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.

@OhShutIt is right. We want to move but it involves increasing our debt. In this climate we are going to wait.

@OhShutIt is absolutely right.

If you can afford to buy it despite the down valuation and you are planning to stay for years , so never needing to move because of illness, death, divorce, loss of job, surprise increase in children then go for it.

I don’t get why anyone would want to pay more for something than an independent assessment says it is worth. Okay may £5k but £50k? Plunge yourself into negative equity immediately for what? A house? Is there diamonds or gold buried in the garden? If something happens to you in the next handful of years, you would be in a lot of trouble because that amount of negative equity would easily last 5 years before you could break even. Don’t do it. It is nonsense.

A valuation for mortgage purposes is not an independent valuation.

Okay it is on behalf of the bank but it is a different company and they have to give as independent as possible as they have legal obligations. They are definitely more independent than the seller and estate agent and definitely more qualified in giving a value. Do you think the seller and the estate agent are more qualified and more independent?

It all depends on how much someone wants something, regardless of how much other people say/ think it’s worth ( or how much they would pay ). If you can afford it , buy it simple as that.

My daughter offered £250 k on a flat and it was valued at £190k. She has walked away. If the prices drop it would be awful to be stuck in negative equity for years

The OP offered what it was worth to them. Nothing to do with the agent or seller. They suggest a price and you offer what it is worth to you.

The valuation is to give the bank an indication of what the property would be worth if repossession was needed. You can understand in the current climate why this valuation may be cautious.

The OP would only end up in negative equity if the house needed to be sold and the mortgage amount was in excess of that. She would not be plunged in to negative equity immediately as we don’t know how large their deposit is and negative equity is really only a factor if you need to move but can’t. I would imagine that is unlikely immediately after buying a house.

What is more likely is that the downward valuation has put OP into a different ltv bracket with the lender which may affect their mortgage offer.

Does it matter in terms of ltv? For example if you offered 300k for a house and valuation came back at 285k but you're putting down a 50k deposit would the bank approve that?

Yes they would

A bank valuation is completely different. For that price they won’t even visit the property.
Just assess it online. My bank told me they’d come out to see the house if it’s worth over £500k. As long as you e got some equity in it then I’d go for it.
That’s why people say your house is only worth what someone else is willing to pay for it.

We’ve just had a similar situation at a higher price point. It is happening everywhere at the moment due to a combination of post-lockdown/stamp duty exemption rush pushing up prices and banks being very uncertain on what’s next for the housing market. For us, we couldn’t really put the whole amount additional cash as it is very much a doer upper and that cash was for the doing up!

Fortunately, we met with the sellers midway me they came down by a fair whack - I guess recognising that they are going to likely run into this with other buyers, too, and that the market might be starting to turn (and that we genuinely weren’t trying to muck them around, just the circumstances that we are now in). But very individual to the circumstances. For us, we’ve got enough equity to run out any storms over coming years and it is a longer term house. If I was a FTB on 85/90% LTV, I’d be more conflicted in this scenario. Good luck, whatever way you go on this!

The surveyor acting on behalf of the bank have asked for the vendors contact details as they want access to do valuation.

Mum It would effectively take your deposit down to £35k in that example so if a bank is only lending at 85% LTV they wouldn't lend to you unless the seller reduced price or you increased the deposit.

@SilkieRabbits thank you that makes Unfortunately the sale of our current home fell through 6 weeks ago and we had enough equity to pay cash for new house, which was the plan. We have new buyers for our house but it's not going to complete in time to secure the house we want so I've had to apply for a new mortgage in my sole name. so it's all a bit last minute and we've only managed to scrape 15% deposit and literally have nothing else at this stage. So stressful as we're re-locating over seas with new jobs etc lined up. I just hope bank values at what we've agreed to pay.

You might well still be fine in that case as you've the asset of the other house but all very stressful atm. We bought before we sold and are selling now, thankfully just had a deal agreed but who knows what will happen now. The banks are being cautious in valuations / lending atm as the outlook for the economy is bleak so they have to cover themselves incase there is a big drop in house prices.

I had this. I negotiated the price and also put some of my savings towards it

@Guymere

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.

Shes done well for herself, and you sound very proud of her

If it turns out that you can't afford your mortgage, and the house gets reposessed and auctioned, the bank will only get back what it lent to you if that auction achieves the amount of outstanding debt. The bank doesn't care if you lose every penny of the equity that you put in as deposit.

You are at liberty to pay £35k more than the independent valuation if you want the house enough - it is your money you are risking. The LTV percentage used to set which mortgage rate you qualify for will be based on the valuation value, not your purchase price.

If this is your "forever" home, and you are in a stable financial situation unlikely to be disrupted by Covid, then it probably doesn't matter that much.

Does it have a loft conversion? It's not unusual for this kind of situation to arise when the owners market and price a property as if it is a 4-bed home but legally and practically it is only a 3 bed home because the attic room is not building-regs compliant and can't be made to be so.

My friend had his house repossessed years ago and the bank sold it for less than he owed. He only very recently this year finished repaying them the difference. The bank will chase you for the shortfall if it sells it he property for less than the mortgage amount and the banks don’t waste time haggling for the highest price. They’ll sell it quickly and you are left to pick up the mess.