House down valued by the bank, advice please

[MeaSky]

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.

I wouldn't offer £100k over valuation in the first place - that's crazy,.no wonder people can't get on the housing ladder! Also if it's got a sitting tenant this would have rules it out anyway.

@TyneTortoise My point is that (in my recent experience) the EA have priced the house correctly - or, in line with what the valuation comes back at when the Mortgage company ask the surveyor for one.
Then - because, as you say, people get to a place where they have put in offers and been outbid - people get to a place where they do start offering more and moreover the asking price (all offers my ds put in were over asking price, and they were outbid several times).
But it is human nature, and absolute sense when you are the person selling a house to accept what appears to be the best offer - usually the highest offer. I don't think there are many people who would say "No, we've put the house on for £X,000 (be that £100 000 or £1 million), therefore we refuse to accept £X,000 plus 10%, when 3 or 4 different people are offering that.

The EA have done their job in the first place of ascertaining they have an OIP, or the actual money to buy at the advertised price, and that is the information given to the vendor. Some buyers (including the OP) can afford the offer they put in. Others - as has been said in this thread - are able to borrow from family / have "inheritance" early, etc, and some won't be able to do it. In our experience it doesn't delay that much - it was about 10 days after being turned down that my ds was contacted to see if he was still interested. 10 days in a process that often takes 5 - 6 months is not a lot.

I had initially assumed they had mistyped an extra zero - but when they said 100k difference again in a reply I guessed not!

I suppose it is all relative. I'm very much in the 10k difference on a £100k house bracket, and would pay the extra 10k for a house I loved. The thought of paying 100k more blows my mind - but then if I was in the position of buying £1million house, it's still 10% so maybe I'd also not worry about it.

100K is a huge amount of money.
If you are worried about overpaying and losing money then you should pull out. You can try to renegotiate but the chances of success aren't very high unless the market in your area has cooled (lots of areas have now so yours may follow).

@Kite22 but if it’s human nature to accept the ‘best’ offer it’s also human nature to offer over, isn’t it? The seller has no right to be angry at the buyer.
An OIP states that a buyer is supposedly pre-approved for borrowing X amount on their salary. It says nothing about the state of the house. A buyer may be able to afford the mortgage payments several times over but the bank won’t lend more than what they think the house is worth. In which case it comes down to spare deposit money.

if a buyer submits an AIP and proof of funds with exact amount of deposit required there’s no proof that they’d be able to withstand a downvaluation.

If you’re talking about people being rejected due to affordability that’s a different scenario altogether and nothing to do with house value.

Also @Kite22 10 days after being turned down isn’t the total since the start of the offer. Mortgage applications can take several weeks, so it may have been anywhere from 3 weeks to 3 months that the process was delayed by. Whether or not that’s an acceptable delay depends on how far along the vendor is in a chain. If they’re still waiting for one to form they may be less worried. If THEY are the final link in the chain, with their own sellers threatening to pull out then the buyer’s bargaining power increases.
Maybe in your experience people have re-listed, gotten along with their lives etc etc but that certainly hasn’t been mine. Quite a few vendors who refused to negotiate now find that the market has cooled, and houses have gone less (with more faff and longer waiting time) than if they’d just negotiated on the down valuation.

Why did you make an offer you dont feel comfortable with? The house was up for sale with a realistic guide price. IT WAS YOU who decided to offer more. Its upto you to make up the difference or to pay the extra interest.

You basically offered them monopoly money and wasted their time otherwise.

@hannahcolobus fair enough, but in your first post you said buyers negotiating a downvalue ‘soured the relationship’, despite you admitting that you’ve done it yourself and people have no choice.

Again it’s extremely easy to find out whether your buyers can proceed in the event of a down valuation. All you have to do is ask for proof of extra funds. If you knew that yo ur buyers offered over the odds, but there was no proof of extra funds, surely you knew there was a risk of down valuation?

Buyers asking for last minute reductions, last minute pulling out etc are all immoral and unfair. But I don’t think negotiating a down valuation is. Especially as the market isn’t consistent. Houses are undervalued in some places, overvalued in others. In your experience it was accurate, but in mine a lot weren’t. Anecdotal evidence isn’t going to for anything though is it?

FWIW I’ve offered on a house, 20K over asking. The listing said ‘offers over’ - so the wording is already encouraging bidding.

I have enough to carry on if the valuation is up to 5K above the listing price. Presumably this is what the vendor expected to get. all fine.

However if the value is much lower than that - the vendor has clearly been wrong. And should accept it. They shouldn’t get angry at me, for not paying what I offered although the bank says their house isn’t worth that much.

In good faith I provided the estate agent with all my proof of funds, even the extra. They can do the maths. All the information is there and if they choose to ignore it well tough luck. I don’t want to drive a hard bargain or the cheapest house, I just want a fair price.

Also in my case I can more than afford the mortgage, and the house is a probate sale. Sometimes vendors don’t want to split the difference because they need the money for an onward purchase (fair enough), but this isn’t.

If the vendor insists on getting my offer price despite evidence of worth to the contrary then it will be pure greed, nothing more

As there was a guide price and you went over it then it would be expected that you would cover any additional amount the bank valued it at. If it was valued at less then the guide price then I would try to negotiate. There's no harm in asking but be prepared for them to say no especially if there was lots of interest.

Don’t offer if you can’t afford it. If it turns out your hedging on the bank lending you a large sum of the offer value, it’s probably the wrong house for you.

OP, it's a tricky one, but you are the only one who can decide how to proceed.

Is the house worth the money that you offered to you, or not?

It's probably not the best time to over-extend, but at the same time, in my lifetime property values have only risen. Any potential period of negative equity would likely be short-lived, as it was in 2008. If you can afford to pay your mortgage then you'd be fine to ride it out...

If your nerves win then it'll be easy for you to find a nice cheaper home!

If you know this is your dream forever home then pay the additional 10% and celebrate!

Best of luck.

It’s fair enough that they had the money and didn’t want to give it. that’s a separate scenario and it’s fair to be annoyed at them.
However for the general case your whole argument hinges on the fact that the guide price is correct. So it’s fair for the buyers to assume this, yes? As you said estate agents should know what they’re doing.

If the down valuation is BELOW the guide price then the vendor has been wrong. All the burden shouldn’t be on only the buyer to pay what they offered.

If the vendor really doesn’t want that then don’t choose anybody who needs a mortgage with a high LTV.

Buying and selling houses is a negotiation. It’s not just ‘ you offered that so you must pay no matter what’. The vendor can of course reject, and choose to relist. But if the house was overvalued it will sit there for months and then be reduced. They might as well have reduced the price for the original buyers and proceeded.

Anyway it all depends on the character of the people involved. In my case I have given all the necessary information (more than required), been clear in communication, timelines and expectations. If it’s downvalued and the vendor chooses to reject any negotiation and re-list, it’s their prerogative.

But it’s not cheeky for me to ask. They know how much I can pay, I’ve shown all that without being asked to anyway. And they chose us for being ‘proceedable’ over all the other offers (we were the highest but barely).

What if you go with a different mortgage co?

I think it is totally fair enough to go back to agent and say mortgage valuation is less than hoped which affects mortgage product avaloable to you can they assist with providing comparables to appeal surveyors decision.

If you dont want to risk losing the house i wouldnt renegotiate but you may find that the next highest bid was £50k less - agent won't want to risk sale falling over and may help you on this but i would ask for help on getting the mortgage product rather than money off. Have you had the survey yet? Very common to renegotiate price after survey.

How much do you need the price adjusted by to get the mortgage product you want?

@nomoneytreehere we need at least £30000 off to get the LTV we need. We have spoken with the vendor and they have agreed to meet us halfway through to achieve this. They have been very understanding and we appreciate this lot as this really is going to be our forever home. We love the house. Our worry is with all the warnings about the economy if the house prices fall, etc.

If it’s going to be your forever home tben
it doesn’t matter if prices drop for a while. I had a house in negative equity for several years, but it picked up again (that was in the 80s). The sellers are being really good to you. Do you think you will find the difference?

That seems a great result to me -
I don't think you ever know for sure if you're doing the right thing, but for us we didn't pull out as we didn't want to spend the next 2-3 years in the place we were living in.

You could pull out and stay where you are, or start looking at cheaper properties?

If it’s going to be your forever home tben
it doesn’t matter if prices drop for a while. I had a house in negative equity for several years, but it picked up again (that was in the 80s)

I disagree. If buying the house still meant I have a good LTV & savings then that's very different to a high LTV & little savings. Because what will things look like when it's time to fix again