Offer likely to be over valuation

[SellingBee]

We listed our house on Rightmove 5 days ago. Had 12 viewings on Monday and 7 have made offers above asking price. One is 26 percent above asking price. We haven't accepted any yet. Our estate agents have noted that if we go with the highest one the mortgage valuation will likely undervalue the property. What happens if this is the case. I'm not suggesting they are wrong but we've done lots of work to the property since we bought it. How do we ensure the mortgage company are aware so they take this into account when valuing the house? I'm a first time seller so a bit clueless.

You can't ensure anything - the buyer is getting the mortgage, not you. When you're choosing a buyer, it's not just about who offers you the most money, it's about how proceedable they are, and how mich capital they have.

Personally I'd go for someone who needs a small mortgage/cash buyer every time over someone who is flashing their lender's cash! It means nothing if they can't get the mortgage.

If the work you’ve done genuinely adds value then the mortgage lender will take it into account. But a lot of work people do is wasted in investment terms. That’s why people are always advised to take the ceiling price for their road into account when planning work.

Then they'll either go to another mortgage provider who may also undervalue or agree. Or most likely ask for a reduction in price.. or make up the difference themselves. I would check what % their deposit is at etc. the market is very bizzare right now. I wouldn't automatically go for the highest but the one who seems the most proceedable/realistic.

The valuer will have plenty of experience, and the valuation may still be way under the selling price. (Often what you've invested won't add the same value when it comes to resale, but if it was that bad when you bought it you'll benefit from a bigger increase in equity anyway.)

If that is the case the buyer will have to stump up more cash if their mortgage is a high percentage.

Eg. You've accepted an offer of say £100k. Buyer hoping for a 90% mortgage and they have £10k deposit.

Valuation comes in at £90k, bank says nope, we will only lend £81k, so they need to find another £9k (£19k altogether) to reach your sale price.

They might then try to renegotiate with you about the sale price.

We're about to sell with best offers - I'm hoping for a cash buyer or low loan-to-value borrowing in case its down valued.

They can discuss it with their lender. My lender does an online or drive by valuation. If it hadn't been sufficient I could have paid for an 'in person' valuation. Hopefully if necessary, your buyer can too.

Thanks everyone, really helpful info.

Also, I think most buyers at the moment realise that to secure a property they need to top up their offer with additional capital (over mortgage valuation / asking price).

@SellingBee

We listed our house on Rightmove 5 days ago. Had 12 viewings on Monday and 7 have made offers above asking price. One is 26 percent above asking price. We haven't accepted any yet. Our estate agents have noted that if we go with the highest one the mortgage valuation will likely undervalue the property. What happens if this is the case. I'm not suggesting they are wrong but we've done lots of work to the property since we bought it. How do we ensure the mortgage company are aware so they take this into account when valuing the house? I'm a first time seller so a bit clueless.

Has the EA established that they need a mortgage? If they are cash buyers then they may not even realise they are paying too much!

Hi, yes they need a mortgage.

Where you're based makes a difference to this. In Scotland it's normal for properties to be listed at an "offers over" prices which is typically below the valuation price. If people bid above the valuation price then they to have cash reserves to cover it as a mortgage will only lend based on the valuation price. It's not uncommon in some areas for properties to go for large amounts over the offers over price.
You may find that they renegotiate their offer when they get the valuation back!

We have sold but didn't choose the highest offer as assumed it was just to secure the property & wanted a quick sale. A few friends/neighbours have accepted the highest offer but then had issues after the survey/valuation.

We thought about it long and hard and haven't gone with the highest offer. We are happy with the person we've chosen and feel they will be more reliable through the ups and downs of this crazy process. Thank you all for your comments.