Mortgage company valued lower than offer

[Puravida23]

Not me but my DS . They have just heard that the mortgage company have valued the property they are buying £45,000 less than their offer. They are first time buyers so no not able to cover the difference and also spooked they may now be paying over the odds . Anyone else had this? Is this unusual ? What would you advise?

I have had this the other way around, been the person having the house valued (for remortgage not for sale) and it has been down-valued. The conventional thing is to go with another lender as you won't change a valuers mind. If another lender also down values it then it would seem it wasn't worth what they are paying for it. But valuers differ widely I find.

This does happen sometimes. If the undervaluation is only by a few thousand, the seller may reduce the price but I doubt they will be willing to reduce the price by 45k.

The best thing would be for your son to apply for a mortgage with a different company who will organise a valuation with a different person - they may value it very differently and the problem will be resolved. If they come back with another undervaluation, it will be evidence to the owner that their property is significantly overpriced. However, another mortgage application with valuation will cost your son money, which he may be reluctant to pay on a property he is already starting to get cold feet over.

Another option of course would be for your son to walk away because 45k is really rather worrying.

Was it a drive by valuation? What are the comps like? What was their offer compared to asking?

45k is a big differential.

I had this back in about 2009. The valuation came back £10k less than our offer. (Probably 5 percent of the value of the house)

The buyer refused to the reduce the cost. The bonkers estate agent suggested that we pay the difference using credit cards.

We walked away and the house sold many months later for a further £10k less than our offer.

Yes, it happened to me too and it was also a significant amount. It does put the wind up you! They just need to research the market more so that they can be confident in what they are offering. We applied for a different mortgage and it all worked out in the end but it was scary.

Yep, this is currently normal across most lenders.

The last I heard (probably about four weeks ago), mortgage lenders are undervaluing properties by an average 4-5%.

She needs to negotiate down with the seller. Anyone else buying the house is likely to experience the same problem.

https://thenegotiator.co.uk/news/down-valuations-rearing-their-head-again-says-big-property-firm/

^^ this was not where I read/heard it. I can't remember where it was, but it was definitely closer to at least 4%.

I've been the seller in this position - v keen buyer offered over asking price to secure property. EA advised us it was likely that the mortgage company might not agree with the higher value. They didn't. So I accepted the offer at the valuation price. (Which was the asking price after all). But it was only £5k difference.

Yes, lots of properties are being down valued. Speak to the seller and show them the valuation. See what they say.
Your DS may want to consider paying for a second valuation.
My advice would be to research the local market very carefully, looking at sold price, consider what his LTV is, consider how secure his employment is, etc. Personally, I would be extremely wary of paying over the valuation figure in a falling housing market. He could easily end up in negative equity unless he has a significant deposit.

Thanks everyone for replying it is so difficult to advise as they love the house and there were a few offers on the property at around the price they offered so this has been a blindside for them.

So then he needs to pick up the phone to a good mortgage broker asap and ask them to find him a different lender who is currently not down valuing as a matter of course.

Some lenders are extremely risk adverse (esp if he has a high LTV or his affordability is borderline), others really don’t care as long as they can see you easily have the income to cover any potential negative equity.

A good broker will know which lenders to look at to meet his needs.

But @rainingsnoring gives some very good and serious advice and he should heed these words. If he is pushing his finances and only wants to live there for 3-5 years then I would recommend listening to the lender, and he should try to find a house that is really good value instead.

If there were a few offers on the property at around the price they offered then that suggests the price they offered was about right so the 45k down valuation is particularly surprising.

I think with this added information it really could be worth trying a different lender, if your son is willing to pay for a second valuation. As mentioned previously, different valuers can give very different valuations as it can be subjective. If I was your son I would talk to a broker about it & talk to the EA about it. The EA should be able to show examples of comparable recent sales to justify the price they put the house on at, which may reassure your son. If they can’t provide comparable examples though, then maybe the valuer has a point.

This happened to us but their value had just compared us with next door and infact our house is much bigger. A lazy valuation.