RICS Homebuyer valuation much lower than offer price!

[Cookiecrumblepie]

AIBU to reconsider my purchase if my RICS surveyor has valued the property I want to purchase for significantly less than what I offered? Has anyone come across this before? I'm talking over £100,000 less!

Any advice appreciated!

It's more about percentage than real terms.

Is this a case of making up the shortfall?

No I'm just worried that I'm overpaying for something! It just seems to be a huge difference from my purchase price. I was expecting a valuation that was at least close.

Oh wow, that's a huge difference. I expected to say don't worry too much & thought the figure would be 10 or 20k.

Will it be an issue for the mortgage?

This is normal. House prices are hugely inflated at the moment, but this doesn't mean that the house is actually worth that much.

You can choose to lower your offer, the seller can choose whether or not to accept or hold out for higher. An issue could arise if the valuation has an impact on what your lender is prepared to lend, and the debt to equity ratio. If you still meet their criteria, you should still be ok.

No, my bank has approved my mortgage. I commissioned a separate RICS Homebuyer survey plus valuation, just to check the property condition and value.

Does it need a lot of work?

We had this on our first house - we paid £233k and it was valued at £170k (I know that’s not £100k but percentage terms fairly significant).

the house is now valued at £300k so if take it with a pinch of salt. Maybe see if you can knock a few K off the offer but I wouldn’t be worried enough to pull out.

@Cookiecrumblepie doesn't your lender still need to do a valuation on the property though? Or you mean they've done that and still approved it? In which case, all good.

My lender has done a valuation so I'm fine to buy it, but I don't really want to overpay for something that is worth a lot less.

@hatchyu the surveyor seems to think so. Odd as the property looks perfect

Are you sure it's the sales valuation and not the rebuild cost? It would be really odd for a bank to agree a value 100k different to a surveyor.

At that level of difference (percentage) does the house have any features that your RICS surveyor was unable to take into account in their valuation? Outbuildings? Land?

The value of a house is simply what a buyer will pay, so I suspect the seller might tell you to take a running jump if you try to use this as leverage to get the price reduced. There are a lot of cash buyers around...

@Cookiecrumblepie That's the problem buying in the current market. Property prices are over-valued in many areas; you have to consider the value to you, if it's a price you're willing to pay, and if you're happy to stay there long-term if prices fall a little.

The seller isn't obligated to reduce their price, you can of course ask, but they're unlikely to drop it (and certainly not by £100k), unless they're needing to move quickly.

It's worth what it's worth to you. If you think it's not worth it, reduce your offer and see if the sale falls through.

It's definitely valuation. Bank values only to see if it's security for my loan. I have a smaller loan so it's no problem. It's literally what the property is valued at.

But this type of disparity is quite common with more expensive properties or in very active selling areas.

I've never had anything like that much difference. It would certainly make me stop and think.

One good thing in your case, though, is that you've had a mortgage offer but there is so much we don't know about this. I have nothing but questions. Did the mortgage company have a valuation figure? Is your offer based on the selling estate agent's advertised figure? Or arrived at after a bidding competition, making it higher than the advertised asking price? Is it a freehold house (of standard construction, and what age and condition), or is it a house or flat on a lease and if so what length of lease, as that could affect the valuation? What pointers or clues can you find in the surveyor's report to possible reasons for a lower than expected valuation?

This is exactly what happened to us. Bank fine with mortgage as LTV was good so their valuation just said they were satisfied the value was over the minimum needed to protect their equity.

Our surveyor valued the house at about £70k (about 10%) less than our offer and said even that was generous comparing price per sq foot in the area. We told the estate agent who conveyed it to the seller who was stunned. Before we could even set out what we wanted to do the seller offered to knock £5k off our offer but nothing more.

We walked away in the end as it was a house we would need to size up from in the next 5 years or so, and worried that the value of the house would have barely caught up with what we were paying for it in that time.

Ultimately ended up with a way better house at a better value! But depends on the market now - this was at the end of 2020 when the market was only just really opening up again post lockdown.

the surveyor seems to think so.

Such as what?

A friend recently sold for 100k less that valued as a survey picked up something which they then hand to declare to other buyers.

You obviously thought it was worth that when you put in the offer- how does it compare to other similar houses in the area? If they’re all moving in the same price range I wouldn’t be too worried unless you’re planning t sell very soon.

Have you chatted to the surveyor about the valuation at all?

@riotlady I will do. Am seriously thinking about not buying the place now.

Have you asked the surveyor to explain?

Have you researched what similar properties have sold for recently?
I work in an estate agent & houses in our area are going as soon as they are marketed, if not before, for at least asking price & often over.

@MothershipG I have done research but it's a difficult one because it's a small flat with an outbuilding that isn't technically liveable but is used as a living/office space. So technically its tiny, but you could say it has more space that it seems.

Comparables all compare literal flat space, not for example a garden shed space as well.

Also it has a nice garden which I value, but I don't think technically adds that much value. I'm going to talk to the valuer but useful to hear others thoughts. From this thread I still think I've offered way too much.