Lost out on house due to another bidder having a larger deposit. Why?!

[firsttimemumtobe122]

Lost out on a house today because it came down to the deposit amount each bidder had and they chose the one with the highest deposit. Even though my bid was highest (there probably wasn't that much in it).

Because I am porting my mortgage from my current property my deposit would be quite low. But I've made over £100k in profit from my house sale so could easily offer a much higher deposit, and get a new lower mortgage. I have just decided to port my mortgage due to the fact I have a good rate, and would prefer to avoid spending a couple of thousand in the early repayment fine. I honestly did not know my deposit would be so important, and I still don't understand why. I'm devastated to have lost out, and am blaming myself badly for this deposit hiccup.

I offered 16k over asking and my buyer is chain free. I honestly thought this put me in a really strong position, never once did deposit amounts occur to me!

When I received offers on my house, I never once questioned the bidders deposit. It doesn't matter to me if the buyer has a huge sum they are smacking down as a deposit or are mortgaging themselves up to their eyeballs. As long as I get the price I want I'm happy? Makes no difference!!

Can anyone explain this to me please? So I don't get stumped again when it comes to bidding on the next house.

This is probably as per the estate agents advice due to the way some lenders are restricting lending. Our estate agent was automatically rejecting anyone with less than a 15% deposit for viewings unless they met income criteria, and ranking offers based on deposit size.

So the house you are buying is cheaper than the one you are selling?

No I dont understand that either...could the estate agent explain the reason to you?

It’ll be mortgage based. Banks are massively favouring those with big deposits. So I imagine the seller feels the bigger the deposit, the less likely there’ll be any mortgage issues..

The valuation might come back lower than the agreed price. In that case, someone with more cash can make up the difference more easily.

@Alexalee yes, my plan is to buy a house roughly £100k less than what I've sold mine for. And then use the equity to get a buy to let.

Seems strange as the only reason would be thinking you might not qualify for a mortgage but you already have one (though the lender would still value the house and have to approve it).
Who knows why people make the decision they do? I would accept in order or preference: cash buyer, no chain, low mortgage (or high deposit), so it comes last in my opinion.
25% of sales don't go through so ask the agent to inform you if that happens but keep looking.

Can you go back and explain that if there's a mortgage issue you can easily increase the deposit?

@JacobReesMogadishu I am going to call them in the morning and explain this to them. Although most likely too late, just so angry at myself!

I had two identical offers on the same day on my house, I went with the buyers with the bigger deposit as they are more likely to get a mortgage approved and/or be able to cover any downvaluation. Obviously your situation is different and maybe should have stressed that as part of your offer.

Did you fully explain your position?

It will likely be because the EA knows that the house is being sold for more than a mortgage company will value it at, so automatically are favouring those with the biggest deposits.

But sounds like you're in a very strong position, definitely push that! Good luck

@IsThisCrazy

How does it work if a house is downvalued? Would you still pay the agreed sale amount? Sorry, I've never sold and bought before, just bought my house new build as a first time buyer and it was so easy! 🤯

So say a vendor accepts an offer of £300k but a mortgage company values it at £260k, the buyer will need to be able to cover in cash that £40k difference in value as well as having a good deposit for the mortgage to be approved on the £260k, and as lenders rarely will give 100% mortgages anyway this makes the biggest deposit the most likely to be proceedable.

I hope that makes some sense!

@IsThisCrazy oh i see! Thank you

Could you be mixing up mortgage deposits versus house deposit? So they may have offered to pay a 20% deposit at exchange, instead of the standard 10%, thereby leaving the vendor better off if it all falls through. Otherwise yes, I’d say it’s just that having a bigger deposit makes them seem like less of a risk. I disagree on the undervaluing point. If my mortgage company valued the house as lower than the accepted offer I would be renegotiating the offer, not topping up with cash! (As any other mortgaged buyer wouldn’t be able to go over that value either)

I'll always take £16K more and pray the it doesn't fall through

This happened to me. Could not understand. Had exchanged with my buyer so no chain, and had gone through the mortgage underwriting with bank and had to find property urgently cos seller pulled out at last minute. They came back to me after the buyer with the larger deposit pulled out. It was too late and I was relieved actually cos I found a better property.

It's such a minefield. This is the second house I've lost out on over the past 2 weeks, nothing else out there that fits our criteria. Hoping something comes up real soon, and even then what's the likelihood of securing it? It's too stressful! I'm 6 months pregnant too, hoping everything happens for a reason and we secure our dream home soon.

buyers with 20% or more are very likely to get mortgage approved or they know the property sold more than what lender will value it, hence the buyer with a bigger deposit will be able to bridge the gap.
sold recently well over asking price (few offers over asking price).
very lucky the highest offer had the biggest deposit, agreed to pay the difference minus 5k.

It might not be too late. Fingers crossed for you.

That’s weird to assume of expect that normally buyers will pay more for the property than it was valued by the bank. There are some desperate buyers out there but they are not the majority when the cold hard facts slaps one in the face. A seller should never make a decision about the buyer and the size of the deposit based on the erroneous assumption that they are more likely to be stupid and desperate to pay more for a property than a qualified, professional valuer says it is worth. The seller cannot possibly know more about the market conditions, expected economic risks, and condition of the property than the professional whose bread and butter is to know this. OP if that is the mindset of the seller you should thank the Lord you’ve avoided that drama.

The seller will be over optimistic about price. The valuer more conservative about price. The truth will not be the over optimistic view.

I just don't understand why buyers would be so desparate to buy they would pay above valuation price. When we bought one of our past houses it was valued lower than our offer but we lowered our offer in line with valuation and venders accepted that too.

Depends on the local market
Logically I agree that it is mad to pay more than the valuation
But where I live you simply wouldn't get a house and therefore bi in catchment are for school unless you went 15% over

Then why are sellers and estate agents pricing 15% below? Sounds very very odd and illogical.

Called the EA and explained my situation clearly, they said they would speak to the vendor about it and get back to me this afternoon. Obviously they have agreed a sale as of yesterday evening but I can't say I didn't try! It was such a beautiful unique house and nothing like it will come up again in the area.