Worried my house might be over-valued

[Pegs11]

Hi, I’ve just sold my house (subject to contract) to a first-time buyer, for a very high price compared to all the other houses in my street.

This is because we have completely renovated and extended it, whereas the other properties have not been. It is also in a highly convenient location, with a lot of new businesses springing up nearby.

We had LOTS of interest, and several offers. In fact it went to a bidding war! We accepted an offer that was over the asking price (and the asking price was already quite high!).

I’m now worried that it might not pass the mortgage valuation! I’ve heard that often the mortgage guy will just do a quick drive-by, or even not bother to come out at all and just go on what the other properties in this area have sold for. They are unlikely, from what I’ve heard, to know about the extensive renovations we have done (or bother finding out). I’m so worried because we need to find somewhere to buy and I don’t want to get financially or emotionally invested in a property if it turns out ours won’t even pass the mortgage valuation!

My estate agent, much to my chagrin, has advised our buyer not to make any moves (not even get a mortgage survey!) until we have found somewhere and have started spending money on the buying process! They never used to do this, but apparently Covid has changed things in this regard.

So... I don’t want to fall in love with a house, start spending money on buying it etc, if it turns out I can’t even sell my house at the price I was expecting because it fails the bloody mortgage valuation. I know that any number of things can go wrong with property moves but this one seems stupid. (Although I’ve heard it’s happening a lot at the moment, especially with low-deposit buyers.)

We certainly won’t be able to move if we don’t get the asking price... and I just want to know! Can I ask my current mortgage lender to come and value my house (so at least I know what I might have to deal with!)

Any advice would be appreciated, thank you 😊

I would proceed with caution if I were you. Just because someone is happy to buy your property for a certain amount, it doesn't mean the lender will agree it's worth that. When we bought our house we offered 3k under the asking price, which was accepted. When the surveyor (instructed by our lender) did the valuation they said it was worth 10k under the asking price. The vendors were furious about it and got quite arsey, trying to get us to put a larger deposit which we didn't have as first time buyers. Ultimately I told them that we either paid the revised valuation amount for the property or we'd be walking away. I also advised them that they'd potantially face similar issues with anyone else who needed a mortgage for the property. They didn't want to lose their new property, so they just had to suck it up in the end.

@Pegs11

Also, as I said our offer on the house we fell in love with was declined and we were heartbroken... but before we found that one we had put an offer on a different house but had pulled out when we realised it had been massively over-valued... the current vendor only purchased it a year ago, and it was for 15% less. We initially thought it warranted the price rise as we were told by the vendor’s sneaky EA that our vendor had completely renovated the house in the one year she had been there... then with a little due diligence we discovered that this was a complete lie and all the renovations had been done before she bought it! So she’s done nothing at all to improve the property, yet was expecting to make a 15% profit on it in just one year. When we discovered this, and also compared the price of the property to others in the street, we went right off it!

I guess if you are willing to reduce your purchase offers based on how much previous owner made rather how much is worth or lack of research then accept reduction from your buyers. or at least accept homebuyer reports offer.

@Pegs11

He just advised against a homebuyers survey yet. We had an AIP and have applied for the mortgage and our broker has instructed a valuation.

Sounds like they are friends of the EA, definitely something not right here (I've sold and bought a property in the past 3 months and none of this was advised on either side). I'd be on to the EA first thing this morning to find out what is going on with them.

I assume the EA has a relationship with the buyers (family/friends) as that is the only logical explanation for their behaviour. I would take the house off the market, stating that they have failed to bring you a proceedable buyer - this is important to say.

When you go back on avoid this agent like the plague.

If

If you stick with this EA, I guarantee that he will tell you that the buyer's valuation is considerably less and that they are reducing their offer in line with it. The EA will pressure you to accept it as they will say that they think this is the best offer you will get.

Of course they want you to have found your next property/gone into rented so that they have more leverage to force you into accepting a low offer.

Just to add, we bought a house with a very similar problem to you - on paper it's a four bedroom semi, but the layout, unusually large garden and location at the end of a small road make it very unusual and desirable. We've had EA's round to value (just being noisy) and they estimate 150k more than what I know the bank will likely value it at. When we bought it the mortgage valuation was under what we had offered by about 8%. We renegotiated and reduced this to 5% (and could cover the difference as we weren't first time buyers).

We have the same issue every time we remortgage, and always ask the broker to look for a mortgage provider who has flexibility on this - to be fair though they never find anyone and on our last remortgage the algorithms were in our favour (it also matters less as your equity increases).

My experience with mortgage companies has been that there is zero ability to challenge a valuation, which is annoying as we have lost out on better rates.

Ah man... this is all looking really bad for me!

I wonder if I should tell my EA that our vendors need to get their AIP in place, and also tell him my concerns about the mortgage valuation and make it absolutely clear that we will not be able to proceed if the lender values our property below the asking price... and that we need to know ASAP or our sale won’t go any further.

Yes, it does mean our buyer will have to pay for a mortgage survey, but given that they will lose our house completely if they don’t do this, perhaps it’s a fair trade-off.

Alternatively we could re-market the house to cash buyers only, but the two offers we did have from cash buyers were way below the asking price - like, 15-18% less - so I’m not sure how long it would take to find a cash buyer who is prepared to fork out the full amount!

I would contact the EA and say that as you haven't received any proceedable offers you will be forced into taking the house off the market. See how he reacts.

Ok just spoke to the agent... he said:

1. Our buyers are totally proceedable, they DO have an AIP in place. I said do they have an actual AIP from a specific bank, and he said no, their AIP is from a private mortgage broker and this is just as good. He seemed absolutely certain about this and said it was perfectly normal for things to proceed on this basis.

1. “Any agent with experience and a conscience wouldn’t ask a buyer to spend money on a valuation until their vendor has found somewhere”.

1. Mortgage valuers “almost always” liaise with the EA about the valuation, they usually go into the EA’s office to collect the keys to the property, and so the EA has the opportunity to run through comparables with them and alert them to the extent of renovations. He is not concerned that it will cause any problem (although did accept you can never be completely certain). He has sold several other properties in my area for a similar markup.

1. We couldn’t be in a much better position than we already are - first time buyer with “a good deposit” (whatever that means) who are so besotted with our house they are willing to remain in their rented accommodation for as long as it takes for us to find a suitable property.

1. Even if it was devalued by the banks, things are expected to get better very soon for first time buyers in any case (banks will be willing to accept lower deposits etc) so it’s not likely to be as risky with FTBs as it used to be (and they may be able to increase their borrowing to make up for any shortfall caused by a not-perfect mortgage valuation).

1. He didn’t intend to put us under pressure to find somewhere within 4 weeks and that I had misconstrued his words. He felt certain our buyers are willing to wait however long it takes.

So he had quite a lot to come back with!

We had this, but luckily one property near by had sold for more, it was actually completely different but seemed to work in our favour. We sold for 70k more than most others the same in the area, just due to completely modernising. I feel we could of got more but knew we'd be pushing it.

For the mortgage survey, it is free, for a lot of banks. Ours came the next day (in early Jan), and the surveyor came in to do it. I was worried about down value as we'd renovated also. Turns out it was fine, and valued at about what the agents had suggested. Don't know why the buyers can't get this part rolling straight away.

We did lose out on a great place last year, as someone with a huge deposit offered a similar price. I completely understand, as in my view also, there are less risks there. We would only have had 20% to put down.

A friend did have the place she was buying down valued, but luckily she had a big deposit and so topped up the extra.

I was a first time buyer a couple years ago, and I just had an indication from the broker as to what I could afford. The estate agents seemed happy to accept this. They seemed more interested in what deposit I had.