Valuation is lower than offer, what on earth do we do?

[Grantaire]

We need to move and quickly. We are trying to work towards a exchange date of October 17th.

The house we're buying was marketed as 180-185k and we offered 180 which was accepted. Valuation is 170k.

The mortgage dude says our options are to put down more of a deposit to retain our LTV, continue and move an LTV bracket which has quite an impact on repayments or go back to the vendor and ask them to drop the price.

I am in such a tizz. This has been the most stressful time for lots of reasons and our house move has to happen for myriad reasons. I don't want to be a fool though. We've sold our house, everything was progressing well without a hitch thus far, but I'm really worried it's all going to fall through. Do we leave it to our estate agent to renegotiate? Would a sensible vendor agree to renegotiate? I'm not a chancer, we want to pay a fair price for the property and we're trying hard to make this as smooth and reasonable as possible.

I've never been in this situation before so I don't know what to do.

Have you got more of a deposit? Can you afford higher repayments? If yes, then you have options. If no, then your only option is to renegotiate the price.

If yes, then I would still use it as an opportunity to try to renegotiate the price. Try to assess how strong the market is in your area for houses like the one you're buying. How desperate is the vendor to sell? If the market is not that strong and the vendor needs a sale, then definitely try to knock £10k off the price. Even if they turn round and say no, then you haven't lost it, if you can afford to then you just agree to pay £175k, or £180k, and choose to pay either more deposit or higher repayments.

Good luck.

I personally wouldn't pay more than a house is worth - remember the credit crunch where people were getting 100% mortgages? This would essntially be the same although it's your own money rather than the bank's. I would renegotiate the offer you have made on the basis of the survey, the vendor won't be surprised if they know the survey has come back at £170k.

You have to think about resale too, if you are going to pay more than it's worth then you have to hope that a buyer would too. I wouldn't count on that.

Sorry i mean to say 110% mortgages.

But don't you then potentially end up with a house in negative equity?

We would really, really struggle with the higher repayments. The deposit option could be doable but we're keeping a very small amount of money back from our sale for a couple of jobs which need doing immediately ie putting in some central heating. We'd have to use that money and live in a freezing house with no money to do any work that needs doing.

The vendor has already had a sale fall through but the area is pretty desirable right now. Surely they'll have the same problem with the next purchaser?

Renegotiate the price. The vendors will have no choice but to agree.

Thanks crayfish. It seems ridiculous to pay more for a house than it is worth. We're good buyers I think. We've sold, willing to move to the vendor's timescales and we're not unreasonable. But then the area is quite buoyant.

Oh this is bloody stressful

Try renegotiate. The vendor will absolutely have this again with another buyer if your sale falls through.

What have comparative proper sold for in the last year OP?

We offered 405 for a house that then got valued by the mortgage company st 380. We therefore went back to the vendor and offered 380. We eventually compromised at 385.
So, definitely worth going back to the vendor.

Surely the vendors also have the choice to pull out and sell to somebody with lots of money who isn't so fecking tied to the LTV rate.

Possibly OP, but very few people are willing to overpay to that extent (even the BTL brigade).

Is Zoopla the only place to find out about prices?

Their valuations for that road seem to be around 160-175ish so probably right.

A house just down the road which is exactly the same age, built at the same time but has an extension and is in better decorative repair with a new kitchen has just gone on for 185k.

I have to nip out for a bit. I'm not ignoring you all.

mouseprice also tracks land registry data / sales. Which, with no small amount of irony, the valuers also use

I would drop the offer to the valuation. The vendors of course may not accept but they will struggle to sell at a higher price because ...well the house isn't worth it & people aren't stupid.

Better not to buy at all than to buy at the wrong price.

I think you need to re-negotiate. Maybe you'll end up meeting in the middle. Go through your solicitor but let the estate agent know too I guess?

Remember there is no such thing as a fixed value, or "what the house is worth". It's worth what someone will pay for it! In a moving market it's virtually impossible to put an accurate value on something, the valuer will work out the value on the basis of the most recent comparable transactions, but if the market is moving up and there are several people wanting the property then you may have to offer more than the valuation says it's worth. (I'm a valuer).

But I think this is a great opportunity for you to try to negotiate the price down. Unless you are sure that this would lose you the property, then it would be mad not to try. If the vendor holds out for his price, then you will have to take a view on whether you can afford to pay it.

You're only in negative equity if the estimated sale price of a house won't pay off your mortgage. So it would only be negative equity if your mortgage was more than £170k.

Definitely go back to them and put the ball on their court.
When we bought the validation came back 10k short. Their estate agent just told me they wouldn't take less, and I had to insit they asked the vendor if they would accept that.
Half an hour later they came back and said yes.
In our case they were BTL selling up, I think in your case you need to work out their situation.
If they need the money for their move, and you can't pay it, then the chain has no way to continue.
If you can both move a little, then you can meet in the middle.
If you end up in the first situation, then it's worth appealing the valuation.

I don't think Zoopla is particularly reliable for comparing prices on the same street, only for giving a sort-of ballpark average. One road I used to live in has a mix of 2 & 3 bedroomed terraced houses which look virtually identical from the outside. Its a popular area for first time buyers. On average the 3-bed houses go for about 30K more, but you can't tell from the Zoopla valuations which have 2 beds and which have 3. Adding a single story extension or conservatory also makes a difference but Zoopla doesn't seem to reflect that either.

Vendor could always decide not to accept a lower offer but it depends on how much they want to start again with the whole process. Have they already seen something they want to buy - would they be in a position to move fairly quickly, or can they afford to wait? If the area is as desirable as you say, they could be in a much better position in a few months and get a higher offer. On the other hand, a few thousand less for a quick sale may be very appealing. Really depends whether they are in a position to wait, or need to get moving.

This happened with our first house we bought.
it was valued far less than we agreed to pay, about 5k but would be equivalent to about 20k now.
Obviously we wouldn't have been given more mortgage than house was worth and they had to sell to us at the valuation price.
we got a really good deal. I think it's all you can do because the result would be the same if you let your buyers go.

To give the other side of an opinion: sometimes surveyors are a bit more conservative than the market rate, and downvalue because they're employed by the banks.

We bought four years ago and the surveyor valued the house £30k less than what we had offered (which was already £10k below the asking price). The vendors came down £5k but wouldn't shift further, we loved the house which is very unique, like nothing else on the market so went for it anyway. As a result our LTV changed from 70 to 75%, but we could still afford the repayments. We did sign on for a 5 year fixed mortgage so we'd be sure of what they were.

Prices have soared since then in our area and the house is now worth about 40% more than when we bought it. Even if prices crash, they'd be unlikely to crash that far. It still slightly rankles that the surveyor refused to agree the price & we've had higher repayments as a result, but we were vindicated in our feeling that this property was worth what we paid.

I think given that a neighbouring property which is significantly improved has gone on at the same price and looking at sold prices, I think the valuation is realistic.

We need that LTV and we need to move. If I was the vendor, I'd renegotiate without a fuss but that's because I accept the survey as a reasonable part of the process and know that the valuation could come out under what our buyer offered.

It would be so much easier if we could get in touch with our estate agent. Is it something for them or the solicitor to deal with?

Thank you for all the advice/opinions. Sorry I had to dash out.

Tell your agent, they may wish to see the valuation report before going back to vendor.

The vendors should realise that if it's undervalued by your surveyor, they will probably be in the same position with a new purchaser.

A property we bought was valued £50k below asking price. Vendor was furious we wouldn't pay a penny more but capitulated and sold at the lower price.

EA not solicitor - negotiations on price is defo EA territory.

The EA selling our house is the same EA we're buying through so they have two sales riding on this tiny chain. This is also the first hiccup and we're less than 3 weeks from proposed exchange. I'm hoping some of this goes in our favour.