Our surveyor dropped the valuation by 20%; what's next?

[Graciescotland]

Would it be fair to drop our offer by 20% too? It's old, needs loads of work roof, windows etc, is listed and there will be an expensive visit from a compliance officer requiring us to reinstate 35k worth of staircase plus other jobs. It was on the market for 2/3 initial valuation (flogging the inheritance) so our offer is still under valuation but given it'll cost us 150-200k to renovate which will push it over our surveyors valuation. The place is unmortgagable in current condition, so no one else is likely to buy it.

Should I drop the offer and maintain the 2/3 value for money ratio that I think we need to stand any chance of recouping renovation costs when/ if we come to sell it on?

I don't quite follow. Is your surveyor's valuation less than what you have offered to pay? If so, then yes I would offer what the surveyor has valued it at.

When you say "initial valuation" do you mean what the estate agent said the seller could ask for it? I wouldn't really call that a valuation, as it's not independent - a surveyor's valuation carries much more weight in terms of truly valuing the house.

Or was there a previous valuation done by a different (or the same) surveyor, which valued it 20% higher? If so that's a bit more tricky, you may end up in an argument about why your surveyor's report is more reliable than the earlier one. I'd still drop the offer though.

Gracie - see my thread "issue with structural survey". Our surveyor flagged up needing a new roof and some electrical works. We are cash buyers so stood our ground and said we'd only proceed if vendor paid the works. He agreed and has knocked off £10k to cover the works

I'm north of the border so there was a proper single survey done by a different surveyor. My surveyor thinks it's worth 20% less.

There's no real comparables though, the markets dropped since the initial survey was done and the house is deteriorating fairly quickly as roof needs redone so there's damp issues etc.

The place is an absolute money pit but could be lovely and special again with a lot of TLC.

Thanks OhEm I'll have a read of your thread.

No real advice, just curious - can you drop your offer in Scotland? I thought an offer was binding.

It is binding but it's subject to survey, so if survey turns over new information (subsidence/ needs a new roof/ difference in value) you can adjust your offer based on the new information otherwise there'd be no point in getting them.

Indeed. Hence we reduced our already accepted offer by £10k to account for a new roof and electrical works. The vendor willingly agreed.

I don't understand this either. Can I put some numbers on it?

Initial valuation (say) - £600k
Asking price (2/3 of initial valuation) - £400k

Your offer - £400k (I think? You offered the same as the asking price?)
Your surveyor's valuation - (20% less than initial valuation) - £480k

So your offer is still less than your surveyor's valuation? (I think? Have I got this??)

And your question is whether you should drop your offer to 80% of the asking price, i.e. £320k (say), to reflect the work requiring to be done?

I think if I were the vendor I would say that the reduced asking price reflected the fact that a lot of money needs spending on it and refuse your £320k offer [though might negotiate a bit & accept £380k].
If I were you, I would just negotiate - especially if you're in a strong position and they're keen to sell. I don't think there's any "mathematical" justification for your proposal - it's purely a business[like] bargaining one.

If I've misunderstood then can you explain again please?

The other thing - is your valuation a valuation of the house in its current state, or is it a valuation of the house if £150k had been spent on it?

If it's a valuation in its current state (i.e. it's worth £480k, THEN you spend the money) then your proposal isn't "fair" - which is not to say you can't try it of course.
If it's a valuation of the house as it would be AFTER you'd fixed all the problems - then you have a far stronger argument.

You've got it Bilbo, the survey is current value but has assumed essential repairs will cost no more than 25K but it'll cost a minimum 100K to do the outstanding stuff before we can begin to renovate which would put it around the survey value. It's not really a worthwhile project for us unless it's a bargain so I've put in the reduced offer and if they don't want to sell we'll walk away.

Phew!

Good luck with it.

If its listed you need to take into account the extra cost of traditional materials and specialist tradesman for windows/plastering etc so the 25k your surveyor quoted sounds very low and you do right to up the rennovation costs. Be prepared for the fact that you might not be allowed to fully replace stuff but may have to repair (ie windows) which can sometimes be cheaper or more expensive, depending on what levels of repair are required.

Good luck with revised offer!

Drop your offer. The surveyor was assessing the market value and his opinion is that your offer is 20% in excess of market value.

Don't feel bad about it. It's a fact and you are not being cheeky or trying it on.

Good luck

Skandi - it's not. The market value (according to the surveyor and using my guesstimates above) is £480k, after £25k has been spent on it, and the OP's offer is £400k.

I know just to sort out the windows, in accordance with listing, is going to cost about 23K+ according to the builder, that's before we replace roof, staircase, reinstate fireplaces, repair damp etc.

The problem is the 25K is vast underestimation of the costs it's more like 100K+ and then the cost of renovations another 100K. Which could mean the house cost more than it's worth.

I think when we put in the original offer it was on the basis of getting a bargain and unless we do it's just not worth the hassle at the end of the day.