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Original poster

How likely is it that mortgage valuation will be lower?

19 replies

BonnieBlueButler · 28/01/2018 16:43

Our house created quite a lot of interest with first time buyers and sold within a week. We had several offers but accepted an offer that was 5k above asking price.

The surveyor from the buyer’s mortgage company came round last week. We haven’t heard anything yet but this weekend I’ve had a bit of a panic about what they might say.

The extra 5k has secured an accepted offer on our dream home and I’m now worried that our buyers may not be able to secure a full mortgage. They are clearly paying over what the property is worth but knew this when they offered over asking price. I know they are first time buyers but don’t know how much of their funds will be mortgage and how much deposit.

Does anyone have any experience of a mortgage valuation being lower than offer? I’m aware that I’m worrying about something that hasn’t actually happened yet but would rather be prepared.

Thanks.

OP posts:
heymrsb · 28/01/2018 17:58

I believe - just going by how my mortgage company works - is that they work on a "loan to value" ratio (LTV), BUT - they will only use the value they determine in any calculations, unless you can present a case otherwise. So it could be the £5k is not taken into this value and they'll have to cover it directly...

I would hope that your buyers have done their homework and they've already been given a good indication by their lender based on the LTV (and figured out what they can afford, including over and above) but it's all down to the paperwork at the end of the day. Sadly 🙈

Moving house is so stressful! After 10 years in our flat we are looking to move pre baby arriving but it's so bloomin' hard - if you could cut out all the estate agents and lawyers and red tape I bet we would all have a much easier time! It's different in Scotland as well, we don't have the same chain stress - but still, so complicated!

Good luck - I hope it all works out, fingers crossed!

Original poster
BonnieBlueButler · 28/01/2018 18:09

That makes sense. Thank you. This is the third place we have sold but as we’ve never been in the position of accepting an above asking price offer before, this worry (to add to the million others!) is new to me.

I hope the buyers have done their homework too. They came in with a high offer very quickly. If they ask us to renegotiate then I’m afraid we will lose the house we are buying.

Thanks for the best wishes.

OP posts:
Candlelights · 28/01/2018 18:17

Normally they accept whatever you've offered as a fair price for the property and put that down as the valuation.

But I did have a mortgage valuation come in at less than I'd offered once. This was because the house was concrete, so potentially harder to heat and harder to get a mortgage for (though my bank were happy to lend on it) I could still have bought the house for what I'd offered if I'd wanted to because my deposit was plenty high enough (ie I wasn't asking to borrow more than the surveyor said it was worth). But I did use the valuation in order to negotiate down a bit on the price. I think that's unusual though. Normally the valuation is whatever your buyer has offered

Original poster
BonnieBlueButler · 28/01/2018 18:27

That gives me some hope candlelights. The 5k doesn’t sound loads but it has put us into a different bracket in terms of what we are able to view and offer on.

OP posts:
Lilmisskittykat · 28/01/2018 21:46

When I sold my last house the first time the valuation was 12k less then the vendor had offered.

It was a real shock as several estate agents had valued it, I never realised that it was all about how the bank saw it and nothing else mattered.

That sale fell through as they didn't have the cash difference (fair enough 12k is a lot to find) second time valuation went through at offer - so go figure that one.

Original poster
BonnieBlueButler · 28/01/2018 21:55

That’s a big difference! Oh dear. I’m afraid that’s what may happen with us. It seems fairly common. I also didn’t realise it came down to this.

OP posts:
Original poster
BonnieBlueButler · 28/01/2018 21:56

On the other hand, our buyers knew the value of the house and chose to offer more so maybe they have the difference?

I need to stop second guessing and just and see.

OP posts:
Candlelights · 28/01/2018 22:30

It's unusual for buyers to be getting a 100% mortgage these days. If they're only borrowing, say, 90% of the value then it won't really matter of the bank values it a little lower. They might try and argue you down on the basis of a low valuation but they can still get the mortgage so you don't have to agree.

Lilmisskittykat · 28/01/2018 22:56

If they are borrowing 90% of the value so for sake of easy maths ... 90k with a deposit of 10k.

If the house get valued at 90 so the deposit now needed is 9k but the offer was accepted at 110k ( as it's over the value of the selling price and valuation price) that's 11k for the buyer to find and immediate negative equality to the sum of 10%.

This is all just easy maths but my point is The difference between valuation and offer price not just a matter of deposit but the prospect of negative equality which immediately effects the ltv ratio and so future mortgage rates and remortgage ability.

I'm not trying to make anyone nervous, been there as said it sucks. But it's more complicated then a matter of finding the difference ,unless you have very naive first time buyers who aren't bothered about two years down the road situation. (And unlike me didn't buy in 2007 and now very wary of negative equality and its impact)

Lilmisskittykat · 28/01/2018 23:02

Like you say it's all out your hands .. try not to worry and maybe make plans to get your hands on a little bit more money so you don't loose your dream house.

Really hope it's all ok for you.

NotDavidTennant · 28/01/2018 23:07

immediate negative equality to the sum of 10%.

Negative equity is when the outstanding mortgage is greater than the value of the house. You can't be in immediate negative equity unless the mortgage lender lends more than 100% of the value of the house, which they don't do anymore.

Original poster
BonnieBlueButler · 29/01/2018 06:05

Thanks all. It is worrying.

I don’t understand why anyone ever offers more than full asking price for a property? Is it usually only people who don’t need a mortgage who do this? Because surely the surveyor will never value it at more than it is worth?

OP posts:
MessySurfaces · 29/01/2018 15:01

Well what it's worth is what someone will pay, and all the figures are just guesses!
So it could be that your asking price undervalued it.

Lilmisskittykat · 29/01/2018 16:02

Ah I guess my terminology is off Confusedbut you'd still be a risk especially if you had to sell before house prices had increased by 10%.

I'm with op I don't understand why you would pay more then the value of something.

It's only a reflection of how I would feel as someone bitten in the last housing price crash

SkyIsTooHigh · 29/01/2018 16:33

I think engineering prices to go over asking is an increasingly common tactic by estate agents, personally. Surveyors deal with sold prices, they don't care about asking prices, and I don't think they worry about a few k here and there, because that comes down to what someone will pay.

There was a lot of competition for your house at its price point and it only went a few k over. I don't think you need to worry. It's much more likely that your house was priced sensibly and your estate agents did their job.

Equimum · 29/01/2018 16:33

I have no idea how common this is, but when we bought our first house, we offered below the asking price and the valuation was even lower. Mortgage company weren’t happy to lend at that value, even if we found the difference. We ended up renegotiating and paying what the surveyor suggested.

I hope you sale all goes ahead smoothly.

SkyIsTooHigh · 29/01/2018 16:38

I'm with op I don't understand why you would pay more then the value of something.

Because it's not a value, it's just an asking price. Estate agents are sales professionals, not independent oracles on the true value of their "product"

LooksLikeImStuckHere · 29/01/2018 16:42

Ours sold for £16k over the asking price and I was worried about this for the same reason as you. The estate agent said that they had cases from the local area to prove that it was a fair price in case the surveyor did say it was worth less but they didn’t, luckily. Could you talk to the agents and make sure they have evidence of the price not being unrealistic?

sdaisy26 · 29/01/2018 17:05

You need to look at what other similar properties close to you have sold for - that's what the surveyor will use to determine value. Asking price is nothing to do with value.

We had this when we sold last year - all EA's we spoke to gave an asking price of over 10% higher than we knew any similar property on our road had ever sold for. So we were sceptical! We did actually get an over asking price offer straight away but it did (unsurprisingly) get downvalued a bit on survey. Luckily we were able to drop the price to the valuation (which was still quite a bit over any other sale price on the road). In part we dropped straight away because we'd had a similar experience as buyers at the same time & there the vendor just completely refused to negotiate (& it was a whole lot more than 5k!). Their house is still on the market (a year on).

However our downvalue was 10k, we could suck that up luckily. The other was loads more than that. I'm sure for 5k you'll be fine (as long as asking price was reflective of recent sales of similar properties.

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