Property downvalued - how to renegotiate the offer?

[polka14]

Hi everyone. I made a thread about a month ago to say I'd had an offer accepted on a property that we'd offered almost 10% over in this crazy sellers market. It has now been downvalued a little bit from the asking price. So now the same offer price would have gone from about ~9% to ~11% over. There was a fair bit of interest and it went to best and final. The mortgage broker has advised we renegotiate - any suggestions on how to go about this? How you'd word it and how much to suggest?

We are new to all of this as FTB but on decent stable incomes with a decent deposit/savings but haven't had the geographic stability to buy till now.

Asking price: £465k
Originally offered asking, but at best and final went up to our max of £505k (obviously not knowing what the other offers were)
Lenders valued it at £455k

What is a reasonable renegotiation offer? I of course don't want to offend anyone but equally would like to get the best we can at this stage.
Thanks!

I wouldn't want to pay so much over valuation unless I had money to burn. I think you need to say the valuation has come back at £455k, and see what they say.

thanks everyone, I think I’ll plant the seed that we’d like to negotiate but I have no idea what to suggest next. I suppose I’d prefer it if they just came back with “480 ono” etc whatever their next offer down is and we’d accept. I hope it doesn’t turn into an awkward back and forth.

Also worth checking that there isn't an LTV requirement from your lender. A down valuation of this size will make a big difference to your LTV.

OP you’re over thinking this.
Mortgage valuations do vary from lender to lender but I highly doubt it would be so wildly different. Have you asked your broker? (Assuming it’s an independent broker)
People try to renegotiate all the time, rightly or wrongly, for example as the result of a building survey. If the survey brings up the house needs £20k of unexpected work I would be trying to get some money off (you can tell things like decor and windows of course). The bank valuation and the EA valuation are often different. You justify a lower offer by saying “the bank valued your house at £10k less than we expected” some people wouldn’t be able to afford that extra £10k, I’d be heavily implying this is the case for you too when talking to the EA. It doesn’t matter what others offered, it’s about you! You’re not going to lose the house by opening a conversation. I think your suggestion of going in at £480 is a great idea, and if you can end up getting £10k off your original offer it’s a double win: better LTV and stamp duty benefits as FTB.

some people wouldn’t be able to afford that extra £10k, I’d be heavily implying this is the case for you too when talking to the EA

This, but see this as a can’t afford to ‘lose’ X amount because you are literally throwing this money away.

Valuations are usually pretty conservative as the lenders are risk averse.
I think it’s absolutely fine to ask for a reduction based on unseen work identified in a survey. That would cost you money. Otherwise it’s sold as seen. I’m not sure you’ll be viewed well for putting in a high offer to secure the house (they’ll have turned others down) and then backtracking to a lower offer when there’s no material difference in the house or market. What did you base your offer price on? Why did you offer that amount? How much do you want the house?

Thanks everyone. Would you suggest sending an email so everything is in writing or a phone call.

I think I’ll go in at somewhere halfway between the two - 455 and 505, so something like 480. But how do I respond if/when they ask why I’d originally offered 40k over? Is there ever a reasonable explanation?

@BungleandGeorge - I suppose the honest truth is, I was fed up of house hunting, something we really like propped up, there was a lot of interest, we offered our best at best and final. It was all very rushed ( we initially only offered asking price) the best and final was requested and asked to be submitted in a matter of hours during the working day (didn’t get a chance to digest it/ talk to people about it). It’s been a month now, have spoken to others (including those selling) and while some are selling over asking price nothing as wild as this and we are being warned to be cautious etc. we havent pull out as we really like the property and we’re waiting to see what the valuation comes back as. We do still want it and are torn between going ahead paying now what would be a whopping 50k over or trying to negotiate to something more reasonable.

I would be telling the agent that the mortgage valuation was at 455k and you will need to revise your offer... don't give a number. See what they say
For all you know, the next best offer may have been 466k, the agents response may well give you an insight into what the other offers (if there were any) were.
if they are dismissive then chances are that the other offers were close to yours. If they engage with the idea of a reduction then likely that the other offers were much lower
Whatever you do don't go in saying 480k
Ignore all of the people saying you are out of order for trying to reduce, you are not, a professional has now given an opinion on value, which an estate agent or random person on mumsnet is not.
Also the people saying try another lender... so you can pay more money for a house, you wouldn't do that with any other financial decision so why with a house!!

You have my sympathy I think best and final offers are a total con to push up prices. However, you offered 40k over asking to secure the property. The asking price and valuation were only 10k different. So you knew you were over offering so that you could knock out the competition. To now ask for 25k off I’d be really annoyed as the seller. Whether they’ll renegotiate depends on how much they need to move, what other offers there were etc. Many things are sold for more than their intrinsic value just because people want them, the house may have more value to you than to your mortgage company. But at this point you’re not legally bound to buy so you can take a chance and ask for a reduction. Perhaps it would be less confrontational to fist just tell them the valuation and that it might cause a problem with the mortgage rather than suggesting a figure..

Thank you both. I intend to just be very honest through all of this, in what feels like a very blind process.

@Alexalee thank you, really appreciated your reply. I will tell them what the valuation is (I recognise it is only 10k different). What next, how do we talk numbers because I assume they will ask me first what I'm offering. How do I ask what theyd be willing to accept?

It's not 10k it's 50k different between your offer and the valuers value
I would just give them the 455k value and see what they say. A decent agent will have a good few recent examples of the actual sold prices, which the surveyor would also have access to, making me think there are no comparable to support the offer price.
In the art of negotiating the same is always true, whoever throws a number out there first loses the negotiation

@Alexalee but are they not just going to turn around and say but you chose to offer that price?

They might do but you aren't a professional valuer, and now you have the report from a professional.
What area is it? And what sort of property? People on here are usually very good at finding other suitable properties, it's always good to have another option

So do we feel it’s acceptable to say that I thought the value was close to what I’d originally offered and disappointed that it’s come back at 10k less than asking ? (Surely no seller would marker their house at less than value or do they?)

What reasons do other people have for offering high then negotiating normally ?

I suppose the honest answer in my case is naivety and inexperienced rush decision making at best & final. As I also keep saying I’m in half a mind to just go through with this inflated price just to move past this process and be a homeowner but what’s holding me back is the fact it’s such a big financial decision that will likely impact the rest of my life and I don’t want to live in regret.

Don't overpay 50k through embarrassment. Buying badly can take you years to recover from financially

So do we feel it’s acceptable to say that I thought the value was close to what I’d originally offered and disappointed that it’s come back at 10k less than asking ? (Surely no seller would marker their house at less than value or do they?)

I would assume that a seller pitches their price at the point that the property is worth/valued at, yes. But you willingly offered well over that amount!

So do we feel it’s acceptable to say that I thought the value was close to what I’d originally offered and disappointed that it’s come back at 10k less than asking ?

You are WAY overthinking this.

Estate agent advised the sellers on market price. They went ‘offers over’ and best & final and you bid accordingly.

Now the bank’s professional valuation has been done and they say it’s worth £50K less than you’ve offered, and £10K below asking. The market is volatile, the undervaluation is an indicator of where they believe house prices to settle.

You are going back to the sellers to say “Goodness, valuation has come back way under our offer price and £10K under original asking price. We are shocked and disappointed as our mortgage borrowing is now reduced significantly. We are still very keen to proceed though and can cover some of this shortfall through a larger deposit. We are willing to split the difference at £25K off our original offer (££480,000), which is still £20,000 over the asking price.”

This is good advice!

I would also recommend getting a second valuation - your broker should be able to advise which lender to approach. If it comes back higher, go with that lender - if it comes back the same/lower, your negotiating position is stronger. We had a down valuation a couple of months ago, but another lender agreed with what we’d agreed to pay so there was no issue in the end.

But bear in mind that they may have offers from cash buyers, who won’t be as worried about mortgage valuations. You need to decide whether you’re willing to walk away if they won’t reduce the price.

Have you had a survey done? If the property needs work that’s another thing to play into price negotiations. We have successfully got money knocked off because of issues uncovered by our survey.

good luck!

This. This is soooo important. Nearly all lenders have this and it’s usually more than 10%

Really good advice on this thread! It is true that the sellers might find a cash buyer, but isn't it also true that the cash buyer might also be keen to try to renegotiate if they saw the same valuation (from the perspective of not wanting to make a bad investment)? I suspect I might be in the the OPs position myself, and while I have a large enough deposit to cover the entire shortfall, I would not be happy to overpay by that much and would at least attempt a revised price!

How would they see the same valuation?

OP is unlikely to either know the other prospective buyers and/or share that valuation with them

And if they're cash buyers they wont be getting a mortgage valuation

So we’ve just heard back and it sounds like they aren’t willing to budge and will just go for another offer. So disappointing. Thoughts?

I think it all depends on what other options you have and how much you want it. It looks like the market will slow but keep going this year. There may be a small correction next year. It’s always possible there may be some huge crash buts it’s very unlikely.

I’ve bought quite a few properties. I definitely overpaid for one I bought in 2017 but it’s gone great guns and if I hadn’t bought it I would have found it hard to find something else and probably would be in a much worse position now.

but if there are other options you can get then move on

it really is very hard.

Houses must be the only thing where a specialist say "it's worth £x" and the buyer says "but i want to pay £y"

The value isn't pulled out of the air, or based on whether the kitchen is painted in F&B. it's a complex and involved calculation where a chartered professional uses the knowledge and guidelines laid down by their governing body (look up red book valuation)to assess the current value, bearing in mind, as well as other things, the current economic climate

"The Red Book valuation is a professional valuation of property or land carried out by an RICS registered surveyor. It provides a trusted, unbiased valuation report that adheres to stringent professional standards outlined in the Red Book itself"

you're talking about a huge amount of money. huge. don't lose sight of that