Mortgage valuation lower than our offer - what to do?

[Milco]

I'd really appreciate any advice/experience anyone has to share. Sorry, a bit long to explain the background:

We have found (and had offer accepted on) our "dream home". Have been trying not to get too committed to it emotionally, but it ticks all the boxes for us as our long term family home. Just round the corner from where we live now but quite a lot bigger.

Our offer was accepted about 7 weeks ago and house taken off the market. Ours went on straightaway with the same agents.

We had our own buildings survey done a few weeks ago on the place we want to buy - came out fine, despite being an old house. Valued (FWIW) at the agreed sales price.

But just heard this afternoon that the mortgage valuation came in at almost 10% lower than our offer. We are taking quite a big step up so 10% is quite a bit of cash which we don't have. Mortgage was for 75% LTV - the max our current provider will offer (and we want to keep our mortgage as it is a great rate).

Some other context: Our house has been on the market for approx 6 weeks. Had 20+ viewings and 2 offers; first one was withdrawn as the buyers decided they could not extend in the way they wanted/needed; second was this week but 50k/12.5% lower than our original asking price and 30k lower than it is currently on at (we reduced the price about 3 weeks ago as at that time our vendor had her place to buy all sorted; now she doesn't so there is less time pressure). So the amount of equity we might be getting out of the current place seems to be falling all the time.

We are in Hertfordshire on a good train line and in walking distance to the station. We had been told (by various local agents of course) that the local market was doing pretty well.

Question is really - what are our options? We simply don't have the money to pay the full 10% shortfall on the place we want to buy, but have we any hope of renegotiating? The place we are buying is definitely in a different league to our own (5 bed detached vs 3 bed semi) so I do worry about some pure cash buyer turning up for whom the mortgage valuation isn't an issue. We haven't yet told the agent.

Anyone been in a similar position (as buyer or seller)? Or have any other thoughts?

Thanks for taking the time to read this far!

I know soemone who brought his own flat - as his girl friend and him split (amicably) and he brought her out. He had a valuation doen and that was fine - the mortgage valuation was 20% less than the flat was worth by the same people...

basicly the bank doens't want to lend and would rather undervalue as far as I can see - so they are hedging their bets

Thanks ivykaty.

So do you mean that the same surveyors gave two different figures - one for your friend and one for the mortgage?! Sound crazy but unfortunately I can believe it... Have I got that right?

I wonder whether other banks would be different (this is Intelligent Finance, part of Halifax) but I'm not desperate to apply again and to cough up another £900 for a different survey just to find out....

Can you meet halfway take a 5% hit, and the vendors take a 5% cut in price?

I'm guessing it's different in the sort of price bracket you're looking at but I'm aware even when making offers that we can't pay more than a house is valued no matter how much we fall in love with it (hence trying not to fall in love with anything). As first time buyers we only have a 15% deposit so any drop in valuation compared to agreed price means we'd struggle to get a decent mortgage.

Everybody is being very cautious right now. A lot of houses we've viewed have had agree sales fall through because the after valuation the finances stack up.

If you could pay a bit extra and keep the LTV below 80% you might still be able to get an ok deal with another provider.

We were in a similar situation 3 years ago - mortgage valuation came 20k short - we then offered 10k over valuation but seller declined, so we pulled out. Within a couple of weeks we found house we are in now (at lower price and ideal!). Original house is still on market - fixed price at what we offered.

This happened to us and we made a complaint about the valuation to the bank - which was Halifax and they investigated it but it still came out at the same valuation. We were devastated as it was our dream house.

However, 8 weeks later a much better house in same village came on the market and they accepted our offer. Same surveyor did the valuation and valued it at what we had offered. I had a chat with him on the phone and he pointed out a number of reasons why property one was not worth what we offered. With the emotional attachement gone I could see he was right.

So it may be worth

1. trying to renegotiate with the sellers - you don't want to pay more than its worth
2. talking to the bank and explaining that the building survey differed
3. requesting a different valuation to see if it is closer to the building survey

Crossed posts with ginmakesitallok - and basically said same thing

Thanks all for the responses so far. Sounds llike trying to split the difference with the vendor might be our best first approach. We could (just) afford to do this if we got something pretty close to our current asking price. But am not feeling massively optimistic about this at the moment.

Thing is, until the vendor of our place finds something she likes again (she pulled out of the first place as it did not survey well - not value but something else I think) then we are not under any pressure to accept an offer on ours. Accept that I'm sick of tidying up non stop!

Obviously though if we reveal this issue (and I'm not really one for playing games so was planning to phone the agent tomorrow) then there is a real chance she decides to withdraw from our agreement and re-market, since she has now got some time to find another buyer. I just hope that maybe we have built up enough goodwill so far with her and the agent to prevent that. And I suppose re-marketing is going to be hassle and we might not be the only people who will experience the issue.

Looking into another mortgage at 80& LTV might be worth a try too, thanks tyler. Our current mortgage is a base rate tracker so it is brilliant, but we did think it was a bit too good to be true when they said we could port it and borrow more. Now I know it was!!

Other thing to consider is that if you will be stretching yourself to your limit with a mortgage what will you do when interest rates go up?

Thanks Lcy. Just saw your post. Yes, I think we will try to talk to the surveyors for IF (Colleys). I have their number but it was too late this evening to get hold of anyone. And I will talk to our surveyor too.

I do wonder whether we might be paying a little over the odds but its really difficult because there are so few houses of this sort where we live and they are all different, so there is nothing else on the market at the moment to compare it to (and not a lot recently either) A good reason why it went quickly, I suppose, and also a good reason why we don't want to lose it. But things do happen for a reason....so I'm sure it will work out for the best one way or another.

I think properties like that are pretty hard to value accurately as their is nothing to compare to in the local area. The surveyor may be willing to shift on valuation a little. If not, ask why it is not worth the price you are offering - it may help clarify whether you are paying over the top for it. Good luck and let us know how it goes.

Thanks. Yes I will.

yes you got it, he said he was going to do something and was told if he did he could say goodbye to finance ever

I put in an offer on a house and the valuaton for the mortgage was fine, but I put my own surveyor in and he valued at 10k less than I had offered - which was 4 k less than asking price (we are talking 14 year ago when prices where a lot lower and 1k was worth 15% of value of house) I pulled out altogether on the basis of report and price, the agents wanted the report and I sadi they where welcome to buy it form me guess what they didn't want to stump up the price of half the survey so they didn't get to see the report all 20 odd pages!

You could appeal the decision but do your research first. Have any similar homes sold in that time? look on nethouseprices for comparisons however I would also add caution - the banks are looking to protect their investments and forsee house prices being lower in the medium term. You have to consider if you are overpaying for the place, especially if it's a stretch for you and your house has reduced in price. Land registry showed a decrease across the country for all houses in Feb.

The surveyor maybe doing you a favour - do consider how you would feel if prices continue to fall. The economic news isn't positive so can't see a sudden rises in prices.

yes, you shouldn't automatically assume that the bank valuation is wrong...just as you shouldn't assume that the asking price/offer is right or wrong either!

Ask the bank to explain themselves, ask the agent to explain themselves. Depending on the actual value of the property 10% could be a huge discrepancy (obviously doh!!)

Thanks ladies (and possibly gents?). Some sound advice I think. We will be on to the surveyors in the morning.

Milco - why did your vendor accept your offer when your house wasn't even on the market? If she had been getting plenty of viewings and positive feedback then surely she would have kept it on the market until you or some other buyer were in a position to proceed.

Good luck - I'm waiting valuation on the house we are hoping to buy!

The seller of the property you want to buy was given very bad advice when she took her house off the market for your offer, when you haven't yet agreed a sale on yours.

You presumably don't know yet whether you can afford this house, as you don't know how much you will get for yours, unless you have reserve funds elsewhere?

I would suggest waiting until you have a sale agreed on yours, for as much as you can get, then going back to the agents selling the house you want and re-negotiating the price according to what you can afford and what mortgage offer you have. It may be that they won't reduce the price from what you agreed, in which case you will have to come up with a bigger deposit somehow.

Remember to check how long your mortgage offer is valid for, too, as some expire after three months, (usually six months though, I think) as you may need to reapply if your house takes too long to sell or your seller doesn't find somewhere to move to.

Good luck with selling yours!

Hello mumtoshun and gently.

We were one of the first to view the house, having been tipped off by another agent that it was coming on the market. We offered the afternoon of our first viewing, initially lower than asking price but then the next day at full asking price when turned down. The vendor was then planning to buy a place that was tenanted until July this year (and this was Feb) plus we agreed to go on the market with the agent she was selling and buying through, so she had an overview of the whole chain. I agree that she could have held out longer for perhaps a bidding war, but apparently she liked the idea of the house going to a local family (her children grew up there). No doubt the agent played a role in persuading her we were a good bet, and perhaps this whole thing suggests she and and the agent both thought it was a full price they were getting.

We had a mortgage in principle agreed and most of the deposit is coming from savings. So we had been reasonably confident we could make the finances work (had been....)

Anyway, the update from today is that we have spoken to both the mortgage valuer and our surveyor. The mortgage guy was perfectly reasonable and appeared to have done a lot of desk/phone work on comparing other transactions locally over the last few months - both ones which are complete (so we can see) and others still in progress (which we can't). Sounds fair enough. But our surveyor said that the 3 big firms (Colleys, eSure and Countrywide) had their fingers burned in 2008 and are now extremely cautious and to some degree are encouraged to down value. He stands by his own valuation, though as far as I can see it is a more "broad brush" one than the mortgage company (which I can understand).

The agent seemed to be genuinely surprised. I have encouraged him to provide the valuer with examples which he thinks support the agreed price. I really don't know which way the vendor might go. We have not formally withdrawn nor made a lower offer. She is now looking again anyway, so is under no time pressure, therefore remarketing it might prove tempting. However, personally I think prices are more likely to slide a bit than stay the same, and we at least are a known quantity for her. So who knows.

Meanwhile, we are having continued interest in our place, so we'll see.

Thanks for all the thoughts so far.