Mortgage valuation MASSIVELY lower than agreed purchase price

[May2311]

House was up for £320k & we had an offer accepted for £305k. Mortgage valuation has just come back and states it's only worth £270k!!!

How an earth can there be a difference of 50k from asking price?

Obviously we are going back to the sellers but do you think it's worth getting another valuation with another mortgage provider or do you think it would be similar? Our thinking is the valuer is independent so it is more likely to be the same.

I fear we are in a house pricing bubble tbh. I live in South West London and houses are selling like hot cakes at high prices due to pent-up demand post covid/lockdown. Prices that are unlikely to be sustainable post-Brexit/when covid loans need to be repaid.

Get a 2nd opinion and if that comes back the same you have a tough discussion to have

Get a 2nd opinion - we had a £50k difference in valuation at the end of last year which was resolved with another lender.

It’s £35 k difference isn’t it? What size is your deposit? Is it worth £305k?

DD was told when her flat was valued in late summer that come October the valuer expected to “devalue” lots property. She’s in SE London but a fairly desirable location with great transport links - 1 stop into zone 2.

I guess renegotiate with the vendor if you don’t have the money.

I'm worried about this - our buyers' surveyor told us about 50% of houses are being valued at below the agreed price at the moment! Still waiting to hear how the survey went.

If the price you offered matches sale prices for the area (including pre-covid) then I'd be getting a second opinion I think - as a seller I would be reluctant to accept a £50k drop from asking price!

Have you had your survey yet?

We had this and our homebuyers survey came back same time and agreed.

Vendor refused to negotiate and threw it back on the market, where it still is six weeks later...

That is scary. You have a tough decision ahead of you.

How an earth can there be a difference of 50k from asking price?

Greed.

I read in the Sunday times last week that valuers are under valuing in a lot of properties now due to covid/brexit - expectations that house prices will drop going forward.

If you love the house its probably worth trying to find out what, if anything has caused the lower valuation, including having a survey to make sure all is well with the house and then see if you can get a lower price accepted? If it is worth less then the next buyer they get will come up against the same problem.

How big is your deposit? It’s not really an issue if the valuation still covers the amount of your mortgage. You may be in a different ltv bracket though.

England really, really needs to adopt at least one of the Scottish property market standards. Like the compulsory Home Report survey and valuation, commissioned and paid for by the vendor., carried out by an independent professional surveyor and available free to all potential viewers, buyers, and mortgage lenders.

www.homereportcompany.co.uk/home-reports/

I was told mortgage lenders base the valuations on if the property had to be repossessed , but just for the basic structure. That means what they could get for the house if it had no kitchen/bathroom , no internal doors , no heating, etc , I’m sure some repossessed houses look like this .

Makes sense as most people don’t leave repossessed houses immaculate ready to sell .

This is one benefit of home reports in Scotland, you know what the mortgage valuation is before putting any offer in. Houses still routinely go for way above valuation though if in a desirable area etc etc

You need to ask why it’s been valued that way - overpriced for the area, what? Was it an actual person who came out to value or an online average price? Is the property unusual in some way that means it’s worth more than the ‘average’? That give me you a good idea if whether you’re likely to get the vendor to negotiate.

Can you afford to buy it without a mortgage for the full amount - what is your deposit situation?

@2bazookas. Whilst I agree that it is beneficial to know the valuation rate upfront, the Scottish system has massive flaws too. The surveyor is appointed by the seller so is definitely not independent. The estate agents and surveyors work closely together and the estate agents will use the ones which they know will state the highest price. Our estate agent even suggested a potential selling price to the surveyor and low and behold this is what it got valued at. There is no incentive for surveyors to produce a low valuation figure as the local estate agents simply don’t use them.

A mortgage valuation is instructed by a bank.

A bank makes money by lending money.

A bank wants as many people to borrow as possible!

However, they need insurance.

If they don't think the asset is worth the price of the loan they feel they have no way to recoup their money should you not be able to pay.

Houses are being down valued because banks are preparing for a market correction/crash. Banks are giving this guidance to valuers.

Added to the ridiculous post Covid increase this is no surprise.

Yes, people have been talking about a crash for a long time. However, banks and access to lending determines the market and nothing else.

If they are not lending, surely there is no greater indicator that the correction has already started. Temporary market boosting activities such as the stamp duty break included.

Rather than find another valuer, perhaps you should be asking yourself if you're comfortable paying for something above the value that a property professional has deemed it. Not an estate agent 'professional' but one without vested interests.

OhShult you have said it perfectly. You make a lot of sense.

@Chumleymouse

I was told mortgage lenders base the valuations on if the property had to be repossessed , but just for the basic structure. That means what they could get for the house if it had no kitchen/bathroom , no internal doors , no heating, etc , I’m sure some repossessed houses look like this .

Makes sense as most people don’t leave repossessed houses immaculate ready to sell .

tell this to a buyer!! without going into much details, my ex property got something the next door property didn't have and yet same lender valued them same price.

moved to a new property with new outbuilding(roofed massive garage and games room) costed over 30k, finished about a year, yet the desktop valuation came short of the agreed price.

I would just go back to vendors with evidence and see what they say. I wouldn't pay for another valuation myself and would walk away if they won't reduce price to new valuation. If they want to pay for a second valuation would agree to it and see what that says then if higher try to get mid point.

I'm selling and if my house got marked down I would agree to lower price as that's its value atm. However that wouldn't take me into negative equity and for some people it might and some people are just unrealistic. My mortgage valuations have always matched price I've paid so don't think it is value stripped of kitchens etc, its just the market value though what the bank will want is if it will get its money back if repossessed and house prices fall but they will have their own models to calculate that.

Often a mortgage valuation is 2 mins and a comparison of local houses.
Either way the price is what the mortgage provider will likely loan.

You might wish to speak to the valuer in case there has been an error or they know something you do not like the house is in a mining area, flooding area or the construction is not the norm.
Has there been some sales with issues they have knowledge of?

You might pay for a survey but must stipulate you want a valuation price.

You might speak to the v

Look at what the valuer has said marks down the price, does the house need rewiring, new roof, anything major that you didn't know about, then go back to vendor & adjust your offer, or ask vendor to sort the problems & get revalued. Be prepared to walk away if you have to.

I agree that the banks may well be cautious, but a valuation for mortgage purposes is just that. With the current economic situation and so many jobs at risk, they are probably being very cautious.

In your shoes it wouldn’t unnecessarily concern me, as long as the house was a mid to long term house rather than somewhere to live for a short few years.

We ‘overpaid’ for our house in 2007 but if we sold the house now we would make money on it. We were never concerned about paying more as it was a long term investment.

2bazookas. Whilst I agree that it is beneficial to know the valuation rate upfront, the Scottish system has massive flaws too. The surveyor is appointed by the seller so is definitely not independent. The estate agents and surveyors work closely together and the estate agents will use the ones which they know will state the highest price. Our estate agent even suggested a potential selling price to the surveyor and low and behold this is what it got valued at. There is no incentive for surveyors to produce a low valuation figure as the local estate agents simply don’t use them.
This
Am in Scotland and always get a second survey

2 of my neighbours have had their sales fall through because of this. Tbh there is no reason why their homes are worth 50k more all of a sudden. My direct neighbour has sold for the same value pre Covid which makes sense.