Mortgage valuation came back - 60k below asking price

[wannabehousebunny]

We are first time buyers and had an offer approved on a property in a commuter town outside London. Our offer was a bit more than we had hoped to pay (but still below the asking price by 10k) as we really liked the home but we were aware that the property wouldn't appreciate much in 5 years. At the end of the day we are looking for a home more than an investment but at the same time we don't want to lose money in the long run either.

The mortgage survey came back and valued the property 60 below the asking price, 50k below what we were willing to pay! The seller is refusing the budge so we had to pull out.

Is it normal that the banks devalue property to this extent? Or is this maybe due to the uncertainty of Covid etc.?

That seems extreme - do you know how the bank did the valuation (i.e desktop, roadside, actually went in?).

Surely they won't be able to sell at that price to anyone that needs a mortgage?

Who were the surveyors? There's one in particular who regularly devalue properties.

Just proof that the housing market is built on hot air!! House price increases are just based on nothing, just hopeful thinking on the Eastgate agents/home owners part in an effort to get richer. Sooner or later as you’ve now seen people are going to realise houses aren’t worth that amount and should actually be priced lower.

House prices are going to fall they have too. There is no realistic support from wages for homes at 8-10x individual income. The surveyor is just reflecting that. what percentage is 60k anyway on a £1 million house it is 6% so nothing on a 200k house it is 30% so very different. As a homeowner I expect prices to fall and hard in the worst recession for 300 years it has too. Despite the froth post stamp duty removal.

Thanks for your replies, I struggle to understand the property market at the best of time!

It does seem extreme but the Estate Agent and seller seemed very sure that the property was indeed worth the asking price which was 450 000.

Not sure who the surveyor was but they did go into the property to do the survey.

Been there - it's not especially unusual. Either you got a cautious surveyor or the house is overpriced. Pretty horrible though.

Did you get a view of the surveyors report?
The property maybe worth the price if structurally sound however if the surveyor pick up on any potential issues (roof, damp, movement etc) it will be reflected in the valuation.

Normally I’d say the banks surveyor land on the side of prudence when valuing a property so would be less than the estate agents view however the gap on this one seems excessive, unless the estate agent is foxtons in which case not surprised.

Yes, onlyk.

There wasn't anything structural wrong with the property but it was sold as 2/3 bedroom but the valuer did not deem the third room a bedroom which would have reduce the value somewhat.

We're back to house hunting now and really hope this won't be happening again and again! Fingers crossed!

Only having two bedrooms instead of three is a massive difference in valuation. What’s the matter with the third bedroom? Is it tiny or inconvenient? If it’s something where most people would see it as a bedroom, then you could try a different mortgage company.

Oh ok well yes the absence of the advertised 3rd bedroom will be a massive issue.... was it too small? No windows ?

I'm a valuer (but not residential). It's not easy valuing at present. There is "material valuation uncertainty" in some markets.
I have told our teams to largely ignore the pre- coronavirus evidence, and focus on what levels transactions are achieving now (of which there are not many).

You could ask for it to be checked/reviewed, or get a second valuation - which may mean you have to go to another bank.
I've never met a vendor or selling agent in 17 years who hasn't sworn the agreed price/asking price is very sensible, "I've got a queue of alternative buyers, mate, if yours does not proceed." Often I think "yeah, right!".

Our house was actually initially valued at £0 by the mortgage provider's survey, because in the drive-by he could see an old crack on the outside.

I suppose it may be too late for you to do so now if you've pulled out, but we were able to provide our own survey and other documents to prove that there was no structural issue. After that they were satisfied it was worth what we were paying for it, and we got our mortgage.

• sorry, I meant to add - I know your issue seems to be whether the 3rd bedroom is a bedroom? It may be that another surveyor could have a different opinion that could help you.

If the EA advertised it as 2/3 bedrooms this indicates to me that they were aware its really only a 2 bed property otherwise it would have been advertised as a 3 bed.

@wannabehousebunny

Sorry to hear but at the same time I am sure you will be thankful in the long run. I agree entirely with @BrieAndChilli.

The current and projected state of the economy is absolutely dire (circa 3 million due to be made redundant and the BoE anticipating a 10%+ correction in house prices).

The current state of the housing market is frenzied and completely out of touch with reality. Agents and sellers are frantically putting house prices on at 10%+ over current (!) market value to take advantage of the stamp duty cut and the pent up demand from people being precluded from moving over the past 6 months or so. This will die down dramatically over the next 3 months or so once we pass the back-to-school window and once the real state of the economy feeds through to the economic data.

Without trying to sound like a harbinger or doom, please do not forget that the entire reasoning behind the stamp duty cut is to prop up the market...

Always go with the banks and their surveyors on this - they know the real value of houses as its them that the housing market is built upon (mortgage issuance not supply and demand). This explains why they have dramatically reduced the high LTV products and have tightened criteria generally.

When properties come onto the market because people need to sell as opposed to wanting to, then you'll be in a much better position and will end up underpaying as opposed to overpaying as you would have done on this occasion!

Or was the ‘3rd bedroom’ a loft room that didn’t meet building regs and would have cost tens of thousands to make legal? Sounds like the surveyor might have saved you from getting fleeced.

This will absolutely be the 2 or 3 bedroom issue. To answer your question, this is about right for the difference between a 2 and 3 bedroom at around the £450,000 point (if not generous on the part of the surveyor) and yes, when the estate agent bases the price of a property on something that doesn’t exist (like a room that can’t legally or isn‘t suited to be a 3rd bedroom), the surveyor is likely to go significantly below that price.

Was it a loft being used as a bedroom?

My DH is a surveyor working for a national company. He doesn't down value properties, he values them!

Banks do generally devalue a property as they need to consider what would sell quickly if the property was to be repossessed.

If you consider this to be a home you like and see yourself in for a reasonable amount of time, then you won't be losing out. Also look at whether the town has any investment and opportunities to increase house prices. For instance, Watford is not considered London but more and more people are moving into Watford due to the fact its quick to get into London for those who work/like to socialise in London and for the money, you're getting a lot more than you would in the Greater London towns such as Harrow, Stanmore, Enfield, Barnet etc. The town are investing a lot and over the last few years, house prices have risen as demand has increased.

I'm not sure if a survey price would reflect the greater scope of possibilities, its just what they could get in a quick sale to get their money back. I'd personally be more concerned as to how it impacts your mortgage offer if you decide to continue with the purchase.

Thanks @Cranton

You make such a good point there and after the initial disappointment of not being able to proceed with the house we do feel like we dodged a bullet. Ultimately we trust the surveyor more than the estate agent and the seller.

In regards to the third bedroom it is too small to be legally called a bedroom and the very small window could not be used as a fire escape.

Thanks for all your replies on this. We looked into getting another valuer around but even the EA didn't think it would change the value much and they are going to wait for a cash buyer..

If 2-beds are worth 390k in the area, then a real 3-bed should be possible at 450k especially if it’s a bit dated? Have you seen quite a few?

This doesn't surprise me.. The endless increase in prices seems to be tailing off now, and i'm seeing ambitiously priced houses stay unsold. Four weeks ago, everything was selling.

Whether that's demand or the valuations coming in lower, I'm not sure.

But the market looks to be self-correcting around London. Maybe sellers find that very hard to comprehend. I'd say you've had a lucky escape.

I did read an article the other day (think it was the Telegraph) saying mortgage valuers are starting to downvalue houses. This is probably an indication there is a good possibility prices are going to drop. But better you got turned down rather than paying a hugely inflated price for a house.

This happened to us a few years ago, it was down valued (thankfully only by £10k) we couldn't offer any more as our deposit was already small, our vendor relented as he knew he'd have the issue with others. Just as well as we are selling now and we aren't selling for as much as we initially offered, it was definitely too much, we just liked the house.

Hope you find the perfect home.