Mortgage valuation lower than agreed price

[TryingtoBuy2021]

We've had a pretty stressful time trying to find somewhere to buy - broke our chain and moved to rental, multiple purchases have fallen through and it has all been pretty terrible really.

We've now had an offer accepted on a place we really like and everything seems to be going smoothly except...we've had our mortgage valuation come back at 4% lower than the agreed sale price. Our broker has said "The valuation took place, they have valued the property at £X. The bank is happy to proceed with this as the loan to value still fits with their policy and your application is currently in the queue to be offered."

I've emailed the broker to ask them to clarify but maybe someone here will know and understand and be patient enough to put me out of my misery while I await a response, does that mean the bank will reduce their mortgage offer to reflect the lower valuation, or not?

Let’s say you accepted to buy it for £250K and were going to put in £20K deposit so wanted a mortgage for £230K.

However the valuation thinks it’s only worth £230K and after your deposit of £20K they will now lend you £210K.

It could be that your seller may decide to sell to someone else who can pay £250K, perhaps they may be able to do this by paying more deposit. But really, do you want to buy a property that is more than the valuation? It’s not advisable to do that

Okay so the broker has confirmed that the bank is happy to loan the full amount so that we can purchase the house at the agreed sale price, despite the down valuation. Sorry for my impatience!

So that's good news although slightly alarming and we'd rather the house was valued at the price we are paying for it at least.

We have also had our own Level 3 survey and it has flagged some unexpected issues, none of which are massively expensive to fix but still thousands rather than hundreds and they need to be done urgently. So we are likely to be trying to renegotiate the price to reflect that work.

If anyone has any useful thoughts or comments on our situation, please fire away now that I have answered my own question...!

Thanks @TheSweetLady - sorry I missed your reply and had heard back from the broker in the meantime. Yes it is as you set out except we already had a sufficiently large deposit that the lender is happy to loan what we need to make up the total amount for the agreed sale price rather than the price from the valuation.

I totally take your point about it not being advised to pay more than the valuation but we've also had our own level 3 survey and the RICS surveyor felt the valuation was fine and we know from watching property in the area that we wouldn't have a chance of getting something comparable for the valuation the bank have come back with.

So we may try to renegotiate and meet in the middle but most likely will go ahead anyway, assuming it is otherwise plain sailing with this purchase.

What sort of things have been highlighted in the survey?

I didn't get any feedback from the bank's valuation. Our survey has identified some areas of damp and repairs needed to the roof and to the walls to fix it. We're getting quotes for the repairs this week.

Yes we had exactly this situation and managed to negotiate the price down. This was between the two lockdowns though so think it was more of a buyers market - you may still be able to agree a mutually acceptable price.

That's good to know @Backhometothenorth thank you.