Lower mortgage valuation than offer

[Stokey]

We have just had our survey come in with a lower valuation than the offer price. We originally offered what the survey came back with (which was 40k under asking price), but ended up going up £30k to secure house. There was also another offer £5k higher than ours but they accepted us as we all wanted to move quickly and have family - baby number two due in 6 weeks.

So our mortgage lender will now not lend us the full amount to secure the 75% rate we had agreed. Exchange date was due to be in three weeks time.

I suspect the problem is that we are in northeast London and the housing market is crazy, with things moving very quickly and the surveyors have not yet caught up with the market. The property is reasonably unusual too as it is a 3-bed Victorian detached house in an area where 3-bed terraces are the norm.

What would you do? The fact that the vendors had another offer that was higher than ours on the table makes me think it unlikely that they would negotiate lower, as well as the way the housing market is moving. Its difficult to say whether we are paying over the odds, but the house has loads of potential to add value (kitchen extension, loft conversion etc). And I would really like to move before this baby arrives. And although it is £30k over "value" price, this is still less than 10%.

Any advice?

This has happened to us twice in NE London! Both times we were lucky that it didn't affect our mortage-loan ratio, so we bit the bullet and paid what we'd originally agreed.

In one case I think we paid a fair price and the surveyor was being over cautious. In the second case I think we did pay over the odds, but only slightly, and the seller was holding all the cards so would never have renegotiated, and we just wanted the house by that point. Also we had a very good offer on our house and didn't want to lose our buyer.

At the end of the day, the valuer is covering his back/the bank's loan. Only you can decide what the property is worth to you and your family.

Good to know youngvisiter -seems to be a London problem! Unfortunately it has affected our LTV, thought we were at 75% but in fact had a 70% deal (and we were at 74% annoyingly).

Think we either need to get the valuation overturned, which I think is unlikely, or switch mortgages to a 75% deal, meaning we lose the cost of valuation and initial legal costs.

But really don't want to lose the house as it was by far the best we've seen, and we have buyers in place for our flat so hoping we can resolve. Also we plan on staying for at least 5 years, so we are looking at it as family home rather than investment.

Must be different in London, i live in Scotland, and work in solicitors and if Survey is lower than offer, then on more occasions than not, the purchaser will put in a lower offer citing the reason that the property is not 'surveying' up. This isn't happening too much now though as most properties are going below valuation anyway where i live.

we had that happen to us but we were on the selling side in the south west.
The surveyor had issues with ex council houses.
we wouldn't drop the price as had completely renovated it so the buyers got in a different surveyor at there own cost and our house was put back up again the 10 it was knocked down.
so you could speak to the estate agent as they will know if a different surveyor would be a yes or no go.

Thanks annalouise - will look into that. So i guess the mortgage company accepted the independent surveyor's valuation over their own survyeor's one?

Did you manage to have a chat to the surveyor themselves to ask why they gave a low valuation? This happened to us (and we lost the house cos we had no spare cash to afford to foot the difference) but I understood why when I spoke to him. Hope you get the house you want, sounds stressful!

the must have as we sold the house to the buyers.
the surveyor was know by the estate agents for not liking ex-council houses and was know to do this alot

It is very common for lenders' valuers to do that. I suspect they find out what the agreed price was and knock a bit off to be on the safe side.

I just sold a house for 130 and the valuer said it was worth 129.

Sometimes the surveyor will up the valuation if the estate agent persuades them - they can send over documentation proving that the amount you've offered is reasonable based on recent similar sales, and that can sometimes help.

Having said that, it's unlikely they'd change the valuation by 30k I think, so it depends what you would need to get your loan-value ratio back up.

Alternatively, can you not change to a different product within the same mortgage company? If you did that you might lose the application fee, but you shouldn't lose the legal and surveying costs, because the bank would not need the property resurveyed.

What a pain for you - I guess the other thing you need to consider is that you might get bitten if you had to resell in a hurry for whatever reason. We factored that in when we took the hit - we went into it knowing that if we had to resell quickly for some reason, we might end up losing out.

A chat is a VERY good idea if you can possibly swing it. Did you get a full survey done? If you didn't, and the value seems inexplicably low to you, it might be that they've noticed something potentially expensive, like subsidence or major dry rot.

If you're going to take the hit then you need all the information before you proceed.

You can challenge the valuation survey.

We did, and they raised it by 30k without a quibble.

I had to provide details of similar properties which had sold recently with their sold prices. All of them were 30-50k above the value we had given (so 60-80k above the surveyor's valuation)

I don't know whether it was because he hadn't researched properly (he certainly wasn't a particularly local surveyor and the relevant sales appear under a different village name although they are in ours), or because he couldn't count the number of rooms.

When we got the paper copy of his valuation it became clear that he had missed one of the reception rooms off, pushing the house into a lower value bracket. He had been into every room.

If you (or the selling agent) can provide good reasoned details of why the valuation is wrong, it's worth challenging the value.

Does it look as though it's just been valued as though it's terraced because there isn't much else to compare with price wise?

I'm not sure Barbeasty, maybe. Basically I think the problem is that it sold in Dec 2010 for £70k less than the amount we have offered. But the market has changed since then, and it was on at teh amount the valuation has come in at that time - the then buyer just got it for £40k less.

We have details of two properties that are kind of similar, one has just been Sold STC and one went at £100k over our offer price in November 2011 (but is bigger).

I think our best move is to go to the agent and get them to provide details of how the average selling price has increased in the area over the last year. And see if the mortgage company will accept an independent valuation.

The other trouble is, like all parts of London, parts of the postcode are more gentrified than others. So while the property we're buying is in the "nice" part, the average prices for the area are a lot less.

Basically I think the London market is just a rule unto itself and does not follow the trends in other parts of the country, whereas surveyors think the market is falling so reduce the valuation, and lenders want to manage their risk by having a lower valuation.

Unfortunately our mortgage company only has a 70% LTV product or the next one is 85%, whereas with new valuation we are 74% - so we really would want a 75% LTV product now.

Can you take out a different loan for the balance to keep the mortgage down to the 70%? You may find your existing lender will offer a separate extortionate loan on a quicker repayment profile.
It is very unlikely that the lender will accept an independent valuation, they use a panel of valuers with the right level of professional indemnity insurance so if they have to realise the asset and it's worth significantly less they have recourse to the valuer.

Did the surveyor who did the valuation actually look at the property or just do a "drive by" where they literally just have a look at the outside to see if it seems to be in good repair and then use house price indexes and sold prices to calculate a valuation?

If that is what they did I would be getting the surveyor to go back and do a proper valuation in the first instance.

However, it the valuation still comes back, is stil under and is fair then reduce your offer. Unless the other buyer has cash to buy (unlikely or the vendor would probably have snapped up their offer) no one else will be able to make such an offer because the survey will keep coming back low.

So, check the survey details and if necessary insist on a site survey and then drop the offer. You hold the cards.

Or move mortgage company and get a loan with 75% ltv.

He did do a proper valuation Katie as we got him to do a homebuyers survey for us too. Looking at it I think there is room for manoeuvre, found some rotten timber in sashes and patio doors so think we can get some moeny off for that. But probably not enough to get original mortgage offer.

We could take out a second mortgage Pepper but wary of over-extending ourselves, particulalrly as am about to start mat leave so will be have a year of lower earnings (and tuppence and hapenny for the second six months of that).

Then it's perfectly possible the offer is too much and if someone else were to offer they would find the same problem.

What is the vendor's position? Could they stay put and wait for a better offer or are they in a chain?

They are moving to Ireland to be near a sick parent and so want to move quickly - in April - which suits us as baby is due end of April so we want to be moved and somewhat settled before it arrives.

So yes, I think there is room for some negotiation.

We faced this problem two years ago when trying to buy a repossession - long story short, we got outbid over the survey price (by £10k) and we dropped out. I still regret that now - we should have gone with it and found a less picky lender, in the grander scheme we will have spent more renting in the time since then than we would have spent over the valuation.

EA at time said he thought he could sort it by showing the valuer comparables on their sold lists. Don't know if it would have worked, but he seemed to think it might.