Darned mortgage valuation lower than accepted offer price

[StepfauxWife]

We had an offer accepted on a flat in London after fighting off a zillion others and after many many rejected offers. Prices around here have gone crazy with a two bedroomed flat fetching anything up to £700,000. It's barmy.

Our mortgage valuation has just come back with a valuation way below what we offered and way below the asking price. We know for a fact that smaller flats have gone for more money. So it seems this knobber surveyor hasn't looked at enough comparables.

I wondered what we can do next? I have found countles examples on Zoopla and Rightmove of flats in the area that have sold for more and I was going to use these to challenge the valuation.

The seller may be open to reducing the purchase price a little but not by the amount suggested by the survey.

Am at a real loss as I adore this flat and fear we couldn't afford anything else in the area now, prices have rocketed since we had the offer accepted.

Meant to ask - has anyone had any experience of this? Can I do anything or am I doomed?

I have but it was a tiny 5k difference and we had to suck it up. The bank refused to lend any more.
Did the surveyor give any reason for the low valuation?

Is the amount the mortgage company say it's worth, worth less than your mortgage though? The bank won't care about you losing your own money, only theirs.

Although it might affect your LTV

Need some numbers to know what best to advise: How far does the new valuation affect the LTV for the mortgage? Does it put you beyond the point that any bank will touch you? Or does it just disqualify you for the deal you were hoping for? If so, you may be able to go ahead and pay the price you want to, just paying a little more than you were expecting to in monthly repayments.

For example, say you offered £400,000 and had a £40,000 deposit so were expecting to borrow £360,000 and get a 90% LTV deal - and now it has been valued at £380,000. The LTV will be calculated with this valuation so borrowing £360,000 will mean just under 95% LTV which some lenders will nevertheless still do, probably with just a slightly higher interest rate. If you do the maths you may find it will only cost you an extra £30-£40 per month to find a deal that fits the facts. In 2 years time you can get it revalued and will probably be able to get a better deal then so you just need to manage the consequences in the relatively short term.

We could live with a 5k difference. This is a 10% difference! It's insane.

No reason yet, we are waiting for a full report. Really don't want to lose out

Yes we've had this happen, on a flat in London about 10 yrs ago. Bank refused to lend (100% mortgage), seller refused to lower price, we had to pull out. Estate agents were really arsey with us over it too!

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We are already at 95% LTV so couldn't go any further.

Risk of outing myself but anyway...

Property was on at £445k and £465k accepted. Mortgage valuation is £420k. It's almost 1100 square feet - properties half that size are going for around £475k around here.

But how much is your mortgage for - that's the point. If you're borrowing £420k or less, the bank will be happy, as it's only your deposit that's at risk...

So you need a mortgage of £442k but the valuation says it's only worth £420k.

I think your first step needs to be to wait for the full report and see if there's a genuine reason why it is worth less than other properties in the area taking everything into account. E.G. I remember a friend of mine was intending to buy a "4 bed" house which was priced about average for houses of that size in the area, possibly a little lower than average. HOWEVER when the survey came back the surveyor had spotted that the loft conversion didn't meet the building regulations in force at the time of the conversion, and this couldn't be reasonably rectified or mitigated, and that therefore it was illegal to actually describe or assign those rooms as bedroom accommodation - and so it should only be being marketed as a 2 bed property and was worth much less (she didn't buy it). There might be any number of other issues which are depressing the value below average for the area, and if your surveyor has spotted something important then you need to be thanking him/her not criticizing. This valuation is for your protection too and if the surveyor is right then you could end up in negative equity when you come to sell. If the full report has nothing untoward like that then perhaps the bank will agree to a second valuation.

Back in the olden days when i worked as an Estate Agent, whenever we had a down valuation which we thought unfair in the current market, we would gather comparable properties which we had sold, or which we knew other agents had sold and present them to the surveyor. More often than not, with evidence of what similar properties were actually selling for, they would change their valuation. Although a lot of purchasers didn't want to proceed with the niggling worry that they were paying over the market price.

If you are buying through an EA, they could do that if you still want to proceed at that price?

(This was quite a number if years ago, but I assume the same procedures apply)

Hi OP, this happened to me.

I am in London, have been looking for an age, have a tiny budget, was priced out of one area after another, seemingly on a weekly basis, and could not see anything else on Rightmove I remotely liked, and they were all in horrible areas. So I sucked it up.

I had to pay 10k over asking to get the flat but it ticked a lot of boxes for me. I was comforted by the fact I wasn't the highest bidder, according to the estate agent, but that may have been a lie.

Having said that, I have thought estate agents were lying before, claiming there were offers from cash buyers and higher offers on other places I'd bid on... but, guess what, they weren't! And I missed out on one place after another because I was too suspicious and stingey to offer another few thousand!

The mortgage valuation valued the flat I'm (finally) buying at £5k less than asking price, so effectively I am paying £15k over the odds. I have a 40 per cent deposit so the down-valuation did not affect my mortgage offer.

I thought about going back to the vendor to negotiate a discount, but after listening to friends' advice, asking myself whether it was worth the grief of losing the flat for the sake of 2-3k, and the thought of starting the whole process again and possibly ending up buying a worse place for £10k more six months down the line, I thought better of it.

Now if the vendors try to stiff me for more money before exchange, which we are swiftly approaching, I will walk away from the sale. And leave bloody London.

One thing as estate agent said to me about property going for over the asking price by £10ks was "In London you'll always make the money back"... which over the long term (ie. 10 years plus) is probably true.

Good luck OP.

Assuming there is no substantive reason for the under valuation, then it is not unheard of for the entire chain to take a hit or one property to do so, rather than allow the chain to break down. You have to offer 10k less, your seller has to do the same and so on.
The current market makes it more likely that it won't work, however you may well look back at this in a year and think "lucky break"