Mortgage lender valued £292,000 on £295,000 property

[Fuckedoffat48b]

So, we have just heard that our mortgage lender has valued the house we have had an offer accepted of £295,000 on at £292,000.

Our deposit is £70,000.

What does this mean in practice? Thing is the broker is saying the bank still have to review other documents before they make a decision, so it isn't an outright no.

So what does this actually mean in practice?

You have to make up the shortfall in cash or renegotiate the purchase price with the vendor.

Your deposit just became £67,000

Yes - true. If that affects your LTV then you need to find the £3k elsewhere.

Gives you a chance to go back to the vendor and offer a lower price.

My understanding means they will only lend you maximum of £292000 as thats the value they deem the house. They wouldnt lend anymore than what they value the house so if you defaulted on mortgage payments they could take the house to get their money back. So if you have a deposit of 70k you should be fine as means they are lending 70k less.

Just tell your vendors the bank doesn't think its worth the agreed amount and you need to reduce your offer. They'd be mad to argue over such a small amount especially given the market...

That's not correct ididnothearthat. The value is just that, the value. It's not the maximum amount the bank would lend (as that would be a 100% mortgage).

It means instead of lending you £225,000 they’ll lend you £222,000. You’ll have to make up the £3k shortfall in cash if your vendor won’t agree to a reduction to match the valuation, or have a slightly lower deposit and higher LTV.

Different mortgage products have different limits for LTV. If the property was actually worth £295,000 then your £70,000 would give a LTV of 76.3%. Because the value is lower, the new LTV is 77%. So you will probably be absolutely fine.

In an almost identical situation someone could be in real trouble if their mortgage offer was based on a LTV of 74.5% with a mortgage product that had a maximum LTV of 75%, and then a revaluation to 76.5% would be massively significant because they would no longer qualify for their mortgage and would have to reapply.

Your change in values is unlikely to be taking you over any such boundaries so I doubt they will object. There's no harm in asking the vendors to consider their own response to this lower valuation though. Having a low valuation come through is one if the few circumstances when asking for a last minute price-drop isn't a horrible thing to do (another being if the survey reveals significant expensive works are likely to be needed which wouldn't have been obvious during viewings)

@namechangedtoday15 that makes sense. Ignore me then! I am only a first time buyer so all new to me too!

Thanks for your help. I was having kittens about this as I really hoped this would all be over soon.

So basically we can either go back to the sellers and ask them to drop the price by £3,000, or stump up the extra £3,000 ourselves (which we do have).

When do we go to the sellers with this information? Nothing has actually happened wrt to the mortgage, we only found this out from chasing the broker who told us verbally over the phone. How would we prove it?

You should receive a copy of the valuation report. Your solicitor will need it and the easiest thing to do would be to speak to the EA and tell them the valuation figure. Ask them to speak to the vendors and put the ball in their court to drop the price first. If they refuse, then you can make up the shortfall yourselves.

You won't necessarily have to make up the £3k yourselves- you will just have a slightly higher loan-to-value ratio.

They'll still have to pay a total of £295k to the vendors unless they renegotiate the purchase price.

I’d ask the sellers to at least meet halfway on a price reduction. It’s a buyer’s market at the moment most places.

This happened to us when we bought our first house. We went to the EA and said that we literally didn’t have the money to make up the difference, and would have to pull-out unless the sellers were happy to accept the valuation. They did and we bought the house.

You either find an extra £3k, get the sellers to reduce price by £3k or meet them halfway :-)

Is it just me that finds it very odd the mortgage Co or valuation survey would quibble over 1% of purchase price? I’d there really any difference between a value of 292 and 295?

No there were so many negligence claims against valuers after the last "crash" that if a valuer values it at £292k, that's exactly what they have to put.

But how does a valuer decide 292 but not 295?? They are so very very similar. A margin of error in what a house is worth should’ve more than that!

But how does a valuer decide 292 but not 295?? They are so very very similar. A margin of error in what a house is worth should’ve more than that!

Computer says No?

Most valuations are not done by actual people now, but by algorithm. If they've changed it or down-valued it recently this could be why. Possibly if you complained and got an actual human it might be changed back up, but easier probably (and cheaper!) to go to the sellers and ask them to absorb the difference.

The Valuer may deducted a nominal amount for any items not deemed to be fixtures and fittings for example carpets and curtains, or freestanding items such as a range cooker, were any such items included in the sale?

Pretty sure that in the UK no valuation would include carpets, etc so the surveyor won't have made a deduction for them.

I also find it weird that they would quibble over 1% of the value.

I think this example is quite pertinent considering some of the recent threads about price crashes and posters howling 'a house is worth what someone will pay for it'.

For what it is worth, this is for a two bed house in fairly good nick, in a London postcode, minutes from the train station and local amenities by the way. Not a particuarly complex valuation at all I would have thought.

I think it is fairly common for lenders to quibble like this at the top of the market with interest rate rises in prospect. For every £1 the buyer risks they are risking £9, so a £3,000 quibble for them gives them an extra £27,000 wiggle room on their capital requirements. In a rising market they are at much less risk as they are building themselves an equity cushion almost as soon as the transaction completes.