Low valuation - what to do?

[Spiderhands]

We've been looking to move since March and due to specific requirements (school catchment and number of bedrooms) there hasn't been much suitable on the market.

We found a property last month and had an offer accepted, but our basic mortgage valuation has just come back with a lower valuation. We can still borrow what's needed on this basis but I'm not sure we want to! The valuation gives a range, the top end of which is 4% below what we offered.

Is it considered acceptable to renegotiate based on these valuations, or is this bad form? At the end of the day we really like the house, but it's not so amazing that I'm comfortable paying a lot more than its worth, and we can stay where we are for now and continue to save.

Would it be worth getting a second valuation? I'm not sure how exact a science this is? If a more detailed survey came back at our offer level I think I could live with it, but how likely is that?

Obviously we could just reduce our offer but I'm nervous of handling this the wrong way and losing the property. That could still be where we end up but we could still conclude that we'll pay the extra to secure the house.

Has anyone been in the vendors position with this sort of situation and can you give me any insight into how this would be perceived? Did you think it was fair enough, however annoying it might be, or did you think your buyer was a CF?

I wouldn't pay more than the valuation came back at.

The valuation is to tell you the value of the house.

I'd definitely expect an offer to be reduced if the valuation cane back lower than the offer.

Thank you! That makes perfect sense of course.

Did they give any details about why they valued it at that?

No, it's just the simple mortgage valuation so it's done by a surveyor but its quite basic, just refers to properties in the area and the state of the market. So I did wonder whether getting a 'better' valuation might be the best next step.

If you take the top end of their valuation we'd be overpaying by 20k.

The way properties get valued is looking at sold prices of very similar houses nearby. Unfortunately, a very similar house 2 roads away might get valued the same but if it just missed the catchment, the price people would be willing to pay is different.

As you’ve noticed nothing seems to be coming up that’s right so there’s potentially a bit of a premium the vendors can charge as there’s no competition.

You can always try and negotiate and the vendors can agree or not to lower the price.

I think the 20k would feel different to me depending on whether it’s a 200k house or a 2M house. Ie probably not that much of a biggie on a more expensive property.

Oh, reading the original post again - so it’s roughly a 500k house? I’d be negotiating a bit.

Why would it even enter your thought process that ''getting a 'better' valuation might be the next step''??

It's remarkable how people, even buyers, can't comprehend the possibility that a house might not actually be worth what the owner and some shiny suited spiv estate agent happen to think it's worth.

Because it's not sufficient for me to believe the house is worth less. To get the house at that price I have to get the seller on board as well, this isn't a unilateral decision!

Or I have to decide to walk away from a house which I liked, with no current alternative, based upon this particular valuation. It's a single paragraph in a short report which was produced for the lender so I'm not sure how much weight it should be given.

By 'better' I dont mean necessarily higher. I mean a more sophisticated valuation than a £200 lenders survey, which might agree with the valuation just received or might be higher.

It’s really very simple. Several options.

1 - Revise offer to the valuation and be prepared to walk away if the vendor won’t budge.

2 - Revise offer and meet somewhere in the middle. You have to suck up additional cash drain and potentially move into a worse LTV% impacting your mortgage offer.

3 - Don’t revise offer, as above, but worse, additional cash drain and worse LTV%.

I’d be looking to do 1 or maybe 2 if you can afford it.

The vendor is going to be in the same position again if they walk away as the next mortgage valuation will likely be the same.

You should be able to get the data and rationale that backs up the valuation. And if you challenge the valuation you need to provide better comparable transactions. It’s unusual to challenge the valuation and manage to get it adjusted.

Spider I think the point that jemihap was making is why would you want another valuation that tells you it's worth more?
Houses are the only thing in the world where people try to justify paying more than it's worth... truly bizarre.
You also said there was a range and that 4% off was the highest... so even then why are you using the highest figure... negotiate using the lower of the band or middle of the range. The seller will likely have the same problem with the next buyer

Thanks everyone I really appreciate the advice.

We are fine on the LTV still so it's not affecting the mortgage offer, it's just a question of whether we are paying more than we should.

I dont specifically want a valuation which tells me the house is worth more. I want a valuation that I have more faith in before I make a decision, as according to my broker theres a lot of variance and they often come in low. If a 2nd valuation came in at or about the agreed price I'd have more confidence in it, if it backed up the 1st valuation I'd be more inclined to say I need a reduction

Where in the country spider... or if in the south east or London what postcode. Many low valuations are being given because surveyors dont see prices going up in these areas so are covering themselves

West Mids. The broker is checking out what the cost would be for a 2nd valuation and we may ask to go see it again, and I've also let the sellers agents know we've had this issue and we're thinking things over.

Aargh!

In my experience the same lender will never take any notice of a 2nd valuation, and a different lender may well use the same firm of surveyors and may even get the same surveyor. Do you have evidence to suggest other sales have gone through recently locally to justify the price you offered? I think they need 3 very similar sales in the last 6 months within 0.5 miles.
Is that a buoyant market?
See what the sellers say I guess

As I understand it this has no impact on the lender, we are still below the required LTV so we dont need to persuade them the house is worth more.

We just need to decide whether we are happy buying at this price.

Very few comparables that I can see and nothing very similar has sold recently, so what I can find isn't comparing like with like.

As others have said, the nearby recent sold prices may have affected the valuation. You're in a better position than us to know whether the valuation seems too low.

Essentially, a house is only worth what someone is willing to pay for it. If you are willing to pay that, because its worth it to you based on your needs and requirements, then the price you are paying is its value.

There's no guarantee that someone else will be willing to pay that too - but then there never is!

Ah if that's the case why dont you just get a valuation survey done by your surveyor... if you are having a survey done.
If you are happy to pay the price agrees then why not just let the seller know about the down value and hope they agree to some sort of discount... if they say no and you are still happy to buy it at the price agreed then do so, or walk away

was it hsbc? or another big name mortgage provider?

I've seen downvaluing by their appointed surveyors for higher risk customers before. Other mortgage providers value at correct point/same as market.

Seen in Coventry area btw.

We recently had our house valued by a lender for remortgaging purposes. They did a drive-by valuation and didn't take into account any of the work we had done to the house. The value came back £110k less than the lowest of three EA valuations. We appealed it and the lender sent a surveyor round for a visit - low and behold the valuation came back in line with the EA valuations. Might be worth checking if there is anything that adds value to the house which could have been missed by the surveyor.

Its Halifax. Dont think we'd be viewed as high risk as we have a decent LTV but it wouldn't surprise me if everyone is being conservative with valuations at the moment given Brexit.

Reallybadidea I agree it's ultimately a question of whether we think its worth it, but one of the factors for making that decision is whether we're paying market value or thereabouts. Its our home first and foremost and we dont expect to move for some time, but it's also an investment and I dont want to make a poor decision. Essentially if the undervalue was £10k or so I'd have shrugged my shoulders and ignored it, but it's quite a bit more than that.

I realise that I'll just have to bite the bullet and decide either way soon, just trying to get as much advice and opinions from others as possible first.

Wineymummy from what I've seen online our sellers bought the house in its current condition around 4 years ago and haven't altered it since, and the report describing the property seems accurate.

Interesting @Spiderhands - our under-valuation was Halifax too. We looked at the reviews of the surveyor (e-surv) online and they were pretty terrible. Luckily the lady who came to visit us was lovely and really thorough. Though sounds like you're satisfied the valuation was accurate. In which case I would see what the vendors response is, and possibly ask them to split the difference with you.

Interesting, this is E-surv!

No I'm not satisfied that the valuation is accurate, I truly dont know either way. I also knows it's not an exact science so was prepared for some margin, just not quite this much!

The broker is still trying to find us an alternative surveyor for a 2nd opinion on value. We could wait for the more detailed survey but then of course we've spent quite a bit more when it could fall through.

Have you looked at what zoopla say the value change is as they have done no work... 4 years is recent enough for zoopla to be reasonably accurate.