Lender down valuation of £100k!

[slugsinthegarden]

We made an offer on a house in London at£1.05M (was on for£1.1). Offer accepted. Level 3 survey showed no issues. Searches in progress. Barclays has valued it at £950k!!!!!

Mortgage broker very surprised at huge amount of down valuation. Was told it was due to comparable sale prices in last 3-6 months. From land register data the price seems reasonable but those sales are all 2+ years ago.

I've gone back to EA and asked if seller would move on price but this was on Friday evening so I'm sitting around all weekend stressing.

Anyone else had a similar situation? How was it resolved (or not)?

Not uncommon I'm afraid. House prices have actually dropped since 2 years ago so if you think the valuation looks comparative to that then it seems fair tbh. Not ideal.

Is it preventing you reaching enough with your mortgage to buy it? You can try to negotiate a decrease but that will depend on the sellers position and any other offers. At that price there are often cash rich buyers around who aren't maxing out their mortgage so your request may be declined

My DS had the same issue but his was 40k down on a 360k house. They appealed to the mortgage broker who with held their valuation . They then tried another mortgage company who valued it at 360k so all good in the end
The house they were buying was on for 3 weeks had 4 offers on it, one higher than DS’s and seemed in line with others available on the market at the time but it had been extended (loft conversion, one story extension ) so was larger than its neighbours so not sure if that caused the issue on valuation

Our mortgage rate is predicated on a 75% LTV so that would not hold if we stayed with Barclays. We are holding back about £25k for some renovations.

So we could swing £975k but that's still a huge reduction for the seller. The house is empty though (ex rental) and the seller an investor. We are FTB so no chain.

We probably will need to try another lender. It's a shame as our rate from Barclays was from a couple of months ago - better than what will be available today.

My son had to start again as neither side would budge. Buyer is always left out of pocket. UK house buying is ridiculous.

Try and get a discount first.
I’m always amazed people say ‘Oh no! Try and pay more than it’s worth’
100k is like having to earn 160k before all taxes and deductions, or an extra £500 every month on the mortgage for 25 years.

Have you looked closely at the agents pricing?

I have a tool that shows price reductions. One agent in particular in an area I am looking at is having to reduce asking prices by an average of 26% where they have overvalued just to get business, in a far lower bracket than yours - with over 50% of their listings. Some are far worse than others.

In fact, the last I heard (about a fortnight ago) the difference between asking price and houses going SSTC across England is 25%.

Your broker really, really should not be surprised at all because this is happening all the time at the moment across almost all lenders. I call BS at the brokers surprise.

Interesting. Where do you find the data on agents asking prices versus sale prices?

Price reductions shown via the Property Log add on via Chrome.

Click the ‘sold STC’ button on Rightmove to see sold prices - or at least the last asking price of sold houses. Some agents keep sold STC adverts up for as long as 9 months.

Occasionally I look at the latest sales on houseprices.io and the minute I get an email from them telling me a new batch has been released (which they get from the land registry - usually a sample size of 10%) I start looking specific addresses up on Zoopla. About 1 time in 10 if I am quick enough, Zoopla has not yet updated the “last sold for” and still has the “put on the market in March at £££”, so you can see what the original asking price was. Once in a blue moon you can find both the old Rightmove advert AND find the original listing price via Zoopla at the same time. The reason this is useful is, I am told, a lot of sellers are reluctant to show their homes being reduced on public portals such as Rightmove but will do quiet discounts behind closed doors. So then only Zoopla shows me what they were aspiring to.

It’s a fair amount of work, but then you are spending a hecking lot of money.

Thanks!

@slugsinthegarden you really need to do more research on your local housing market, look at property log on Chrome. Remember that much of the data is many months out of date. This is also a good website which shows regional house prices by type:
https://otta.property/trends

In most areas, selling prices are lower than they were 2 years ago not higher. I don't know which part of London you are in but in NW London, this site reports that prices are down 12.99% from peak in 01/02/23 (which translates to sold prices approx 6 months earlier because of the lag, so approx Aug/Sept 22). In SE London, the falls are less, just under 5% on average but flats have fallen much more than terraced house, for example.

There is a lot of over valuing by estate agents which just wastes everyone's time and means that some, especially slightly naive FTB overpay or lose money because things fall apart. I agree with @KievLoverTwo about the mortgage broker being 'surprised'. According to other brokers, this is happening a lot at the moment and causing them a lot of inconvenience.

Overall, I really don't think you should overpay (ie pay more than the valuation or more than v recent comparables), especially as a FTB and especially not now, when the economy is likely to deteriorate significantly over the next few years.

Watching.
I'm under offer (lower than value 2 years ago compared to very similar houses on my street which sold then) but can't find anywhere I like where the sellers are also being realistic. Overpriced houses are sat on the market for months and months yet the EAs are telling me the sellers are very keen to sell/move.
So annoying how stagnated it all is, I'm fed up of my situation, commuting miles because I can't move without (as mentioned upthread) paying a £100k overpricing penalty.

Do you really want this house op? I'm assuming if you are FTB then you aren't in a rush to buy at the peak?

Thanks everyone for replying. I'm in SW London. I would love to pay less. Just hoping the seller will be willing to negotiate! It's difficult bc the house is an unusual property - not the typical Victorian terrace but a converted industrial building. Conversion done about 8 years ago. It's in a gated mews.

One similar house in same small development sold for £1.025 M. But I guess prices may have come down since then?

Forgot to say similar house sale was 2016

We rather stupidly gave notice on our rental as thought everything was going well. We do really love the house. I looked at about 20 houses before finding this one!

We are sick of renting and were so looking forward to finally having our own home.

And agree the market is so stagnant right with overpriced properties things staying on for ages!

I wouldn’t pay more than the valuation otherwise you’ll be starting off in negative equity. Hopefully the seller will renegotiate on the price, fingers crossed for you

Doubt house prices in SW lower than 2016... Only flats have plummeted in value... Does it have a garden? If yes, it should sell for at least 2016 nominal price..__

'We rather stupidly gave notice on our rental as thought everything was going well.'

Oh dear. You shouldn't give notice until exchange of contracts. Anything can happen before then!
Renting can be an absolute pain in the UK, for sure, but you would repent at leisure if you pay too much for this house and your circumstances change for the worse or you need to sell in the short term.

Yes (but not in that scale!) and was told the Building Society were valuing it based on what they could sell it at if I defaulted.

I had to take out an insurance policy to cover the difference. This was years and years ago ( the Romans had just left), and so it may be very different these modern days.

If the conversion was done 8 years ago, why do you need to spend £25k on renovations?

As first time buyers with a budget of over a million you've got plenty of choice. Don't stress about it. You'll find somewhere else, probably nicer.

@upthehills1

Not uncommon I'm afraid. House prices have actually dropped since 2 years ago so if you think the valuation looks comparative to that then it seems fair tbh. Not ideal.

Have they? My niece and her husband bought a house for £285K in June 2021, and sold it in April (2024,) for £350K. (3 bed detached house West Midlands.)

Is it just London that has had its house prices drop?

I too wouldn't pay more than the valuation unless I could see myself there for many many years, but when you look at it percentage-wise, it's not much of a discrepancy.

Ah I have this problem too! I'm offering based on recently sold prices, condition of house, and change in the market since 2021 (looking at nationwide price tracker) but noone is willing to budge to anywhere near that. Most are either sitting on the market a long time, with the odd one managing to find a cash rich buyer downsizing who doesn't care about the value.

I sold my flat below recently sold flats in the block that were in better condition and it was in line with online valuations. I was keen to move, but most sellers seem reluctant, and 4 I've liked have withdrawn from the market.

Yikes, assuming by your user name you're in Leeds @amandaleeds ?

Predictably the EA is not impressed by the down valuation. He requested a copy of the report but Barclays isn't willing to release it. I've asked instead for them to confirm the square footage they're working from and to provide us the comps they used for their valuation. Anyone know if they're likely to provide this?