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've had this in the past and the estate agent said "take the expert's advice, you've paid for it". The surveyor knows the market, they know how much it's worth. They can see what the house went on the market for and what other houses in the area are selling for. You'd be mad not to use this information.

You also don't know what anyone else had offered, maybe an awful lot less than you.

If the vendor puts the house back on the market they will have this issue again.

Call the estate agent, they are already aware you are paying too much so it shouldn't come as too much of a surprise. Tell them the valuation and say you are going to have to significantly reduce the offer, see what they say. See if you can get a hint on what they think they vendor will do. For instance they will know if the vendor is downsizing, buying an expensive house that they need all of the £505k or whatever. Just see what you can draw out of them. You don't need in this initial conversation to have a price you are will to go to fixed. Tell them you will have another chat with your DH and go from there. Don't get talked into anything.

Sorry cross posted, so they vendor has said they are not will to move on the price at all?

That's disappointing. Either they think they are in a good position and have other interested parties or they are calling your bluff.
Personally, I would be unwilling to pay 10% over valuation price at present as house prices are expected to fall because of a combination of high inflation which will lead to more interest rate rises, banks reigning in lending and recession which will likely lead to greater unemployment. I guess it depends how desperate you are for this exact house vs waiting a bit longer and looking for something else. There will be other houses but it's your choice.

If it was me, I’d walk away. Or at least just say, look, our offer is on the table, we’re keen to proceed and no chain, so can move quickly, if you change your mind on the price to meet us then we’re happy to discuss.

If you think this is the only house likely to tick your boxes and it’s worth an extra £50K to you then go ahead at the first price. But I know that I would personally have huge buyer’s remorse as £50K is a big extra chunk of either mortgage or cash to lose.

if you really want/ need the house you proceed with your offer. If not, I’d pull out. They might come back to you, they might not. They may well have offered on a house themselves and not be in a position to drop 25k. Is there anything else on the market?

Just to offer a friend's experience, exactly same situation, valued at £40,000. Buyers offered to go 50-50% risks, meaning price lowered by £20,000. Sellers refused but accepted £10,000 lower. It all comes to how long you want to stay there. If more than 10 years, it will probably even out and be ok. If you want to re-sell quickly, don't do it. It seems to have been happening a lot, and people are still buying and sellers don't need to down value

I meant valued at 40 grand less

Unless this is your absolute dream home,I would walk away in your position. 50k is a lot.

House prices have shot up and we all know there is going to be a big drop again, you could probably get more bang for your buck then. I think you can get caught up in winning the property but I would have serious buyers remorse after.

I’m not sure there will be a big drop. Working from home means that many people are just not needing to put their house on the market and moving is expensive. Hence why there is so little property available.

Hi everyone, thank you for the opinions. No it didnt sound like they’re willing to budge at all. They mention choosing us over other offers due to our position and amount offered which they say they’ve based their onward purchase plans on.

Really torn on what to do, my thoughts currently:

1. I accept we offered that, I do. So perhaps I’m in the wrong and there’s no excuse?

2. I offered that because I can afford it (I wouldn’t have offered over on let’s say another house that’s 500+ as I wouldn’t have the wiggle room). However the circumstances in which we had to make this decision was very rushed.

3. the valuation is from the bank id applied for a mortgage with not a surveyor (was planning on doing that next)

4. the house is really nice and essentially ticks all of our boxes. If we didnt go for this we’d be looking for basically something next to identical to come up. So hard to say how long we’d live here, this potentially could be a forever family home but equally with the nature of our work may need to move again down the line (definitely not for 2-4 years but quite possibly afterwards)

5. 50k is a lot of money and would take a fair while to save up even on 2 full time working professionals income.

i really would like to negotiate and somehow convince them to meet somewhere more reasonable. My gut feeling is we are the highest offer by a reasonable margin (again just a gut feeling, I may be wrong) but so think they have several offers and other FTB/no chain offers. No cash buyer.

what on earth do I possibly say to acknowledge their disappointment but still put across that we likely still are the best buyers for them?

Ah OP, it’s so tough isn’t it!

You’re definitely not in the wrong - you made a good offer to secure the house you wanted. Not unusual in this market.

You could make it clear to the EA that you’re serious about pulling out at that price - that might make the buyers accept your offer. But they might equally choose to put it back on the market and see what they can get. If they can wait a few months prices might well go up in the area, and they might get a better/equivalent offer, and a lender that agrees with it if surrounding prices have also gone up. I think trying to reason with the seller that they should accept your lower offer is unlikely to work - unless they’re in a mega rush to sell, they don’t lose anything by putting it back on the market.

Fundamentally I think you need to work out how much you want the house - do you gamble on pulling out and seeing if they then accept your lower offer now or in the future (risk losing the house), or do you want it enough to pay over valuation. Remember Bank valuations are conservative - they are basing it on what they’d get for the house in the very short term, if you defaulted and they had to sell. So it’s not to say that the house will never be worth the higher price. If you’re going to stay there long term, you’d probably recoup the money. What have house prices in that area done recently - I think in an earlier post you said you’d expect the area to go up in value? So if you love the house and think it’s likely to go up in value, and don’t see anything else coming up, you might well choose to proceed.

Just reread your last post OP - if you think you are the highest offer by some stretch, might well be worth making very clear you will walk if they don’t agree a reduction in price. That might persuade the buyer to accept your lower offer. Did you tell the EA you would pull out if they didn’t reduce the price, or did you just say ‘we think this is a more reasonable price’ etc?

I would tell the agent in no uncertain terms that you are not paying 505k... their job as negotiator is to find a price both you and the seller are happy with. You now have an unemotional valuation, don't ignore that fact.
Sellers could be calling your bluff to see if you were just trying it on.
465k is an odd asking price anyway and in my experience they were probably hoping for 450k,
With interest rates rising, huge cost of living squeeze and an Impending recession, there is only 1 way house prices will be going, so of prices fall by 10% you will actually have 'lost'100k in a very short time frame.
If you are looking to move in less than 5 years then you will be committing financial suicide.

As a first time buyer it is important that you remember that the property has been taken of the market as

Sold Subject To Contract or similar.

Now you are getting your legal side of things sorted, the valuation, the survey, and a whole host of other things effect the final price paid. You do not owe them the money you bid, assuming you are in England! You owe them an honest discussion about issues arising and that valuation is one hell of an issue.

Read some of the other posts. You wil be overpaying by £50K, having to find the £50K the bank won't lend, check your LTV, and so will start off in an uncertain financial climate with up to £100K negative equity and a pepetual inflated mortgage to fulfil.

Stop. Let your heads take over your hearts.

They mention choosing us over other offers due to our position and amount offered which they say they’ve based their onward purchase plans on.

Read that again. They are trying to emotionally blackmail you, make you feel guilty. Tough! They can rethink their situation as well as any one else can!

I can't see a seller being willing to accept a lower offer just because of a low valuation, especially when there were apparently other offers above asking around at the time. The valuation is very close to the asking price. You chose to offer more. If you'd had a survey that threw up something nasty and expensive you couldn't have been expected to notice, that would be a reasonable cause to negotiate. But not otherwise. Unless prices locally have fallen- which is unlikely given your timeframe.
'Never offer more for a house than you thjink it's worth, and/or you are willing to pay for it' is the lesson here. What other people think it's worth doesn't come into it, unless it leaves you unable to complete because your lender won't lend what you expected on it.

That's their prerogative.

Trying to make OP feel guilty for having to make a different offer isn't. That's how house buying works. A low valuation wrecks many purchases. Banks just won't over lend.

A buyer makes an offer which pushes other buyers out of the purchase. Then wants to renegotiate it down when there has been no suggestion the house has any problems they couldn't know about. That ought to make them feel guilty IMO- the other buyers got dumped, and the seller thought they had a sale at that price and may have offered on another property on the strength of it. The other buyers lost a house they wanted because the original buyer offered more than they did, they may well be completely gutted, but the original buyer now wants to game down their offer, quite possibly to lower than that of one or more of those other buyers. Guilt is in order here.

what on earth do I possibly say to acknowledge their disappointment but still put across that we likely still are the best buyers for them?

You don’t need to acknowledge their disappointment. Be less emotional - I know it’s personal because this will (hopefully) be a home but it’s actually just a business transaction and you need to think more in those terms. Harden your heart!

’Thanks for getting back to me. Whilst we understand it is unfortunate we’re having to have this discussion over the valuation we are still extremely keen to proceed quickly, are willing to absorb some of the extra £50,000, and are not in a chain. We’d be very disappointed if there was no room to meet us on the price and had to withdraw. Given the valuation is so much lower than expected, it’s likely any subsequent buyer would find the same issue as we’ve run into with a mortgage valuation.’

Why? That's how it works and if you can't handle the way the chain works, can break, reform, break again, then house selling isn't for you - or move to Scotand cos it works differently there.

If the sellers had closed bids then they can go to the next highest offer and the chain could remain. The house seems to have been popular, it will sell again quickly. It's not unsuual, nor isi it the ned of the world.

But it is the result of the overlending that caused the last 2 or is it 3 credit crunches.

They’re being greedy. They will have the same issue elsewhere and will no doubt lose their onward purchase. Let them pull out. But make it clear if they’re willing to negotiate, to let you know as you still want to continue with the purchase but you absolutely cannot pay 50k over the valuation.

You knew it wasn’t worth 505k. It’s just what you’re prepared to pay so it doesn’t make a massive difference. I’d go in at 495k.

I wouldn't put myself into a situation where you have no cushion and only what you earn each month for a house that has been valued at so much less than what you offered. First house we ever bought we had to go back to the seller and say that our building society had valued the house at less than asking and we therefore couldn't afford to proceed. We did some negotiating, can't remember figures but they accepted a bit less.

If you don't mind over paying a little but want to save on the current situation, say you are willing to go ahead for 499 - normally you would expect more off but this will help you with stamp duty. Do you think the nearest offer is within 6k?

Hi, everyone. I hadn't actually made a new offer yet just asked to see if theyre open to such a conversation.

@RoaryLion1 yes we do really like it and do think it may go up in value a bit due to local developments (how much by, im not sure). it really is just a gut feeling though based on conversations had with EA initially at the time of showing interest/offering. we didn't say anything about pulling away or any figures at this stage just if theyd be open and shared the valuation.

@Alexalee yes definitely dont want to be commiting any kind of suicide! how likely is it though that house prices will fall? there are others in the wider area that are over this price range and nowhere near as nice at least IMO hence I havent viewed/offered on them.

@SamphirethePogoingStickerist but is 10k/500k really much of a deal? I'm partly just being devils advocate here and trying to see how they'll think. Equally, I am aware we have been saving a long while and can afford the difference in valuation and that other offer-ers may not be able to but then again they probably haven't offered so much over.

@BlueMongoose Thank you even if this isnt what I'd like to hear. I think next time (if there is one) I wont be rushed into making such a rapid best and final offer decision. I wonder if the property was on the market for 500k instead, would the valuation have come back higher. Also, if after a survey issues are brought to light then whether they'd be willing to drop ££ at that stage.
Just saw your next post - no I have no intention to pay less then any other offer. Is it not possible somehow to discuss this info honestly and openly - as I have got the savings, i probably would pay more than (/ at least match) whatever their next best offer after ours was. Yes, I think the sellers may have offered on the strength of this - where on earth do I stand now on this front.

@NoSquirrels Yes, I need to sit down and think what to say next. Thank you, appreciate the suggestion.

@TheGlitterati Yes I think I agree and cant help but wonder if the others will be able to absorb the difference as much as we can (from what I remember of early conversation of EA, I got the impression we had possibly the strongest deposit)

@whenthegoatcomesin You think go in with a figure even though they werent willing to negotiate?

@fragileconsequence No idea what the nearest offer is and dont want to drive the sellers away. If it came to it I'd rather walk away if they arent willing to budge than annoy including EA.