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House down valued by the bank, advice please

45 replies

MeaSky · 05/07/2022 23:05

Hi,
we got an offer accepted on a house that went in to best and final offers. The guide price was offers between 1000000 to 1050000. There was a bidding war and our best and final offer of 1100000 was accepted. When it went in to the bank valuation for mortgage it was valued at 1000000. So we are over paying by 100000. Given how much interest this house has had do you think vendor will be open to renegotiate the price to meet us in the middle by reducing to 1050000? How can we go about and ask for this please? We love the house and don’t want to lose it.

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Kite22 · 05/07/2022 23:16

If there was a bidding war and you can't finance what you offered, then I suspect they will go to the others who put the next best bid in.
It happens a lot when people get in to a bidding war.

It is "worth" what you are prepared to pay for it - there isn't a fixed 'worth'.
the mortgage valuation comes about in terms of what the company lending the money feel they could easily achieve if they were having to sell it, if you defaulted.

If you have enough cash to make up the difference between mortgage and what you have agreed, and you "don't want to lose it", then pay what you obviously think it was worth to you. If you don't then you can ask the vendors, but they will most likely go to the next highest bidders. There is no logical reason why they should suddenly take that much less, if people were fighting to pay that much more.

Honeyroar · 05/07/2022 23:19

This happened with my MiL’s house. The winning bidders tried to negotiate after winning. The estate agent told them if they couldn’t pay what they’d offered it would go to the next bidder. They borrowed from their parents and paid what they’d offered.

WhatTheWhoTheWhatThe · 05/07/2022 23:24

You can try but I’m currently waiting on my buyers to have their valuation done if they come back asking for a reduction after winning best and final offers then it will be a swift no and on to the next highest bidder!

MeaSky · 05/07/2022 23:26

@Kite22 thank you for your reply. bank is willing to lend us the mortgage amount we need but it is just the preferred interest rate that we are going to miss. Even if the seller offers the house to next buyer wouldn’t they face the same issue with the down valuation when they apply for the mortgage?

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MeaSky · 05/07/2022 23:28

Sorry I didn’t notice relies by @Honeyroar @WhatTheWhoTheWhatThe , thank you

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Kite22 · 05/07/2022 23:31

The valuation is likely to be the same, but
a) they might not need to be borrowing anything
b) the amount they are borrowing might not move them into another band, like you
c) they might be able to rearrange finances and "find" the extra money
d) they might have been holding back some money to make a change to the house , and decide they will pay out for it and start saving again

Thing is, you have no idea. But from the vendors pov, why would they accept a lower offer than what someone else is willing to pay ?

It is up to you how much this house is "the one" for you.

MeaSky · 06/07/2022 00:38

@Kite22 thank you for putting things in to perspective

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Starseeking · 06/07/2022 03:43

You can ask, but given you were part of a bidding war, I'd fully expect them to say no and move on to the next best offer for the property, assuming it was for more than the downvalue.

If you love it that much, have the cash and are planning to stay for at least 5 years, I'd make up the difference if I didn't want to lose the house.

MeaSky · 06/07/2022 08:53

@Starseeking yes we are planning to stay for longer, in fact this was going to be our forever home. We are just worried with the looming recession and the cost of living crisis the house prices will drop and if we over pay by 100000 we will lose house value.

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greywinds · 06/07/2022 08:59

You have to weigh the cost of living risk up with the risk they go to next bidder, and that interest rates will worsen again if the deal takes longer to close. More rate rises are forecast if you've got a significant mortgage in the offing.

We were buying around brexit and neither our sellers nor our buyers would shift on agreed bids, and probably for the best for transactions in flight.

At that end of the market, people can often afford to rent out if sales fall through too.

BuanoKubiamVej · 06/07/2022 09:01

A house is worth what it can be sold for. The bank valuation means that they reckon if thet had to reposess the house and sell it quick to recoup a mortgage you default on, then they'll expect it to be worth nearer £100k than £110k. If you can still afford the purchase then just go ahead. Overpay the mortgage as much as you can to reach the better LTV ratio.

You can't renegotiate with the seller. They might well have had a £109,500 offer from someone else.

Sapphirejane · 06/07/2022 09:03

If it’s your forever home what does it matter if you lose some value in the short term? It’s irrelevant really,

nirvanaviolet · 06/07/2022 09:04

BuanoKubiamVej · 06/07/2022 09:01

A house is worth what it can be sold for. The bank valuation means that they reckon if thet had to reposess the house and sell it quick to recoup a mortgage you default on, then they'll expect it to be worth nearer £100k than £110k. If you can still afford the purchase then just go ahead. Overpay the mortgage as much as you can to reach the better LTV ratio.

You can't renegotiate with the seller. They might well have had a £109,500 offer from someone else.

I think OP is paying £1.1m, not £110k unless I've misread?

Acaseofthemondays · 06/07/2022 09:07

You need to stump up the shortfall.

MeaSky · 06/07/2022 09:19

@nirvanaviolet yes that is correct. In the grand scheme of things it is 10% that we are over paying the valuation

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TyneTortoise · 06/07/2022 09:55

Kite22 · 05/07/2022 23:31

The valuation is likely to be the same, but
a) they might not need to be borrowing anything
b) the amount they are borrowing might not move them into another band, like you
c) they might be able to rearrange finances and "find" the extra money
d) they might have been holding back some money to make a change to the house , and decide they will pay out for it and start saving again

Thing is, you have no idea. But from the vendors pov, why would they accept a lower offer than what someone else is willing to pay ?

It is up to you how much this house is "the one" for you.

Because each new buyer will take weeks, and there’s no guarantee of ANYBODY being proceedable unless they are cash buyers. Even then the latter knows they have all the power and can be quite fussy.

Each new buyer will take several weeks. They need to have searches done, surveys, and mortgage applications. If your vendor is in a chain and desperate to move this will be a further holdup.

I don’t understand why everyone is saying not to renegotiate. It’s the speed of moving, and successful completion that’s usually more important. Not just money.

greywinds · 06/07/2022 10:12

It can go either way though - your seller could have been marginal between selling now and renting it out for a couple of years and riding out market uncertainty, that's what ours would've done.

In that sort of house price range they might need to sell and they may have other financial options. I don't know if you know what the seller's need to sell is like?

Joyfultoes · 06/07/2022 10:17

Someone bought my old flat at £30k over the valuation. It’s now worth that 10 times over

Covidagainandagain · 06/07/2022 10:21

In our last house we has this happen twice. Once when we were remortgaging and once when we were selling.

Both times they bank didn't actually send a surveyor out. Instead they based the survey on what other houses in the area had sold for etc. Except that our house had been extended and was the only four bed in the entire estate.

Each time I had to insist they actually sent a surveyor round, and both times once a surveyor had actually entered the property the survey value went up.

So before you do anything I would first of all check whether the surveyor actually visited the property and went inside.

MeaSky · 06/07/2022 10:35

@greywinds seller is currently renting it out but with buy to let rules changing I am not sure.

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MeaSky · 06/07/2022 10:35

@Covidagainandagain bank did send a surveyor out

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greywinds · 06/07/2022 10:56

It's so hard to say isn't it - BTL may be less lucrative and house prices hardly forecast to skyrocket in near term either but if they've rented it out til now they don't need the quick sale to finance a move for themselves.

We thought about renegotiating price too as the forecasts were dire, lots of scaremongering, and it was made clear that it was either pay the bid or pull out altogether.

hannahcolobus · 06/07/2022 16:20

This reply has been withdrawn

This has been withdrawn by MNHQ at the poster's request.

Kite22 · 06/07/2022 17:24

This reply has been deleted

This has been withdrawn by MNHQ at the poster's request.

Exactly.
I think, unless it is a particularly unusual property, then the EA valuation tends to be pretty close to the surveyor's valuation, as this is what both of them do all day long, for their job, in that area. Once you bid considerably over the asking price, it is very likely you are going to have the valuation come back nearer to the EA's valuation than yours, so you need to only offer what you are willing to pay.

My dc bought within the last year, as have several of his friends, cousins, etc. All at the opposite end of the market from you (ftb, and for a fraction of the money you are talking). Talking to the EAs, it is happening over and over again - there was a bidding was on each house, people got carried away, then the sale breaks down because the mortgage valuation almost always comes in around the original asking price. This, in fact is how my dc got their house - they were outbid and then the "winners" couldn't get the mortgage so the EA came back to dc and another couple who were the next two highest bidders.

It seems you aren't in this position though OP - you have the money, but were hoping for a better ltv. What you have to decide is if you can afford it at what you have offered. As a pp said, if you are buying it to live there for many years to come, then a stagnation of (or even collapse of) the market in the next couple of years is irrelevant - it only matters when you eventually come to sell, many years down the line.

TyneTortoise · 06/07/2022 18:27

@Kite22 @hannahcolobus
Vendors and agents have ALL the power here. They can:
Price the house accurately (no ‘offers over’ nonsense)
Accept only realistic bids
Request sufficient proof of funds to support a Mortgage down valuation.

Buyers have none. If they offer a realistic price they get outbid. This is starting to filter through with the number of reductions but could all have been avoided if accurately priced.

I have seen so many houses substantially underpriced simply to start bidding wars, agents going to best and final. The language used etc. If you face a large down valuation that is 100% due to either your greed, your agent’s incompetence or a combination of both. You’re lucky that your buyers ‘found’ the money/son managed to be second choice house but many, many people are driven into bidding wars not because they’re ‘excited’ . Because they are tired of offering on over 20+ houses, realistic prices only to continuously outbid.

price realistically. Accept realistic offers. Then all of this would be solved. People can offer what they want, but It’s on the seller to accept.