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!

Yes I get that, but do remember that when you remortgage, the valuation may well be different then, might go up, might go down.

As I say, the balance is swallowing this or searching again for a new home. Is this something that you will find easily, is a similar home likely to come up against a valuation issue again (I would suggest at that price it is because there is a bigger margin of error).

Who is doing the survey? Can you add a valuation onto that?

Our surveyor did for about £60 (no mortgage). If that comes in close to the bank, you have further power to negotiate. If that comes in close to asking, you need to consider what you want to do.

Don’t get bogged down by surveys values, unless your applying for an high percentage mortgage, in which case you probably have no choice. It would appear from your posts that you can make up any shortfall. Therefore the value is what it’s worth to you. What you think it expensive today will be cheap in a few years time. Golden rule buy the postcode.

Thanks all. Eek it’s so stressful. We didn’t have any of this kind of thing when we bought our current house, it was all very straightforward.

@LionessesRules we have an independent surveyor doing a homebuyers for us, I will check if he will do a valuation as well. This could be reassuring either way as you say. Although I don’t think the bank would care whatever he says, so we would still be left with the much worse LTV.

Thanks @takeaflight I suppose that’s true. I am quite risk averse by nature though and have been getting quite stressed anyway about the possibility of interest rates rising dramatically and house values crashing and terrified we could be in a position where we couldn’t afford it in 5 years time. I hope that would be an unlikely worse case! The valuation just makes me even more cautious..

If you do go ahead with different lenders then - as some one noted above - check that it won’t be the same valuer going out.

I had an absolute NIGHTMARE trying to get a mortgage in one place that kept on being turned down as I mortgageable. We finally realised it was the same bloke doing all the valuations. Eventually found a lender who used a different valuer and no problem

good luck - it’s so stressful

We had this then realised they'd somehow missed the loft extension and valued it as a three bed! Might be worth checking there's nothing like that going on.

Tbh we were really upset that it was down valued as we were worried to lose out on the house but now that we are working in it I can actually see that it made sense as it needed alot more work than what we naively assumed. Ours was not a desktop valuation the lender had a surveyor go to the property

Thanks, useful to know @Jules912 and @Parkingt111 . Now rather wishing we had paid the bank to do the survey and valuation rather than just the valuation. I wonder if we could change it to do that. The house does need a bit of sprucing up but has a lovely garden and Amazon views. Guessing that’s not taken into desktop valuation!

@DrPaw
I'd consider doing that anyway.

My bank value mine a lot lower on a desk valuation because of the comparables (it's difficult anyway as there aren't many houses the same in this area) BUT that's because of a private 'sale' of 2 houses from a bloke who did a shady deal. Basically on paper sold them for next to nothing but it was all part of a deal involving the houses, some land and a business.

it was valued high enough to get the mortgage I needed (with my significant) deposit to buy it, but if I sold it, anyone needing a bigger mortgage would need an in person one.

though another has sold since at a 'proper' price so not sure what that's fine to the comparables.

I honestly think you need to consider what it's worth TO YOU. You've been looking a while, you've missed out on a few. I know things are changing a lot at the moment, but you wouldn't have offered what you did if YOU didn't think it was worth iT!!

hiw ling are you planning on staying?

Less than 50,000 on just under £625,000 I wouldn't think will make it painful next time you need to fix your mortgage.I'd just overpay as much as possible to reduce the balance a bit.

Property market MAYBE taking a hit, is a risk IF you decide to sell before too long, but if you plan on staying, it should all come out in the wash and £50,000/£625,00 won't change the fact much.

try a different lender who will do an in person valuation if you're really hung up on what a bank thinks, but that won't have any baring when you come to sell anyway. So if you can afford to buy it with the bank offering you to best deal (or easiest mortgage-sane lender or whatever) then I'd just decide what I was prepared to pay (which is presumably what you did before you out an offer in) and go with a full proper survey with a surveyor of your choice.

Our garden is the largest in the cul de sac
It was even marketed at larger than average plot with a sunhouse and some extra bits but It was still down valued

I think it really depends how much you need/want the property. I knew the house I’m purchasing is massively overvalued, easily by 40k. The market is crazy in the area, everything going for well over the inflated asking prices. The bank down valued by 60k 😬😬😬 I genuinely don’t have any other options. We will lose our buyer if we don’t move by the end of September and I don’t fancy my chances trying to sell my flat in the economical shit storm that’s on the horizon. The house is ready to move in to and there’s no chain. I have three kids under 3. I don’t have time to start again and if I don’t buy it someone else will. Going into rented would mean losing more money in the long run and there’s a risk we wouldn’t get back on the property ladder. All of these things make it worth the potential financial hit when I go to resell.

One thing I will say about the desktop valuation. It does not take into account the state of the property or the current market. It’s based on historical sales. Nothing has been sold in the street for 2 years. The market has gone crazy in that time and there is a housing crisis in this country that isn’t going to change.

I tried to purchase a house a few doors down that was a complete renovation job. Would have cost 50k to make liveable and it had subsidence issues. The bank valued that at 375k but down valued the identical house that had been recently renovated, with a new central heating and electrical system, at 365k. Didn’t make sense.

The house I'm currently buying was initially downvalued by £40k. In an asking price of £675k, this was significant, and due to my deposit size, not a gap I could bridge easily.

I paid for a second survey, which came in at a revised £20k under, which the lender was happy with.

I approached my vendor to explain, and suggested reducing price to the new valuation. They immediately offered to meet me halfway at £665k, which I thought was reasonable, so agreed. I had to scrape together another £10k though.

I've now been waiting almost 6 months for that property to complete, so may not end up with it anyway!

Personally I think £50k is too big a gap to be comfortable with. Anything could happen in the next few years, particularly as we are expecting a downturn, meaning you would be unlikely to recoup the full value you spent on purchase, if you had to sell in a hurry.

This happened to us but the valuation was from a proper survey. Offered 50k less and the vendor (also our landlord) told us to F off. Wouldn’t budge at all. So we pulled out. I’m so glad we did, we got a way better house and I would’ve been up at night stressing for months. House also needed heaps of work as old cottage.

Negative equity only becomes a 'thing' if you want to remortgage or sell. Or if you need to due to redundancy, ill health, death, other change of circs. It causes remortgaging problens etc.

Risk of negative equity should not be taken lightly as it causes a lot of stress if it happens. £50k is a big sum when talking about real cash.

@DrPaw I would be very cautious about overpaying at this point. The market has reached turning point and prices are likely to fall possibly by a lot.
I think agents and sellers are starting to realise this (obviously areas vary) and may be more willing to accept negotiation unless they are not too bothered about selling in the first place.
See what their response is first. Are you willing to lose the house?

Thanks for all the advice everyone. It’s very difficult… We don’t absolutely have to move. This move is a big move to be closer to family, which we have been wanting to do for many years but are only now able due to being able to work remotely.

As I said I tend to be quite risk averse and there is a big part of me that wants to just stay put for another year or two and see what happens. DH wants to get moved though.

Desk top valuations are very poor on accuracy, they don’t take into account area demand and any alternations, the bank are obviously only interested in their investment and the resale value to the value of their loan if you was to default, to cover their investment.

Wait for interest rates to peak before even thinking about buying a house, doing anything else is asking to get financially burned IMO, there are tons of sellers now desperate to offload to a bigger fool than them so that they can buy back in later or just minimise their losses.

Your lender won’t care what your independent surveyor says. All they care about is their own valuation. I would pause the survey as you may be throwing money down the drain.
You could find another lender and this time make sure they don’t do a desktop valuation. Or tell the vendor you will need to meet in the middle and see what they say. But they are quite likely to suggest you try a different lender.
It’s so stressful I know.

Ours was downvalued by a similar amount but luckily we had a large deposit so were still able to proceed with the purchase. It was also in 2014 when the market was going mad so it was very much a sellers market and if we hadn't gone ahead we'd have lost out as prices were rising so quickly.

Thanks all. As it was a desktop valuation we’re going to see what the homebuyers valuation says and possibly look at an alternative lender. I have been so stressed today. If this falls through I think I want to give up for a year or two.

House we were going to buy was downvalued by 40k vendors wouldn't negotiate. We gave up and will start looking again possibly when DD starts secondary the market seems too dodgy for me to want to commit to a new purchase. We are very comfy right now.

Exactly this. The market 'seems too dodgy'

@rainingsnoring yes it feels very volatile at the moment. I think we will wait and see what the survey says but I don’t want to overpay that much compared to the valuation. It feels far too risky. It’s such a shame as we have wanted to move for such a long time. And wanted to do it while the DC are as young as possible.