New build - undervalued

[BingeOnChocolate]

This will be long so I apologise in advance but I really need some help!

We are in the process of buying a new build using the previous help to buy scheme with our plot being the show home. We reserved our plot in October initially but the sales office called on the day we got our DIP to state they were pulling out because they prefer cash buyers on show homes and asked if we had a further £20K to cover any valuation difference. Their justification for this was due to the current delays with mortgage offers. This decision was later backtracked and the area manager, in writing, confirming they had acted at haste and allowed us to re-reserve. The condition was we complete by 01 Feb 2021

We are using their preferred broker and solicitors so to ensure there was no delays on our end, sent all the paperwork and more then requested including transferring the deposit to the solicitors as this was to ensure no delays on exchange. I even located current and recent second sales of the same property type on an estate they built 4.5 miles up the way. The sales office confirmed they would use these in the valuation report as it showed the houses now valued to be some £15K more than what ours was currently on the market for.

Our valuation was completed first week of December apparently out of the blue. The developer sales office state they were not warned of the valuation nor had it been booked in. The valuer state they tried to call the sales office multiple times but the calls were ignored - we've seen the calls be ignored when in there so likely to believe this. After they had been, the sales rep called to confirm she showed him what she had managed to pull together but forgot the other house sales up the way despite the email promising it would be included.

The following day the valuation came back as....... £20K less than the asking price. £5K of this according to the report was because the road is not yet completed? My DP was not shocked at all given weeks earlier we were asked if we could bridge a £20K shortfall. The developer wanted to put in an appeal and in the meantime, I done a bit of research:

• The 2 'shells' of our house type still for sale are currently listed at £293K whereas pre stamp duty and covid, all houses that sold of our house type did at £269K. There are only 6 plots on the site overall remaining and all have been increased since covid by £20-24K.
• I found our house on a archive listing on google for £293K from Feb 2020. We reserved it for £315K and the valuation came in at £295K.
• Under the help to buy, we are not allowed to bridge the difference in cash. It states the sold price must match the valuation of the 1st charge mortgage which is a non negotiable condition for the developer. If a property is undervalued, the developer can appeal failing which, they would need to reduce the house price in line with the valuation report.

The appeal apparently wasn't submitted correctly by the developer and they were asked to resubmit but this time in chronological order the week before last. We had a call a few days later from the site saying they were preparing to house for handover first week of Feb and making us aware the drive will be completed shortly and the snags are being done. We contacted our broker who states there was no outcome on the appeal yet thinking she may have been slow to let us know. My DP now thinks the developer know something we don't for why else would they call him/us to get us ready for Feb handover.

On Friday an email from our broker stated the appeal has came back as no change. She is unsure if this is automatic email as it has not rationale on it but she is chasing this coming week.

We are at a completely loss as to what we need to do or what we can do. Who is it we need to speak to regarding the price to be dropped in line with the valuation? They've asked again to bridge the gap in cash but we know we cannot do this under the help to buy - do we need to make the solicitors aware they are breaching their obligations and let them handle it?

The shell plots are not ready until April/May so we cannot buy one of them instead and with the new price cap on the help to buy, there are no houses suitable for us. The broker and developer have all said this delay is not down to us but the valuation and therefore didn't pull out when the 28 days to exchange wasn't met- we've still not exchanged but apparently could exchange and complete the same day. We are currently renting so I've been organising, de cluttering and boxing what I can so we could be prepared.

I'm so stressed with all of this. If anyone's any guidance, help or knows where we can go from here please share.

Ask the builder to match the valuation. New builds are sold at a premium so the builder is the one overvaluing.

Why would you buy something that the RICS surveyor tells you is not worth the money? The fact that someone in a sales office didn’t hand over info is a red herring. The surveyor does their own research. Tell your sales contact exactly this and tell them you don’t have the money to bridge the gap, it’s not worth it. You’ve worked with them at every step and now they need to accept reality. If the bod in the office can’t do that, escalate it until you are emailing the MD (or tweet).

Don’t get taken for a ride. They backtracked on this point once as they still wanted the sale and they knew your situation.

@MrsPotatoHead2021

Ask the builder to match the valuation. New builds are sold at a premium so the builder is the one overvaluing.

This. Lots of rebuild went up near me in the last three years. Nobody is yet to resell at the price they bought. You pay a premium on new builds.

I certainly wouldn’t be pushing the surveyor to increase his professionally given valuation
I would focus on getting the Builders to drop the price
New builds don’t hold their price as it is without paying 20k too much to start off with
And if you were using an independent broker and solicitor they would be telling you that

Thank you for your replies. DP said it wasn't worth £315K when we first saw it but we were happy to pay that at the time. The fact a valuation and appeal came back less backed up what he said but we've had to go through the appeal motions.

I'll email the MD @Weirdlynormal as we've his email from before. I didn't know if there was a protocol we had to follow but we will go straight to the decision makers.

First time buyers and currently stressed but not wanting to loose the house that ticks all our boxes but as others have said, we can't be taken for a ride.

@BingeOnChocolate give the local team one chance, but then don’t mess about go to the top.

This happened to me in 2013

New build- up for 165k we reserved

Mortgage evaluation came back at 155k

The builders said we needed to find the difference I absolutely dug my heels in and refused and said I would walk away and face the consequences and by that poibt my chosen kitchen etc had been put in.

The sales woman was very helpful to us and fought our case with "head office" and said noone would want to buy our house as i had gone for "unusual choices..." (a walnut shaker kitched instead of the trendy white gloss....) and the builder relented and we got it for 155

Sold for 162k 5 years later so even then it wasnt worth what they initially wanted

The developer really has no choice here but to drop their price. Appeals are very rarely successful, most buyers will be buying with a mortgage, and anyone with a mortgage is likely to be in the same position as you, it'll cost them more in the long run to find another buyer, they're on a timeline, you don't want to over pay so stand firm.

As for those saying new builds are overpriced, remember every new build home bought with a mortgage is subject to a valuation, I have never had a valuation come in under on a new build, most of them must pass this stage just fine, so I would take it seriously that the valuer has said it is not worth what they want for it. I think it's more likely to happen with a show home as they try to value it more for the upgrades etc with it, I know a show home here was on sale for £30,000 more than the shell house, but that seems very steep considering it's just decoration and kitchen upgrades etc, not tangible value, more saleability.

@BingeOnChocolate - yours is not the first that this has happened to given that they asked you in advance of the survey to make up the difference. The fact that the price has risen so rapidly post Covid would be another red flag.
I would walk away if they don't drop the price. The solicitor sounds rather biased by the way which is a shame.

@NewHouseNewMe This is DPs thinking. They knew in advance what the valuation was going to do from experience.

We're going to speak to the sales office today as @Weirdlynormal normal says, give them a chance then if not, going to the MD. They are preparing for a handover to us according to the phone call we had last weekend which included taking all the sensors out. Fingers crossed they lower the price in line with the valuation. They are still making more at £295K to what the shells sold pre covid.

Don't overpay, tell them to reduce it to match the valuation.

Good luck - stand firm and be prepared to walk away.

"We are using their preferred broker and solicitors"

'hmmmmmmmmm.

That should prevent you getting independent advice.

HOw did you get on @BingeOnChocolate?

@NewHouseNewMe Been a shite show day. So the developer said first they would be willing to reduce the price to around £307K and then called back 15 minutes later advising we've until Friday to establish either another lender (which isn't possible) or clarity from the appeal as there was no rationale given. The surveyor had just responded with the first report and nothing else despite their 'strong evidence.'

We've spoken to the valuation company used and ask they will look to re-evaluate given the surveyor initially rejected the appeal on the basis he wanted the dates formatted as 13/09/2020 and not 13 September 2020 - utter pettiness!! Awaiting their response tomorrow.

We've also emailed the mortgage company directly asking if we can pay for a second valuation so it's a different person and the site will be prepared with their report. They confirmed they will get back to us by tomorrow if they can do this as an exception.

Update;

Valuation appeal has been rejected. The sales manager for the development called yesterday to give us until Friday to sort the matter out before pulling the sale as he is only able to reduce the house by 80% of the difference. We've decided to email the top of the chain this evening and received a reply moment later confirming they will review.

Even if it doesn't go ahead now and they take the £20K difference vs the costs associated with keeping it on the market, we've tried all we can.

Well more fool them, appeals are very rarely successful.

We bought a new build 10 years ago (exactly to this month actually) and it was also undervalued by £5000 due to the road not being completed (it was completed the day after the valuation).

We asked the sales office for a £5000 reduction or we’d walk away but the advisor thought they’d just cover the cost of a revaluation as we’d gone with a building society which they said was notorious for low valuations.

To our, and the advisor’s, surprise they gave us a £15000 reduction on condition that we completed by the end of January, which meant that from appointing a solicitor once the office had reopened after New Year, we had just over 3 weeks so complete. We’d reserved the house late on Dec 23rd and applied for the mortgage over the Christmas holiday.
It was 24 days from appointing the solicitor to moving in.

I’m not surprised you feel stressed! Hope it gets sorted.

How are things going, @BingeOnChocolate - I'm hoping that, somehow, it worked out for you . . . ?

Builders know that you are using the help to buy scheme so charge a premium because they know your now have more money to spend, unfortunately they can't get it past the RICS surveyors the price they want and as you've rightly said you can only do help to buy on the price it is valued at, if they drop the price that means they have to sell all the other houses for less, they're usual tricks are to give you money towards legal fees, upgraded kitchens /bathrooms and I've read in some cases give you cash back just so that on paper it says that it has sold for the higher price so that they can rope in other buyers at those high prices.

Stamp duty hols is ending soon as well, builders know they will have to knock the premium they've added on because of the savings people had got as will now need it to pay for stamp duty.

@RedPandaFluff Well, the developer wouldn't budge on dropping the price to the valuation amount at all so I contacted the valuation companies ceo myself and sent my comparisons as well as stating their charter speaks of a 3% give on the price can be done. The £307K the development said they would go to would still leave a 3.1% difference between that and their valuation. I also asked they place in writing the price has been confirmed as correct so I can submit it to the developer when asking for the 6.3% reduction.

24 hours later and THEY INCREASED THE VALUATION!

We had emailed the MDs of the development to ask for the full 6.3% off given they had been trying the last 7 weeks and everything says appeals are just process and never change. When the email came through from the valuation company confirming they 'may have not accounted for ABC' the developers could not believe it as much as us. They confirmed they will be dropping the price to £307 and will get the house all done as quick as they can.

Today we got to see the house again and get to have the excited feeling as it's been absolutely hell. The drive is being completed next week and for the new build survey, it was highlighted the downstairs bathroom door is 0.5cm too thick or something so that's got to be redone. Aiming to have the keys no later than 5 Feb!!!

Ahhh that's fantastic news! I'm so pleased to read this! Congratulations on your new home - it's a fantastic feeling, I'm sure you can't wait to get in and start settling!

That's great news, I love a happy thread. Good luck in your new home.

Wonderful news! I'm so glad it worked out well in the end!