WWYD re: house purchase

[ftb30]

Posted for traffic as I really need to make a decision today and my heart is ruling my head.

Property was advertised at £352k, offered £340k and this was accepted. Property is a 3 bed end of terrace in Essex and this seems a fair price looking at other properties on the market. It is ex-LA but has been privately owned for over 30 years and improved/extended. The next door property is privately owned but there are still some LA owned properties in the road.

Mortgage valuation has just come back at £315k. Reason for lower valuation was the mixed social housing and fact the property is ex-LA. Our mortgage provider not willing to re-evaluate and estate agent has told us that there are few mortgage providers that will lend on ex-council (I had mo idea about this!).

We can just afford the extra £25k but it will move our mortgage into the 90% LTV bracket and eat into funds we'd hoped to use for improvements. We also benefit from stamp duty freeze at the moment which I think will be withdrawn if we start again. We've paid for survey and incurred legal fees already.

We would stay in house at least 6/7 years. We are TTC and getting married (hopefully - postponed!) and the house is large enough to grow our family by two kids before we'd need to consider a move!

Seller will not lower price according to Estate Agent.

AIBU to ask WWYD?

1. Reduce offer to closer to £315k and pull out if seller won't accept
2. Reduce offer to closer to £315k but continue with higher LTV if seller won't accept
3. Continue with higher LTV
4. Just walk away now

TIA. 

Have many of the privately owned homes changed hands recently to help getting a handle on the value?

I would reduce offer and wait and see what happens. Listen to their valuation. If you had higher equity you may be able absorb this. As it would take you to 90% it is increasing your risk if the market falls.

@EveryDayIsADuvetDay

Have many of the privately owned homes changed hands recently to help getting a handle on the value?

No, the last sales were August 2017 (mid terrace compared to 'our' end of terrace and slightly more work required - £275k and then the house next door in 2013 (again, mid terrace and needing updating) for £170k!

It totally depends on how popular the location is. That face that the seller didn’t get any offers at asking price suggests not that popular. I would reduce the offer slightly, maybe by £10k and increase LTV slightly. It is a compromise, see what the seller does.

Go in at a lower offer. If the valuer put it at 315k then it is highly unlikely that anyone else would increase.

Slightly bemused at the Estate Agent, also a mortgage broker are they?

Personally I'd be going option 1.

I would reduce offer. Take it or leave it. If the ex-LA status affects value then it will affect the value and limit the market when you come to sell too.

Obviously the seller will resist but they need to be realistic about what their property is worth.

Are there other properties around that fall into your budget that aren't LA?

I'd go with 1 myself.

I've also never heard of mortgage providers refusing to lend on ex-council stock. There aren't many who do "right-to-buy" I believe, but this isn't the case here.

It sounds as if it is over valued. Just because you managed to knock them down doesn't mean to say that it still isn't above a cool-headed valuation.

Things have been selling higher than the norm due to the stamp duty holiday, but that won't continue.

Personally I wouldn't pay much more than the mortgage valuation (£5k ish) but I know house buying is a very emotive thing.

We had this in October.

Vendor refused to even discuss negotiations and slammed it back on the market, claiming it’d sell quickly for full asking (we’d had both mortgage and homebuyers saying it was £15-20k overpriced and they were right).

Reader, it’s still for sale.

He eventually lowered asking (a tiny bit) and it showed as sold recently for a week but then went back for sale again, suggesting someone else had had the same experience. Vendor is a knob for not negotiating.

What you do depends on how much you like the house, how desperately you have to move and your finances. For us, we had a tense couple of weeks but then found a PERFECT house that is so much better (albeit more expensive!) than the original house. I love this one so much I was prepared to take the hit if it came back downvalued.

I’d go with 1.

Don't over pay. Offer less. You have a good reason and prices may be falling.

Pull out! Unless you get a substantial discount. If you’ve not got a spare £25k (obviously who does!) why on earth would you risk buying an overpriced house in a pandemic. What if you lost your job and had to sell it.

I would go with option 1 too. I agree that it’s risky to go to such a high LTV in the current economic climate.

Overpaying by that margin has no guarantee you will recoup the difference in 7 years. Maybe 5-10k but no more.

Offer to meet them in the middle? They are going to have this problem again if that’s the case.

When we sold our last house we were the vendors whose house valuation came in much lower than the agreed price. It killed me but we accepted their much reduced offer because we had found our forever home and really wanted it. 18 years on I’m so glad we did though I still wish ill upon those buyers 🤣

That's a substantial difference in value and I really would not be happy with it especially given how much it reduces your equity and the improvement funds you have available.

At least start by telling them the lender's position and seeing what they say

Option 1.
Your heart may want you to pay the extra but if you do, you may get what you want initially but at a compromise and likely feel aggrieved by it and therefore affecting your enjoyment of the property. Whatever happens you are loosing £25k you will never get it back unless somone else buys it from you and is also prepared to pay the extra cash, this is very unlikely though.

1

Reduce the offer. Give them a bit more than the valuation to show willing if you can afford it (say £320k) but say that's as far as you can go and just see where everything falls.

Are your sellers trying to buy somewhere else? What's the state of the chain you're both in? How important is it to you/them to get this across the line before the stamp duty holiday ends?

315k, explain why - being clear that no mortgage broker will give more as you have checked, and include some paperwork if you are happy to do so.

Play as option 1. It's the only one that makes strategic sense: the owner can't identify option 2 from option 1, and both lead to 3 and 4 in future rounds, so why hasten the play? They will take some time to consider and speak to brokers themselves. They will most likely counteroffer or accept. Calling your bluff is a high risk strategy, and simply means you wait out until they return to a counteroffer.

Reduce the offer. I had something similar. Valuerer said the proximity of a housing estate depressed the price. Negotiated and got a price reduction for that and other structural works needed

Can't understand why you offered £15k over asking price in the first place, unless it was OIEO price, I've never heard of anyone doing that.

It's a big chunk extra to pay and you may not recoup it in equity quickly, plus higher LTV bracket.

You've had 2 surveys stating lower valuation (which is closer to where I'd have put an offer in tbh) so I'd go for option 1. Buyers market at the moment, they're going to benefit from stamp duty reduction too.

Option 1. You don't want to owe more on the house that its worth. What if something happens to your jobs or relationship and you need to sell sooner?
The issue the lender has highlighted is unlikely to go away and will also affect resale and how fast that house price rises compared with other houses.

I brought in the summer. Flat on for 340k, offer of 320 accepted (same as the mortgage valuation).

Reduce the offer and say there's nothing you can do, it's the mortgage provider's valuation and so out of your hands. Who knows what will happen to the property market this year and the last thing you want to do is end up in negative equity.