House downvalued by 50k - advice?

[DrPaw]

I’ve done a search and there seem to be a lot of threads about downvaluing recently so I guess it is quite common. We have been looking since February and had several offers rejected but finally had one accepted. Now, the bank has downvalued it by £50k. Asking was £625k, we got it for a bit less.

I was going to email the Estate Agent to let them know and ask them to inform the vendors we may need to revise our offer and see what they say.

However, the bank’s valuation was a desktop valuation. We are paying for our own independent survey (Homebuyers) which is due to take place in a couple of weeks. Should we wait until we’ve had this before saying anything?

Would the bank use the info from the independent survey to revise their valuation? The mortgage advisor did seem a bit surprised that we were getting our own survey done rather than doing it through them, would it have been better to do it through the bank so they would have actually had to visit the property?

If we renegotiate now and then the survey says the house needs a new roof or something, we’d have to renegotiate again. However, I wouldn’t want to bother paying for the survey if the vendors won’t budge.

We have a decent deposit so could absorb some of it but I’m not paying 50k over value, it significantly increases our LTV and would potentially make remortgaging in a few years painful, especially if values crash as some are expecting.

Any advice would be welcome!

No point in paying for your own survey if they won't renegotiate now. I'd be dropping my offer by 50k and expecting to go and find another property.

@Dazedandconfused10 yes that was my initial thinking too. It is a desirable area though and there is very very little coming to market. Still don’t want to pay £50k more than it’s worth though! I’ve read that it’s extremely unlikely banks change their valuation anyway, even if you have supporting evidence.

I’m surprised that the agent put it on for so much over the value though. The other ones I’ve read on here seem to be mainly people who’ve offered over asking and then lender has downvalued closer to asking price.

The lender won't take into consideration your own survey
Mine certainly didn't
If I was you I would see if the vendors will negotiate

That’s useful to know, thanks @Parkingt111 . What happened with yours in the end?

Ours was down valued by 20k but as we really wanted the house the sellers met us half way and reduced the offer by 10k

@Parkingt111 that’s good. 55k is such a big difference.. waiting to see what EA has to say now.

Were there multiple offers on the property or were you the only candidates?

We had a property down valued by 85k, and we had offered asking. We tried to negotiate as it was also a complete doer upper but they only wanted to budge by 10k! We walked away as it was already a compromise is a few aspects.

If it was me I would negotiate now and drop the price, get them as low as possible but then I would not renegotiate at the survey stage as you have already offered under and negotiated at this stage.

If they say no negotiations I would walk away unless you really love the house , its a forever home situation and you’re desperate to move then you’d need to rethink😣

Estate Agents initially put a price on a property which leads the seller to believe this is what they are worth. I went after a house last year I initially asked why it was so high the EA said that's what they are in that area. No they are not. I got the RICs survey done it was valued 75k under. I was a cash buyer. I offered the valuation price the seller was a nightmare and accepted. On exchange of contracts he changed his mind. Sorry but in today's market I would not pay more than a house was valued at by a surveyor. I bought somewhere else. Someone else bought that property and now they are in negative equity not to mention the mortgage rates are going up.

Thanks @BerryTiredMama. We think we were the only offer. They didn’t advertise very widely. Yes I think better to negotiate now. I would only renegotiate again after the survey if there was something seriously wrong that would be v expensive to sort. Although I suppose we might just walk away if it got to that.

It’s such a tough market but as @Sitdowncupoftea says, interest rates are going up.. I am just not paying that much over the odds when house values could crash in the next few years. We may end up having to walk away, we’ll see.

As an agent (in a different country) I am guessing that a desktop valuation is the issue. Here, I know the approximate value per square metre, then add or subtract from that value depending on whether there is a garage, pool, lift, views, quality of fixtures and fittings etc. So I could easily add another 100k to a property around 600k based on those items alone. I could equally knock OFF 100k based on none of the above being available or of quality. The valuation should not be based on average prices alone.

This is a huge gap, don't offer to bridge it, explain and see what they say.

@m00rfarm thanks. Yes, desktop valuation. That’s why I did wonder whether we would have been better paying for the bank to do both the survey and valuation, instead we had asked an independent surveyor to do this (this is what we did when we bought our current house). The issue now is that from everything I’ve read, the bank won’t budge anyway?

@carefullycourageous they’ve come back telling us to look at alternative lenders 😬

Apart from the physical condition of the property, a bank valuation will look at comparables in the area - the actual sale prices of similar houses. You could ask the bank if there valuer will give you details of the houses they compared it with, it might help in your renegotiations.

Alternative lenders may well use same surveyors and are most likely to come up with exact same valuation.
If it was me I'd decide if I really wanted the property, and if I did I'd attempt to negotiate to meet halfway, then just get what I could off, then if they wouldn't agree to lower purchase price and I could pay extra deposit, I'd go ahead anyway. I wouldn't offer something I couldn't afford of course.
Obviously it just comes down to how much you want the house. I do feel that if you offered that much, you should be prepared to pay that much.
Personally I wouldn't worry too much about a desktop valuation of house, if you're planning to live there a while the price will come good in the next 5, 10, 20 years.
GL.

I would reduce my offer by £50K and see what they say. Their problem if they've over priced it. House prices are forecast to go down and interest rates go up. If you have your heart set on it, maybe reduce by a bit less than £50K?

Thanks @Ihavekids , I know what you mean but this difference would push our LTV much higher. Add on top of this bad economic outlook and interest rates rising I’m reluctant to pay that much over the valuation.

@DrPaw the key thing is they've done a desktop survey. Ask them to come and view the property in person and ask the EA to share like properties to prove the worth of the property.

I don't blame the sellers I'd have told you the same. I think asking for £50k off a £625k property is CF behaviour.

We have a decent deposit so could absorb some of it but I’m not paying 50k over value

If you have been looking for 6 months then you must like the house. Given that you can fiancially make up the difference are you willing to lose the house because the mortgage company value it differently to you?

We're going through a similar purchase at the moment and it does feel more stressful than others have in the past.
I just keep telling myself that we could afford it when we offered, we won't lose our jobs, and we have enough of a buffer to get through a tough winter. We do really want the house, it'll work well for our family, and we don't intend to move for a long time.
If you can't afford the extra on a higher ltv, or the extra deposit, then obvs thats a different story.
Sometimes I think I need to stop following the news etc

@reno2022 we didn’t ask for anything off we just told the estate agent what the valuation was. Thanks though. Still trying to figure out what to do.

@LimboLass I think that’s what we need to decide - sleepless nights ahead!

Thanks @Ihavekids , I am really struggling with stress over the whole process. Good luck with yours.

Theres no such thing as 'value' of the house so all these posts talking about proving the value or it being below value, or why did they put it on below value are irrelevant

A house is worth what someone will pay. On a house of that price the 50k is less than 10% of the asking price, its not very much of a difference.

I agree that a desktop valuation is pretty poor practice, borne out of the current trend for companies not doing anything at all that doesnt involve looking a computer, terrible service

Only you know whether you like it enough. Negative equity only becomes a 'thing' if you want to remortgage or sell.

Thanks @bellac11 yes I know what you mean. It’s just that our LTV ratio will be significantly higher than we anticipated because the bank is valuing it lower. So the difference is that instead of getting into the lower band for mortgages when we come to remortgage (we’ve gone for a 5 year fix, wavered a lot on whether to get 10), we’ll still be in the same band. I hope to God we wouldn’t be anywhere near negative equity but who the hell knows, I didn’t expect energy bills to be going the way they are either!