House valued at 50k less than I’m paying

[Sheerdetermination]

The mortgage valuation (done by computer algorithm, not an in-person visit) valued the house I’m buying at 525k. I’m paying 575k. I’m minded to stick with it, and not risk renegotiating, as the house suits us and is a good school. But, at the same time, I’m feeling worried I’m throwing money away. Have you ever experienced such a big gap between valuation and actual price you were paying? Thanks.

Any house is always worth what it is worth to the person buying it.
If you think it is worth £575, and you have the finance in place to be able to do it, then it is worth £575.
You can't 'measure' the number of ££££ it is worth to your family to have your child at a particular school, or to be near family / halve your commute / away from pollution or noise / whatever reason it is particularly important to the person buying the house.
Most of us buy a house to be our home, not to make money for them. It is so much more than a financial transaction for the overwhelming majority of people.

All that said - depending on circumstances (how many other bids there were, and the circumstances of the people selling) - it might still be worth going back to the people selling with a compromise offer. Of course they are within their rights to refuse it, but they might compromise a little.

Yes mine was devalued 40k and we asked for 35 off . Couldn't buy it otherwise as don't have free cash to plug

I’m selling and my house was just de valued by 30k - which was the asking price anyway but the buyers paid 30k over asking as there were multiple bids over asking.
The estate agent said that in the past few weeks they’re getting a lot of this - so the algorithms are predicting a drop in values I presume.

My buyers negotiated a 10k reduction

We had this and have bought regardless. We plan to be there for 10+ years and even if we then sell for what we bought it for (assuming a slump then a gradual price rise) that’s fine…we’re likely to be downsizing. Did mean we had to free up some cash to qualify for the mortgage we wanted but we were lucky enough to be able to do so. We also know the algorithm is placing this house alongside others we’ve seen locally that need £100k of upgrading whereas our purchase is up to scratch…

My current house which I completed on in September initially had a £35k between the agreed price and the valuation. My gut said it couldn't be right based on what similar houses were marketing and selling at, and as I also wouldn't be able to afford to outbid on any other properties at the time, I arranged a second valuation survey.

The second valuation survey, which was actually with the same lender, came in with a £20k gap. I'd already had an initial conversation with my vendors, so they were already on notice. Vendors and I agreed to meet me halfway, so I had to find an extra £10k and they dropped £10k.

If the house is in a very popular area, you can afford to plug the gap and intend to stay at least 10 years, it may be worth continuing the purchase at that level.

However, if I were you, with a gap that large, I'd at least get a second valuation, perhaps with a different lender if you are getting a mortgage. I'd also start a conversation with the vendor, as they will likely come up against similar with any purchaser, unless new purchaser is buying full cash, so may be willing to negotiate.

It happens. Most people try to negotiate some money off (even if you don't need to in order to proceed). I would tell the estate agent what has happened and request a reduction - maybe split the difference at 25k?
The vendors may not accept this of course but hopefully they will at least give you some kind of reduction because they are likely to face the same problem again even if they sell to someone else.

Do you need a mortgage? The mortgage will be based on the valuation not what you've offered. That's what matters unless you're hoping to sell again in a few years.

This has happened to us.
I think it’s possibly as it’s a desktop valuation and my new house is a small holding with equestrian facilities so potentially not fully taking that into account.

Certainly the cheapest house of its sort around! So we’re ignoring it, we have enough equity it doesn’t matter for the mortgage.

That is quite a big difference.

Have you tried to find out why the valuation came back like this? is there an issue with the house/location you did not spot?

Have you had a full structural survey of that house?

It seems the house was overpriced and I would go back to the seller and negotiate a lower price.

Meanwhile, back in the real world, The house is worth what any competing offers from other buyers could be accepted.

I think I’d be letting the agent/seller know and arranging a second one tbh, then see what that says and possibly look at a compromise price. That’s a lot extra to find, presuming you need a mortgage…

We had similar at both ends (but the gap was more comparable to yours on the property we were buying). So our buyer's bank valued the home we were selling at £10k less than the price we'd accepted and our lender valued the home we were buying at £40k less than our accepted offer. It was stressful at the time, we obviously couldn't take £10k off the price of our home as we were facing a £40k shortfall ourselves. In the end we all compromised (we'd also had a survey done on the house we were buying which independently valued it similarly to our lender as there were a lot of issues flagged throughout).

Even though we negotiated a slightly lower price for the house we're in now based on this we don't regret it. (Although I was definitely anxious about it all at the time). Like you OP we chose here based on the location and schools, in a village where property like this doesn't come up very often. I think we'd have felt differently perhaps if we were buying a standard new build type property where to some extent if you lost out on one house a similar one would likely come up again. I think if this is the house you think is right for you then keep that at the forefront of your mind. X

I would renegotiate

I'm in exactly the same position only I'm paying 530k and Zoopla puts the house at 470! 🤦‍♀️ But I love the house so much and I know they won't sell for less 😔

£30k difference for me, we met halfway. But my (independent, based in the same town as the house I'm buying) surveyor valued it at the original agreed sale price. 🤷‍♀️

Well, I wouldn’t go on what Zoopla said, we bought our freehold, 4 bed semi for £380k last year, and they have down it’s worth £153k, and it’s a 2 bed leasehold flat! I’ve contacted them about it several times, but they won’t do anything about it. So I’ve just stopped their website now

Stopped using their website now, that is.

Zoopla valuations are a bit dodgy at best. I know ours as it is t present is waaaaaay off- far too high, even though we bought as recently as 3 years ago. I mean, the valuation might be right if you took the bottom end, but only if you took into account a LOT of work we have done, which that Zoopla valuation doesn't.

Zoopla is really not reliable at all for property prices

Will the mortgage company actually lend to you? We tried to buy a house at 390k, mortgage company valued it at something like 365k, and wouldn't give us the mortgage.

In my experience the mortgage company will happily lend the relevant percentage to the borrower, but only up to the agreed valuation, not the agreed sale price.

E.g.

Property agreed sale price = £500,000

Property survey valuation = £450,000

Buyer needs 80% mortgage.

Lender will provide 80% of £450,000 = £360,000, buyer has to find the rest £500,000 - £360,000 = £140,000

If the lender had agreed with the survey valuation, they would provide 80% of £500,000 = £400,000, leaving the buyer with £100,000 contribution.

The difference of £40,000 is a huge amount for a buyer in this scenario to make up the shortfall for, hence why negotiations with the vendor are suggested.

@Kite22 Such wise and comforting words. Thank you for taking the time to post.

@Newusernameaug Interesting to have the seller’s perspective- thanks. Do you mind me asking how the buyers approached it, and what your thinking was?

@DelurkingAJ Sounds like a very logical approach

We had this in 2007 just before the last crash (although it was £15k rather than £50k). We negotiated the sellers down slightly from our initial offer.

We sold about 4 years later for £10k less than we paid for the house.