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)?

They peaked in 2022 so that makes sense.

There are a huge number of houses sitting on the market overvalued at the moment. The sellers need to start being realistic, as in real terms (counting for inflation) the value of property is significantly down.

If you punch those numbers into the BoE inflation calculator you’ll see they actually lost £9000 in real terms.

They’ll have some tactic to use on you in this scenario.
Such as the fixtures and fittings are very high quality, or this street in particular is worth more etc etc.

Of course the EA will act unimpressed. They are (supposedly) trying to secure the best deal for their clients. At the end of the day, what they think the valuation should be is irrelevant from your perspective if the bank disagree. I don't know if they would provide the info' that you have requested but, again, it is unlikely to make a difference to what the bank decide. You can definitely speak to your current proposed lender or try another lender if there is one with a good rate. I would be wary with such a big down valuation but see what the lenders say.

I had this (smaller numbers though). House on at £325,000. Went to best and finals in the September of 2022. We agreed at £350,00. But it was down valued back to £325,000. I couldn’t give the extra cash as the place didn’t even have central heating, I needed the cash I was keeping back to make it work for us. The sellers wouldn’t accept £325,000 (even though that was literally the asking price). I sent through the valuation/survey as evidence (Halifax we’re happy to provide it). Anyway, it’s still on the market now. Don’t know what happened to the other buyers. They’re throwing in some Additional land now and have increased the asking price to £500,000.

Meanwhile we bought a different house for £365,000. Bigger garden, garage, better location, detached (the other was a semi) and the valuation went through fine. We’re deep in renovations now and I still think about that first house. I loved it for all its quirks. Probably long term it’s going to work out better this way, when I’m not up to my neck in builders. Ultimately you cannot give what you have not got.

Waiting for DDs mortgage valuation to come through. She immediately offered asking price on a flat in S London, as all the other ones she saw had multiple offers, within hours, some over the asking price!

We are trying again with Santander. The use a different company for valuation, so it will be interesting to see what they say. In the mean time I've got multiple EA's scheduling tours of our current rental house. So stressful!

Good idea - a different lender could well give a different valuation.

If the second valuation is equally low you have a lot of evidence for a drastic reduction in price. But it may well be closer to the agreed price in which case you may still be able to agree a deal. Hopefully still with a reduction but one the vendors are more likely to be able to accept.

House valuations are not an exact science, especially with unusual properties.

Honestly OP, I would ask the landlord if you can rent a while longer. The whole house buying process can take anywhere from 3 to 6 months before moving in. Surely it's better to overpay one months rent than go through this added stress? Plus you could move/clean at your leisure.

I think you might be right about asking for an extra month at my rental house. I had even wanted to have a couple weeks overlap. Fingers crossed.

@KievLoverTwo

Would this work if i was looking at a specific small geographical area - screenshot the rightmove 'STC' properties and then waited for those to appear on houseprices.io?
If they don't appear can I look up the properties individually on Land registry?

Not exactly. I usually find the actual house number (with a bit of sluething), the asking price and email myself the Rightmove URL.
The Rightmove url should always worked, even after it has sold.

If you don’t find out the house number and have the Rightmove URL when you archive the information for your records, it makes it harder to find the actual property after the event. This is important when you need to look back on whether homes have been refurbed (which you can sometimes find on historical pictures on Rightmove and Zoopla), increased in floor size, etc. For energy efficiency improvements you look up the property’s EPC, and its old EPC if it has one. It can show the difference between single glazing versus new double glazing, for example.

Houseprices.io feeds in directly from the land registry and they update the minute the land registry release a new batch, so it really doesn’t matter which one of those resources you use.

Thanks @KievLoverTwo and if I can ask you one more question... do you think the forecast prices on individual properties on Houseprices.io are the most accurate/realistic (as much as they can be!) forecast prices out there?

I don’t understand. It doesn’t have forecast prices. Are you getting confused with something else?

Happy to answer any questions, it’s no bother.

Sorry, it's called "estimated value" (not forecast prices)

Ah, yes. So, it’s a bit complicated.

As far as I am aware, the portal works on what price the house last sold at and adjusts it for inflation.

I don’t think .io takes in surges in house prices if lots of expensive houses have sold nearby.

For example, Zoopla takes in all local house sales which can spike the value. Say you have a house that’s worth 200k and within the last year four mansions sold nearby, Zoopla might spike your house value to 400k. Which is silly, cos you are in a two bed worth 200k.

So to gauge how accurate io is, I take the following steps:

I look at when the house last sold. There have been several house price spikes over the last 20 years and as a general rule, people overpaid at those 3 or 4 peaks.

I look at the io value for identical houses bought in non-peak years.

I dig out the old sales adverts on Rightmove and Zoopla to see if they have added value, for example by doing a complete refurb, adding an extra 25% floor space, etc.

I look at local planning portals which tells me things like; gas boiler installed, 6 windows installed, (electric) consumer unit installed, all of which add value.

I then put the postcode into the nationwide house price index from land registry’s price paid, and for the “time it was last valued” put in approximately six months before its last completion. This index is based on mortgages they gave out and as they are a very large lender, it’s somewhat reliable. Because their index is based on actual mortgages handed out, it also includes house price spikes because that’s what people paid at the time of purchase.

I take all of these things into account. Last week I looked at one paricular street with absolutely identical houses all purchased over various peaks and normal times in the space of about 20 years, all in exactly the same condition with no floor space added, the io value varied by as much as around 25% depending on which year the house was bought.

If they bought in a spike, they generally overpaid.

You can come to an approximate value when you accumulate all of this information. But you will probably find that most house prices are priced bang on the median price listed on Zoopla, because EAs are lazy, and most people think Zoopla is right, when it’s often wildly inaccurate. It dropped the value of my rental from around 600k to around 270 and then back up to around 530 all the space of 3 months because some cheap houses sold around me. Actual value is probably 550 to 600. Don’t listen to Zoopla.

I hope that helps. If you need further help, feel free to PM me your email address and I will send you the above mentioned street example, and help further if I can.

Thanks @KievLoverTwo
I'm currently stalking a house which is for sale at 35% over the last sold price in Feb 2020. They have extensively redecorated, but no building work/improvements to the fabric of the house.
Just trying to work out if they are in glue or I am....

Pretty academic exercise as I don't think they are in a hurry to sell judging on how long they have been on the market and the house is £100k over my budget (but the estimated value on Houseprices.io is bang on my budget).

Conversely I would be very happy with the estimated value for my house, but had to accept a lower offer just to get getting things moving. But now can't find anything worth moving for in my budget

And your explaination about how Zoolopa comes up with its estimated market values makes sense, it's all over the place, so I don't take any notice of that.

I think that’s far too much. 2020 was a stagnant year. Prices started to rise from the stamp duty break in 21 and reached fever pitch around august to November 22. Since then they have been falling, except in the most in-demand areas.

Wait it out!

I've just checked the estimated value of my house on houseprices.io and it's about half of its actual value. I bought the house in part exchange with the builder for £70k instead of £250k nearly 20 years ago. I hope people realise the estimated values can be wildly out if I ever come to sell and they're doing online research!

Tbh I think so few people know about that website that it hardly matters.

Bank went to value the house yesterday. I'm hoping they down value it but by less so I can negotiate on price.

In a similar position. Saw a beautiful property for 850. Offered 765 and settled at 780. Bank told me today they value it at 717!! This is based on desk research rather than a formal valuation. Feel terrible for the sellers. I have my heart set on it but I’m not willing to pay over the odds in this economy, which looks set to get worse.

Not always.

My buyer used a no complete no fee solicitor so when they walked away on exchange day because 'they weren't feeling it anymore' all they lost was their search fees and we were down £2k

Very wise not to overpay with the economy heading downwards and risks high.

Hope it works out for you @slugsinthegarden
If they also down value, you will be a stronger position to negotiate at least.

@fromtheshires that is so annoying. Awful for either buyer or seller to pull out without an excellent reason literally just before exchange.