House Sale Fallen Through

[FortonServices]

Thought we'd sold the house. Had started looking at onward purchase. Saw something we liked last Saturday.

Heard yesterday that despite having an AIP, the buyers lender won't allow them to borrow as much as the AIP said, so they can't fund the purchase ☹️. This is due to interest rates going up and affordablity tests.

How would you know how much they need all of their AIP?

Well they could GTF with that!!

Interesting, as agents are responsible for a lot of the overbidding.

That's what they've said to us as a vendor. They may be saying something different to buyers. They have to try and manage both sets of expectations so that they meet in the middle somewhere.

I think agents would happily try and engineer higher and higher bids. Problem is the lenders started knocking that on the head with down valuations and now they're adding stricter affordability in to the mix.

@FortonServices I'm sorry. Disappointing isn't it. I guess st least it's a sellers market & it's quite early in your process.

the diwn valuing is definitely impacting the market and the affordability checks, with inflation & interest rates.

@FortonServices I hope you find a nice buyer! If you're in the Greater Manchester area maybe consider selling to me ;)
At the end of the day we all just want to move to our new home. I don't have a particular interest in driving down the price for the sake of, I just want a fair price, so do the sellers. The greedy ones always get the name

1 suitable house within a 10 mile radius in the last 12 months of looking. I'd have told them my bra size at this point!

@DomPerignon12

I'm going to be a buyer too. Once we've sold this place. So it's interesting to get both perspectives on it.

We’re in the midst of buying and the bank significantly down valued our prospective purchase. We can make up the difference to get to a 25% deposit so it’s all fine but if we’d been closer to the line would have had to pull out. We’re relaxed because we don’t plan to move any time soon so I see the mortgage as part rent part putting money away…and it was a drive by valuation on a house that’s very well done out on the inside in an area where most of the places we’ve seen haven’t been renovated in 25 years. But the waiting is awful!!

We got an AIP recently and my broker said ‘of course they aren’t worth the paper they are written on’ which summed up what I felt. We had a buyer who was a solicitor who couldn’t port a small mortgage last year.

This year our current buyer got declined on first mortgage application so in process of second with a new lender and an extra bit of deposit. Lender is happy with valuation and allegedly issuing mortgage offer in 7 to 10 working days - I wiil believe it when I see it.Houses not flying off the shelf here and the picture is mixed where we are looking.

I think there needs to be a system where banks and building societies do more stringent financial checks before issuing an AIP, the buyer having a basic valuation survey at the time of marketing and both sides putting down an amount that covers the other party’s legal fees in the event of them pulling out (or so,e kind of insurance) as the current system is so stressful.

I'm not sure you understand how it works, which is surprising, as aren't you going through the process of getting a mortgage yourself?

Very simply, the lender calculates how much they think the borrower can afford to repay every month, and offers that much.

What has changed since the AIP is that interest rates on mortgages have risen quickly, which means higher monthly repayments, which means that in order to still be affordable for the buyer, the lender offers less money.

So the lender will be making the same repayments (affordability check), but for a smaller amount of loan.

*buyer will be making the same repayments

Wrong. Some lenders, like mine only show whether or not a borrower is approved for the amount requested, which may not be the maximum they can afford.

Also there’s the issue of down valuations which there’s really no getting around apart from going with a different lender or making up the difference

Hang on...

[quote] The lender has also valued our house at less than the offer.

I do feel a bit bad not negotiating with them but we need full price to pay for the onward purchase. [/end]

If lenders are down valuing your house you're not going to be able to achieve full asking price. Why would someone pay £££ more than it's worth?

Lol, I understand what an AIP is, thanks a mill!

I'm saying that when it comes time for the lender to make the mortgage offer, the affordability will have changed due to the significant mortgage interest rate rises in the last few weeks.

I'm shocked at the ignorance around the effect of rising interest rates here!

Of course I understand how AIPs are generated! What on earth makes you think I don't?

They're fairly blunt tools, calculated based on the buyer's affordability. What I am saying is that the affordability will have changed dramatically - between getting an AIP and securing a mortgage offer - over the last 8 weeks or so.

And I am worried for the OP who seems ignorant of this, and seems to only be able to buy another house on the basis of getting the exact price offered for hers, which suggests zero wriggle room, which suggests she is going to be in for a huge shock when she comes to actually secure a mortgage, and finds that the bank will lend her far less than she had initially assumed.

You dont, at all, because your very first sentence states ‘ a lender calculates how much you can afford’ which is wrong.

Isn't an AIP just a rough affordability check - they ask you what you earn and what your outgoings are, along with what your deposit is? They don't ask for any evidence of any of that though, so people could fib to get an AIP (bit of a waste of time but people could do it).

For an actual mortgage offer, not only does the lender ask for evidence of income/outgoings/deposit, they actually ask for evidence including bank statements so that they can check your outgoings.

I think the difference at the moment is that many people got AIPs 2-3 months ago, before interest rates started rising and before lenders were taking the increased cost of living into account. So there is now a difference between what they could borrow 2-3 months ago and what the lender will actually let them borrow now.

Why would someone pay £££ more than it's worth?

Have a look at some of the house buying threads on here. People do pay more than the valuation, if they can make up the difference themselves.

Also ‘worth’ is subjective.
Banks dont always do a full on survey. Sometimes it’s based on historical data, sometimes just a ‘drive by’ valuation.
One of the reasons I’m hesitant about buying a doer-upper is because of the significant potential for down valuation, even though land is very valuable…