House down valued by bank

[Pocketchickadee]

We are currently privately renting and our landlord decided to sell but offered to us first before putting on the wider market. The property was valued at 580k by 3 EA but we want to keep repayments affordable so offered LL 490k which he accepted with consideration to the fact that it would probably be a quicker / easier sale as no chain and we already live here.

Fast forward 2 weeks, we have had AIP from the bank, started the mortgage application and started conveyancing. The bank has now come back and said their surveyor has down valued the property to 450k. This is 60k less than the LL paid for the property in 2021.

Now what do we do? Appeal the valuation? Try another lender?

What do you think the actual value of the house is? Are there any other similar recent sales nearby? How do other sale prices compare to the 2021 sale prices?

A good option would be to renegotiate the price with the vendor but I would only do this if I thought it was overpriced based on my research in conjunction with the valuation.

The main point is the LL won’t accept that price will he? So you either try another lender or walk away.

Why would you pay more than the property is worth?

You don't know yet what the LL might accept. Perhaps somewhere in the middle? If he puts it back on the market, the next buyers will likely have the same problem. It's key to establish what the 'real' value is to know how to proceed.

Why would there be such a difference between the EA valuations and the bank? 130k is such a huge amount. Other properties in the area similar to ours are selling between 510k and 650k. We thought we were getting a steal for 490k!

He's just given me a big fat no but I feel like he will have the same problem with new buyers too!

Yes he will have the same problem with other buyers, anyone who needs to get a loan will get the same response from the lender.
I doubt he'll be able to sell to another landlord because lots of them are getting out of the game and those that aren't will be very canny about what properties are worth.
He will have to take the least worst option and that's probably you, so I would sit tight and not say too much.

I've asked to see a copy of the report from the bank so fingers crossed this helps him to make up his mind in our favour.

He will have the same problem with non cash buyers. Even shopping around for a new mortgage may not make the difference.

But what you could do is look around for your own home within your budget. You have no chain so you are in a really good position!

Estate agents basically pluck a number out of the air and call it the valuation though, I find the system so odd! You could try a different bank maybe? Do you have a mortgage adviser?

The system in Scotland is better because we get the home report done prior to sale, which states the valuation for lending purposes. The offers over thing is a nightmare though.

Who is your AIP with? When we bought we initially went with Nationwide but they down valued by a similar percentage to you. Had no issue mortgaging elsewhere though, and we knew that Natiownide mortgage valuation was way out of step so we weren't worrying about overpaying. Weve since heard its fairly common with them.

If you honestly think the property is worth the initial value then I would try another lender that uses a different valuation company.

I would definitely try another lender.

And just to add - current estate agent valuations round my neighbourhood for ordinary terraced houses are insanely high. Ridiculously high, in fact. No-one will get a mortgage on them; landlords don't want them; cash buyers won't pay those prices; and so they all end up reduced after a year. It's nuts.

Get a property valuation from an independent surveyor. Ask your LL if he will pay, or go halves if you think it worth it. We had to get one and it was very detailed, looking at previous sale prices locally, global market forces, local property trends etc etc. It was very well evidenced - which is why our seller accepted a down valuation of 50k on our original sale price. It was more than worth the cost of the survey to know we were paying its true worth.

Make sure you get a valuation survey - this is different to your normal home buyers building survey.

I'd assume the lender thinks you've offered close to the estate agent valuation and are marking everything down by 10%.

This happened to us, we ended up asking another mortgage provider and went with them as their valuation matched our offer. It was a stressful few weeks but it all worked out in the end.

Prices will definitely fall below covid prices so I'm not surprised about this

I would try another lender since you say yourself that other similar properties are selling for much higher.

If the second valuation is also low, the LL has a problem and will have to take it seriously but this one low valuation may be an anomaly.

When did it happen to you?

Do you have a source for this?

October 2021, so admittedly perhaps not recent enough to be helpful in this situation!

Was it a new build in 2021? I can't think of another reason for it to drop so drastically.

I find it highly unlikely that three EAs have all valued it at exactly the same amount.

EA fees on a 580k house would be £5,800, and he's telling you he's offering you a 90k drop for an easy sale?

Nah. Smells fishy.

For sure, lots of lenders are down valuing in this market, but 85k is far too much money to let pass by just for an easy sale, and I don't believe him.

Not a new build, no. It was built in the 80s. I've asked LL for a copy of the survey for when he bought it, wondering if he's covering up something wrong with the property. He's moving abroad and said his mortgage payments had jumped substantially so the house is a burden rather than making him money but agree it was a huge amount for him to drop it, we were shocked but now the valuation has thrown another spanner in the works!

It's with HSBC. I think we will try with another lender but seems such ball ache!

I would definitely try another lender.