy it. The bank also charged 2% more on the mortgage than they would have 2 years ago. Same is happening in residential property.
ChasingSquirrels, the estate agent keeps saying that, "Well, you did offer £265k".
Yes, we did offer £265k on the basis that we would get a mortgage for 75% of that figure. We also offered that amount thinking that the house was structurally sound. If we pay £265k now without the full mortgage we will have to find an additional £11k upfront. The difference between getting the house for £265k and £250k is £22k upfront.
They probably would get another offer of £265k but they also run the risk of the same thing happening again with the survey. Who knows, they may even get the same surveyor!
but you did offer it - the fact that you can't actually afford it is your problem, not the vendors.
I agree it may become his problem in the long run if other potential buyers have the same issue, and with the points made by ABD, but then again it might not - and £15k is alot of money for the vendor to just waive away, it depends how much they want to sell really doesn't it.
This happened to me when I was a seller.
I bought a house in 2001. Sold it in 2002 - my buyers used the same mortgage valuation firm as I had but this time they decreased the value by £10,000 due to the extension (which had been there for 15 years) that didn't comply to regs. Argh! I couldn't afford to drop the asking price and the buyers pulled out as their mortgage company would no longer loan them the full amount.
I sold it again a few weeks later (for slightly more this time) and the next valuation came back fine.
Part of me thinks it all depends on the mood of the surveyor on that particular day
True, we also weren't factoring into the equation that the surveyor doesn't think it's worth that much and the extension may fall down any time soon. I don't think most prospective buyers would.
Fundamentally, do you want to buy a house for 265K when the bank think it is only worth 250K? Why would you want to do that?
Pull out. The vendors are deluded, and need to come to their senses. They may do it in time for you to buy it at 250K, but if not, move on.
It is true that housing supply is low atm, however, 15K is a big amount to pay out when the bank don't think it is worth that.
It is usual to revise your offer if something like this (rear extn likely to fall down) comes up in the survey
It depends if you think the valuer may have under valued it - what are similar properties selling for etc etc
Is there anything about the location that makes is more desirable than the exact same one 3 streets away. Sometimes sellers/buyers have better immediate locality knowledge than valuers.
If you can't afford it now the bank won't lend you what you hoped, seems a moot point really?
Walk away. The vendor may change their minds and come back to you if they don't get another offer. But they're not obliged to sell if they're not happy with your offer.
"you offered £265k and are only now questioning it because of the survey. So why would the vendor not think that others would offer than amount?"
Because it is normal to revise your offer in the light of serious structural issues with the property. The house was sold as having a kitchen but since this does not comply with building regs, I don't think it counts as a room does it? Like having a dodgy loft conversion, you can only sell it as being "boarded storage space".
Well said Dragon. Speckledeggy - what are your thoughts on it all now?
Pull out, don't do the £5k fixtures and fittings, HMRC are massively on the ball on this.
I'm guessing that as a probate property in need of work you would be very very hard pushed to try and justify £5k in fixtures and fittings which you may well be required to do.
Pull out and call their bluff.
Your mortgage company will only lend you enough for £250k so stand firm, you are in rented, you are a buyers dream.
You've all pretty much confirmed what I thought.
Have decided to pull out. It will go one way or the other. Either the vendor will see the light and will accept the £250k which we would be happy with or we will go and find a better house. The right one always comes along as they say.
Thanks for all the advice. Will let you know what happens!
I spoke to the solicitor and she advised not to offer more than the mortgage valuation. She said that the vendor was a stupid mad fool and would very likely have the same problem with his next buyer. She said she sees the same thing happen all the time.
Anyway, we pulled out today and the house went straight back on the market within an hour or so. I will watch it with interest!
Thanks for all your advice and wise words. They did help.
Off to find a much better house now...
Good luck with your house hunting. We've had this happen twice. The first time in a small town where when we talked to the surveyor he said that the seller had bought the house for a great deal less a few years back and that it wasn't worth much more than the amount she had bought it for (this was prior to huge house price rises). They took it off the market and rented it out instead, and I think in that case the surveyor was quite right.
The second time was more recently, and the surveyor said that he couldn't value it at all. We had all sorts of extra surveys and stuff done and they all brought up problems, but then as lots of them were selling a "fixing" solution, I slightly wonder about their opinions. The builder we had go around the house said that he had expected a wreck from the survey (it appeared to be in pretty decent nick). That time the surveyor was very unhelpful and we had a battle to try and talk to him at all. We didn't feel that we had much choice but to pull out, which made us all unhappy (the buyer wouldn't drop the price because she needed the money to move on, and had already accepted a fairly low offer). I think it sold to someone else fairly soon after, but I'm not sure at what price.
One question I would have - what sort of survey did you get? I have come to the conclusion that only full structurals are really worth doing. The homebuyers ones are full of so many caveats they are really worthless.
Your experience is interesting (from my viewpoint, I mean!).
We only had a homebuyer survey but theoretically it's a 60's semi on a small but well established estate. Structurally, there really shouldn't be any problems. The more I think about it the surveyor is right about the price. He was very helpful when I called him. He said that based his price on the fact that other houses in the vicinity that have been extended have larger extensions where the work has been of a very high standard. Not a lot has sold recently but larger 4 bed extended semis with downstairs loos and laundry rooms were going for just under the £300k mark about 18 months. The market has dropped quite a bit since and those houses really needed no work at all. Also, a similar house around the corner came back on the market at £250k. It was initially £265k then was SSTC for a while. Makes me wonder if they had the same problem.
I haven't ruled it out. I think if it is meant to be the vendor will come to his senses and everything will fall into place. Then again, if it isn't meant to be we will find another house.
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