Mortgage Company down valued house by 40k!

[cooperbug]

What do we do? Is this common? To be honest we knew it would be given a lower valuation but not by 40k

Got our verbal valuation back on the house we have had offer accepted on (private sale) today and the mortgage company have down valued it by 40k less than we have agreed to pay!

We have had full buildings survey done on the property today and will receive report back from this next week. Do we approach the owners to discuss this situation now or next week?

Our mortgage application has been paused in the meantime.

Feel so stressed, the sale of our house exchanges and completes on Monday and we are moving into rented for a bit until the new house goes through!

You need to discuss with the owners.
You can't pay £40k more for a house than it's worth

I think we will await the results of our survey next week and re-negotiate from there

This is not uncommon. Please don’t buy a house that is worth 40k less than a mortgage company think it is, otherwise you have to find that 40k from somewhere and have no guarantees of ever getting it back. Unfortunately, estate agents often over value house prices but what a mortgage company value it at is usually gospel. This happened to me some many years ago but mine was only 5k overvalued and I approached the owner and he agreed to go halves...so I paid 2.5k more than I should have. Needless to say it’s worth a lot more now after the extensions and renovations but 2.5k is nowhere near 40k! Think long and hard about this.

I work in conveyancing and this is really common at the moment. The stamp duty holiday has inflated prices to more than is reasonable. They will drop again next year and I would wait. We have had a lot of buyers being refused mortgages because of this including my daughter who had the flat she was buying under valued by 60k. If the sellers won’t reduce the price then walk away. You don’t want to be in negative equity a year from now.

The thing is it is a private sale and we know we are overpaying a bit (not 40k) as its our forever home. Despite this its above the ceiling price for the street.

The owner told us he had four very different valuations on it and we went in at the middle value with our offer.

Dont know what to do for the best. Obviously don't want to overpay but don't want to miss out on this house either if he decides to market it.

I guess he would have the same problem with any future buyers though as if they weren't cash buyers would need a mortgage too.

The mortgage company are still willing for us to borrow the money as we have a good deposit and can afford the monthly payments but obviously I just feel really uncomfortable about this.

The house we recently sold was down valued by £25k, our buyers met us in the middle.

Valuers are only people and they can come up with different numbers (I do mean professional ones, not EAs).

I think it depends on the price too. If it’s 40k on 300k, that’s an awful lot. If the house is worth 7 figures, than the 40k is easily what a keen buyer could pay over a valuation.

The banks value of the house is what they think it’s worth to them, if they should end up with it on their hands ( repossessed) Can’t blame them.
I don’t think a house has an exact price as different people value houses differently. If you think it’s worth the price they are asking and you can get the money.... go for it.

You could try a renegotiation on the price ? But 40 k is a lot toknock off the price for the seller.

Yes I totally get that they need to be cautious with lending especially in current times.

Going to await survey report and approach the owners. I doubt they will even meet us halfway with it though as they haven't marketed it yet.

We had something similar recently (actually more undervalued!) and we agreed to meet in the middle with the sellers. They realised that they were likely to have the same issue with other buyers (unless very luckily) and it is a more uncertain market than when they put it on the market. Stressful but worked out well for us, with a substantial decrease in mortgage, and I still think the sellers got a decent price - in retrospect we offered over the odds due to a bidding war driven by a bit of a bubble after the first lockdown ended. I think the bank’s valuation was on the very cautious side but that’s the risk appetite at the moment, and it is a doer upper so a bit harder to pin down value. For us, it is a long term house in a great location, so I’m glad we were able to go ahead - if a starter home or flat (ie only staying for less than 5 years) we would have pulled out, I think.

@Yazoop I'm glad that things worked out for you and you were able. to get it for a better price. its certainly stressful.

Did you tell them straight away or await results of survey?

We told them straightway as we had a few weeks to wait until our survey was done (unfortunately our local and trusted surveyor had a bit of a wait time!). In our case, we had factored in cost of modernisation (and was cheaper than other properties in the area) so survey not as important unless big issues like subsidence came up. But the sellers did say they were agreeing the drop in price on the basis they would not be amenable to haggling price over any niggles with the survey results - fine for us in our particular circumstance, but something to bear in mind.

If you’ve had the survey now anyway, may make sense to have it and have a quick chat with the surveyor to see what is likely to be highlighted in the report? I would say that our mortgage provider did take a little while to rubber stamp the lower mortgage offer due to an admin error on their side, so might be worth trying to renegotiate as soon as poss to prevent delays with mortgage going through. Good luck!

Way above the ceiling price? What makes it worth that much?