Lender Survey came with undervaluation, what to do

[Sunny777]

Folks,
the property i had an offer accepted had the survey done yesterday and bank has undervalued it or maybe i offered more.
But my offer looked perfectly reasonable considering previous sold prices in same street.

Unfortunately, there is difference of 12k in my accepted offer and bank's valuation.

Now i think, the vendor wont probably decrease that much and i think i shouldnt pay more than what bank has valued the property at.
As it will increase my mortgage interest.

Please advise what should i do as i am FTB so no experience at all in this scenario.

Will the valuation remain same with some other lender.

I am in a bit of panicky mode as i think i will lose out on this property and i have spent money on survey, solicitors, brokers etc

thanks

Do you have 12k to make up the difference?

I doubt another valuer would make a difference - you might find the same person turns up employed by a different bank anyway.

You could contact the bank/surveyor and ask for evidence for their valuation that takes into account equivalent properties in the area. We had similar but this didn't really get us anywhere.

It is worth contacting the vendor and seeing if they would drop the price 12k - they will run into the same problem with other buyers. You could play hardball and say they must or you have to pull out. Or you could negotiate - they drop price by 6k - and you cover the other 6k, if that makes sense. This is what we ended up with.

The house is worth what you are prepared and able to pay for it, so don't worry too much about paying over the odds if you feel it is right for you.

Did you already offer under asking price and were there any offers? How long was the property on the market?

any other offers

Go back to the vendor and tell them the valuation has come in under your offer and by how much. Unless you can make up the difference yourself or your broker knows a lender with less stringent valuation criteria then that's all you can do. No matter what you may have spent (other than survey - it should be minimal at this stage) why would you pay over the odds? Does the valuation report give any clues. Might be worth checking the figure is actually correct before you do anything, just in case.

Thanks all,
the valuation report doesnt list any defects, any problems whatsoever.

i paid 3k under the asking price and there is no 2 bed semi sold in last year or so.
Couple of 3 beds sold in last 6-12 months so i adjusted the price accordingly and was very confident about what i was offering.

Moreover, there are other properties listed/sold in similar price within 0.5 mile.

Called the surveryor company and they said that i have to raise a query with the lendor as they wont discuss this with me.

I can pay the difference but then i will have to pay less deposit and my mortgage rate will increase so i dont think i should do that.

Will it be worth applying with any other lendor

Your estate agent should step in they put the price on originally so need to know why it differs (could be as simple as time on market) provide them with a copy of the survey as proof of value. A surveyor will not change their decision on value they have to justify it so there must be a reason why they down valued it. Your agent should explain this clearly to the vendors who will need to reduce in accordance .... If they don't they may find themselves in the same position with the next buyer further down the line, Only options are to try another lender and hope for a different valuer but that costs more money and may not be as good of a deal on your % so wouldn't recommend this .... You really don't want to be paying over the odds

i have called the agent, she is out sick, so tomorrow morning first thing, i will call her again and discuss and hope for the best.

So basically my only option is to ask the vendor to reduce, if they dont then i will lose on this property.

I dread this not because its my dream house etc, though it does suit my requirements but for the fact that after spending 2 months, i got that house and now i will have to start all over again.

Most lenders use a panel so you may end up with the same surveyor anyway! I would put it to estate agent and seller that price needs to be reduced accordingly (the next person to buy the house will likely get a similar valuation whether it's someone else now or someone buying it from you at a later time) The lender will be able to dispute it with the valuer on your behalf but they will likely want comparable properties as evidence from the estate agents (sold prices not just listings)

thanks, Gracey79, i will surely ask the EA to provide me evidence of sold properties nearby if they think that Bank's valuation is wrong.

Will ask the Lender to reconsider and the vendor too. Fingers crossed.

What a drama? I am chain free, the vendor is chain free, thought i would complete very quickly.

Sorry to hear
Just try and keep in mind it's better to be at this end of an under valuation, imagine if you bought it and then had this when you were trying to sell it. Loads of properties usually come on the market around Easter time

I think it really depends on the numbers Sunny777- every survey I'd had done have given a lower valuation than the price paid - I think it's not uncommon. As long as your bank is happy you are fine - that's who you need to check with and that will probably depend on how much deposit you are putting down. Or has your bank now refused to lend and I've missed that bit in the thread?

Bank hasnt refused to lend, Only thing i know so far as told by the broker this afternoon that my mortgage rate will increase by almost 1%.
Which i am also aware when i was doing the calculations before applying for mortgage.

I agree with what you have said as its a crazy market these days and due to competition, we surely overpay a certain bit.

I dont relish this thought of making up the difference much as i will be overpaying in first instance and then overpaying every month too.

Lets hope the vendor reduces the price, or the Lender corrects their valuation(almost impossible).
Had it been diff of 2-3k i wouldnt have bothered much.

Lets hope something works out.

I agree with Luc28 - get the estate agent to earn their fee!
When we sold our London flat I was worried about the valuation as we had received a very high offer (sealed bids) but when the valuation officer came to get the keys the estate agent showed him other properties on the market, what they were selling for and other market info to pre-empt any issues. It's obviously too late for that but I would be going back to the estate agent and getting them to justify their asking price! I know you're nervous but it is more of an issue for the sellers than it is for you.

Go to the EA and use it as a negotiating opportunity - the sellers will have this problem with any other buyer and they will know that

Has your broker suggested challenging the valuation?

If you have evidence of several similar properties all selling for around what you offered in the last 6 months you can try.

Is all the information on the survey correct? Have they compared it with similar properties? I've known of surveyors getting the numbers of rooms wrong and even forgetting the garden flat they were valuing had a garden.

ok the information on survey is correct and Broker is of the opinion that its very likely that going to a different lender might result in similar valuation.

So talked to the agent and she will talk to the vendor and come back.

Lets see what happens. I feel for the vendor but i cant do anything in this scenario
so not very hopeful that he will take a 10-12k hit.
Its all going in wrong direction as it seems.

Whats the usual and sensible way out of such scenario?

Either agree a deal at a reduced price or walk away.

thanks wowfudge, that looks the most sensible way out of this.

By reduced price do you mean that vendor takes full 12k hit(doesnt look likely) or do i have to share half of it.

The vendor takes the full hit. The house has been valued 12K less than the vendor wants for it and therefore won't give you the full mortgage. You'd easentially (and the bank) would buy and immediately be in negative equity. If the vendor says no, walk away and find something else.

thanks a lot. I am also feeling bit flustered now to be put in this situation.

lets see what the vendor comes up with. Still no contact with him(agent is trying to get hold of him)

I don't think these valuations are accurate though. For exampe, different streets have different values. Some streets are more desirable than others. Some houses are more desirable within these streets. If no other 2 bed house has sold, then how can anyone know the true value? It is the value you placed on the house taking all factors into consideration? It appears ypu did. The valuer is possibly someone who probably does not know the area well and the value you, and others, place in living there? The valuer did not agree with you or the Agent.

Walking away unless you get a lowered price may be a option, but the vendor could still get the price they want with a cash buyer for example. Valuation is not an accurate science and fails to take into account of buyers who want a particular property - very strongly. The Agent is probably better placed to value a property, assuming they are local. Would you get better value elsewhere? Could you raise the value quickly by doing a few small inexpensive changes?

You are also buying a property with nothing wrong with it. That has value. Finding another property in excellent condition may be problematic. If properties sell quickly and this is a desirable area, why would the vendor reduce the price? After all you accepted the agreed price until a valuer turned up.

i have to leave on my holiday tomorrow night for 3 weeks, this undervaluation drama has created unwanted scene now.

You are right, Vendor can find a cash buyer, so good luck to him.
I feel for him too as he seemed like a decent bloke.

Otherwise, he might be in same situation after spending another month and a half in viewings etc. i am already halfway done.

Lets hope he reduces the price, i dont really have much options in this case.

You will not immediately be in negative equity if the local valuation by the Agent is about right. If it is in an area where prices rise, this is unlikely to happen. Everyone is assumig the valuation is correct. Often they are not.

It is very difficult if you are now going away, but could you look at a 50/50 split? You must weigh up if you can get another property as good for the money you have. That's it really! If you can, let the house go. If not, try to meet him half way. Although a cash buyer is better for him so he may walk away from you! I think he will consider your offer but in his position I would leave the house on the market, assuming it has not been stuck for 6 months. If it has, he should accept a lower offer from you. If houses rarely come onto the market, then this one may carry a premium. It is a rare and desirable commodity! Can you make it into 3 bedrooms by converting the loft?

The vendor has agreed to a reduction of 2k only from the difference of 12k.
He and the agent are very confident that Bank's valuation is wrong and agent has sold many in same area very recently above this price.

Broker is going to talk to the lender for a reconsideration, lets see what happens.
dont know what the lender is going to say?

You're going away for 3 weeks. The vendor has a property that is worth less than he thinks it should be worth. His loss.

Walk away now and look for something else when you get back from holiday. The vendor can moan that this is wrong all he likes, but other buyers will also be told that the house is only work £X and not £Y so he is going to have to take that £6k hit or get a cash buyer.

£6k? sorry, £12k hit.