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!

If it was me I’d see it as a second chance and walk away but I’m not someone who likes to offer over. If, however, you were already in it at 505k, then yeah, I’d offer 495k. I’d say, We’re willing to maintain the generous amount offered over the value of the house as a testament to our commitment to buy, but we’d like to honour the valuation.

I think you need to get the EA on side. At the end of the day they just want their commission but realistically it is important that the bank's valuation is recognised as this will come up with anybody else if you pull out or the vendor remarkets and insists on a higher price.

You are in a good position that you can actually afford this but the bank have valued at £50k beneath what your offer is. This is quite significant on the value of the house. Would be less so at a higher value house but it does represent a 11% difference on the value of this house and I would not be happy to proceed with this pricing difference.

Yes I think you have got carried away and now faced with the bank valuation you can see the two figures don't stack up.

Make an appointment to go and see the EA and factually state your case in a calm and professional manner. State you will still be willing to "overpay" to a degree but not by 11% over the bank valuation. Decide on a figure that you would ultimately settle out on if you really do want this house. For me it would not be above £475k and that is if I really, really wanted the house.

Reiterate the good position you are in and the EA will then have to do their leg work to try and persuade the vendor to accept your lower offer.

Houses are going 25% over asking price round me, and some above that. I’d stick with it.

@friendlycat thank you. is that really the role of the EA? (I ask genuinely as I have no idea having never bought before). I assumed they are just mediating correspondence.

EA gets a percentage of the total value it sells for, so it’s in their interest to get the most amount of money.

erhsla14
The job of the EA is to facilitate the sale and get potential buyers through the door in the first place. But whilst the EA is acting for the vendor it is in their interest to get the sale through and yes they do liaise with both vendor (their client) and buyer as a two way process.

Obviously it's up to the vendor to decide what they wish to do, but a good EA can steer them in the right direction - obviously whether they heed any advice is another matter. But if you demonstrate you are still very keen and are in a good position the EA may be able to mediate between both parties. Obviously, the EA knows what the other offers were and what position the other parties were in.

If you can settle out nearer the top of one of the other offers, you may then be able to proceed as the buying process has already started, you are keen on the property and have your financials in place.

My advice is to tell the auctioneer that your bank has valued the property at X and because of this your not going to be able to borrow as much as you had hoped. I would also say that if your bank has this value other banks could be similar. I would that it looks like their will be a recession and bank interest rates have already risen.
The sellers had the house for £465,000 and you offered £505,000 but things have changed. You need to use the information you now have to get the best deal possible.

Ask the auctioneer what are the sellers willing to take. Most important don't give the auctioneer a figure. Let them come back with a figure to you. I would also get a survey done on the house in case it has any problems that are not apparent to see.
The reality is that sellers wanted £465k and if your bank has this value on their home now they will have the same issue with other buyer's.

The reality is that the bank has told you a value on this house. This is what they think it worth now if they had to sell it. So in effect it looks like house prices are falling so why would you borrow the max and put all your savings into a house that within a short period of time could be in negative equity.
Say if you had to sell this house in 2 to 4 years you have to find the money on top of what you can sell the house for then to pay off the mortgage. You could end up stuck with a house you can't sell because the sale price won't pay off the mortgage.
You could then have to rent out this house if you had to move elsewhere due to work and wait for the market to recover.

I saw house prices going crazy in Ireland a number of years ago. People rushed into buying a place otherwise they never get on the ladder. Within a few years values in some places had fallen by 30% plus so people were stuck with big mortgages on house or apartments that were worth far less. A lot of people become accidental landlords to try and keep the mortgage paid until they got out of negative equity.
They had to move house due to having a family or changing a job but could not sell their home/apartments. They rented elsewhere and it was a very stressful time for a lot of people.

I would also keep aside some of your current savings in case you're circumstances where to change as you might be glad to have a buffer at that stage.

@llady thank you. How would you extract this information from the EA? and would you show your eagerness to wanting to buy at the same time?

what information? the what they would be willing to take? You ask. As I said we had this situation years ago. I don't know if there were other offers, I do know we were told there had been quite a few views, but we had to have the discussion because we had not enough money to top up the mortgage loan....so yes we asked the vendors what they would take...its a fair enough begin the negotiation question.

oh PS I'd be keenish...."we really like the house, we don't want to pull out but the lower mortgage valuation.....well that has given us a funding gap......" Don't let on that you could afford to cover the shortfall.

@godmum56 they unfortunately have all the details of our funds. I'm not sure if times have changed but around here you need a mortgage in principle, payslips, bank balance etc.

What's in your bank is irrelevant... move some to another account and say you spent it.
If I showed them 1 million in my bank they would lnow i had more than the house was worth but doesnt mean id be giving them a million for it.
like I said previously, tell the agent the valuation, say you cant/won't bridge the gap. Tell them to go have a word with the seller to see what can be done. Don't give a number
It really would help of you would tell people the local area, could even post the link. You might be getting a good deal and the valuer is wrong... nobody knows buy as you have said there is stuff on for more than you offered and you don't like as much then maybe 505 is a fair price... although as a first time buyer you should be at 500 max for stamp duty savings

It's in the EA best interest to get the house sold quickly. They'll not want to remarket as they know they're likely to run into the same issue. It you take an example of 3% as their fees, the difference between £510k and £470k is £1200 on a £14000 pay check. People often think that EAs want the best price, but they make much more money selling a house quickly and moving on.

I'd chat with them and see if you can find out what the next highest bid was- if you match or slightly exceed that, then chances are the EA will encourage the sellers to be reasonable.

I think, if you want it, you need a reasonably high offer but I do think they’ll drop since it’s a real hassle to go back to previous bidders. And it raises suspicion so they won’t always go for it. Psychologically, everyone wants a house when it’s a bidding war but the lustre fades when they’re reapproached following a failed sale.

When we were offered our house, it was because the other buyer couldn’t commit and the EA made a point of telling us they weren’t going to hold us to the bid.

the estate agent and vendor get to see your bank balance?

pressed enter too soon. Even if the EA and vendor get to see your bank balance, they can't know what other calls you have on your funds

You've had really good advice from lots of other posters about speaking to the EA and trying to get some more information about the seller's position. It's really useful to have this information from the beginning and it works both ways. The EA will try to get information about prospective buyers on behalf of the seller and a buyer needs to ask the agents about the sellers (obviously bearing in mind that they act for the sellers and that not all of them are truthful, eg when you say that the EA suggested values are likely to rise in the area, of course they will tell you that as they are trying to sell the house).
Speak to or meet the agents and say that you are keen to proceed but that you are unable/ unwilling to pay a price so far in excess of the valuation particularly at such an uncertain time.
The sellers may choose to not budge at all and call previously interested parties who may or may not be interested still. Clearly, these parties offered less in the first place though so they would be accepting a lower offer anyway. They may need to re-market the property which is a hassle and then may or may not receive other offers. Whichever option they choose, it is likely that other valuations will be similar so the same issue will occur. They need to weigh up these possibilities up vs negotiating with you. So, bearing in mind these risks, I would be surprised if they dismiss attempts to re-negotiate out of hand. They have as much to lose as you.
One final thing, if there is a possibility that you need to sell and move again in just 2-4 years, I would be much more wary about overpaying.

Thanks everyone. All very useful advice.
I think my options are:

1. Try to negotiate a more favourable outcome, speak to EA etc
2. Cut my losses and walk away without any idea how much longer id have to wait for the right place to come up
3. Go through with it paying above and beyond the odds and try really hard not to move in the next <5yrs and if we absolutely must then to try renting it out instead while we rent elsewhere

The most sensible option is option 1.

Honestly there’s often loads of negotiation when buying property. It’s often a bit painful but you can get there in the end. It’s hard but you have to try and take the emotions out of it (often impossible I know) and realise it’s a business transaction.

The seller wants the highest price possible, but may not always be realistic and the buyer wants to buy at the most reasonable price possible.

my current house took a week of price negotiations with my old sale taking two days negotiations. But once agreed we all stuck with the agreed pricing.
Surveys can throw spanners in the works as has shown with your bank valuation.

But remember that your vendor will be in the same position if they relist and go forward with another high price as the next bank valuation will throw up the same downgrade in price. This is exactly why the bidding process isn’t always that sensible frankly.

Sometimes over paying doesn’t matter perhaps as much. For instance an established buyer who has enjoyed significant property inflation on their property over many years then looking to downgrade to a cheaper property either in size or cheaper area. They don’t have any mortgage, have made a lot of money on their property and will release significant money from the sale of their property and the difference in price on a cheaper property. Overpaying in this case doesn’t perhaps bother them as much as they want the cheaper property and don’t require any bank valuation as they are cash buyers going forward.

But as a FTB starting out why would you want to pay significantly over the house valuation? If the house is meant to be it will all come good with sensible negotiations. But your first action now should be to discuss the way forward with the EA.

Thank you, it all just feels rather stressful

To everyone that’s given all this very helpful advice so far, could I please ask if you have had recent experience with the housing market at all? I just worry in case this advice may be outdated (I’m hoping it’s not of course )

Hi OP,

I’m talking from recent experience - we had an offer accepted in mid-Feb this year. The bank valuation came back 30k lower than we agreed to pay. We got a second valuation with a different lender which agreed with our sale price. I know it’s stressful, I really feel for you! There was no way our sellers were going to drop their price so we were lucky that another lender valued the property higher. If they hadn’t, we’d have still bought the property though, and made up the 30k ourselves.

I also think Option 1 (negotiate) is best, but I wonder if you could try to get a second valuation before you negotiate? So you say to the EA ‘we’re committed to the property, but unfortunately the down valuation puts us at a lower LTV and makes it harder to finance. We’re going to seek a second opinion’. That buys you time to see if anything else comes on the market, and could either come back with a higher value, or come back agreeing with the first down valuation. If the latter, you’ve got a stronger argument to go back to the seller and say no bank is going to agree with this price so they should meet you in the middle.

If it’s relevant, we’re in London, where laying 30k over a bank valuation doesn’t feel totally crazy given how quickly prices rise.

I've been actively looking for a year in the southeast, and prices have started to drop, with people accepting offers below asking recently. As in the last 3 weeks. Don't overpay. All the sentiments are changing.

Hi
in reply, I can see where you're coming from in terms of trying to be fair if you don't want to go below the next highest offer. But I can also see that the agent may say- 'but if everyone did that, it would make house buying like ebay where nobody paid more than a set amount above the next highest offer, and it's not like that'. And your vendors may already themselves have made an offer on the basis of yours. It's all very difficult. I appreciate you got 'bounced' into the offer, but I do feel sorry for the other buyers who may not have your problems with the valuation who got bounced out of the house they wanted. Our last purchase went to best and final after we'd had our offer accepted months before (the vendors could only sell slowly for complex reasons). We offered more-which was absolutely as much as we could afford. And were the higher offer. Only for the person we were bidding against to up their offer after best and final- to beyond what we could afford. Fortunately the vendor saw this as unfair and went with our offer. It's a rough world when you're buying a house.