Lender valuation- is it likely to change between desk-based and surveyor visit?

[Toto21]

We’re in the process of buying a house- It’s not our dream home (and we’re selling one which is close to being our dream home!) but due to several reasons it’s for the best.

We’re porting our mortgage and have just been told that the lender has undervalued by £15.5k. It’s not a huge surprise- it’s reasonable for the area but the house is very similar to several in the area but is a good £120k over the sale price of the most recently sold (2022). When we made the offer I thought it was worth about £15k under where we settled but considering the current market it was the cheapest we viewed (prices seem so inflated currently!). For context, the same house in a different area would sell for around £150k more than our offer.

The lender is sending out a surveyor and we wondered how likely it is that the valuation would change. It’s not significantly different to the other houses nearby and all the information for those is available online.

Why are you buying for more than the valuation & more than the house is worth?

@Nextdoor55 ?

We’re not (not sure where you’ve got that from!). The bank has now undervalued it, and if the surveyor confirms that we’d walk away if we couldn’t negotiate.

House prices generally seem very overinflated at the moment and undervaluing by lenders is currently common. My question related to whether anyone had experienced a turnaround in the lender’s valuation once the lender’s surveyor had visited the property.

Why can't you renegotiate it? It seems like you've decided that you'll walk away if they won't agree to reduce the valuation

The surveyor is for your peace of mind, not the lenders. I doubt it will influence them.

We had similar. The house we are buying was valued at £20K less than we offered. Like you, we thought it was worth the price the surveyor valued it at, but there wasn't much on the market and we'd waited a while to sell and wanted to crack on. We didn't think £20K was that significant as it's a house over £800K so we decided to proceed anyway. The bank might be fine with it if you have enough equity as they just care about getting their money back.

I'd try a few different lenders before going back to the vendor with a request for a price reduction. It gives you a bit more negotiating power, as if you walk away they'll have the same issues with any other potential buyers.

@KeepinOn @Gekko21 thanknyou.

Unfortunately we can’t go to different lenders because we’re porting our mortgage with a favourable internet rate. We would lose a lot of money if we didn’t port so we’re stuck with the lender we have.

You don't have to move lenders, just get them to give you their valuation? Is that possible?

@KeepinOn you mean ask another lender to value it? Possibly but if we’re stuck with the lender we have it doesn’t matter what another lender values it as because we’ll still have to make up the deficit out of our own pocket, which we’re not willing to do.

Depends how much you are borrowing.
If you are borrowing 100% then yes it’s a problem if the valuation is less than your offer
If you are borrowing £200,000 on a house valued at £300,000 and you have the extra £100,000 yourself then it doesn’t matter to the lender.

Most people have some sort of deposit and if you’re staying long term is it an issue

If it’s valued under the current offer then obviously you run the risk of losing the property if you don’t want to make up the difference. Which I’m sure you know.

In terms of how likely is it for the valuation to change that very much depends on the condition of the property. If they find the roofs caving in, there’s dry rot or the electrics are shot to pieces then yes it may well lower if the original valuation wasn’t aware of this. If it’s in good order then it’s unlikely to reduce further. Lenders desk top surveys are quite basic and generally done by people without knowledge of the area. It’s like flood risk surveys, they are generalised and your property could be sighted as a flood risk even though locally your on a hill 30m above the actual flood risk area.

Why would they. Other buyers may have more of a deposit.
A Lender is just interested in covering how much they are lending out.

Your post is too confusing for me to understand it.

For example, why is the Lender sending out a surveyor? Normally the Lender just does a Valuation ( sometimes referred to as a valuation survey but basically it’s just a valuation). The Buyer then books their own survey if they want something more in depth to check on structural issues etc.

If you have decided to pay extra to get a structural survey then the results of that survey belong to you not the Lender who won’t see the survey. It won’t affect their valuation which has already been done.

@Twiglets1 there are two surveys done when you buy a house - survey paid for by the buyers (generally a RICS survey) to look at the condition of the house, and a valuation survey. The second can be desk-based (which has already been done) or the bank hires a third party surveyor to either drive by the house or go in to the house to value it.
The desk- based valuation estimated the value to be lower than we’d offered so the bank has hired a third party surveyor to visit the house to do a in-person valuation.

@StandingSideBySide thanks for your response.

We have the money to make up the difference between the valuation and the offer but we are risk averse and each property we’ve bought so far has been a lovely home but also an opportunity to make some money through improvements or because we know we’re in a good area to invest or have bought below the market value.

As nice as the house is we wouldn’t want to pay more than it’s worth, we’re aware the market is full of over priced properties at the moment whose values could fall significantly over the next 10 years and the house has been fully renovated with very little left for us to do to improve the value.

We’ve also, as of yesterday, discovered that a significant number of developments are planned around the property which would double the village in size.

We’ll wait for the new valuation to come through and then make a decision.

I know there are different types of survey though normally the only compulsory one if you are getting a mortgage is the valuation survey ( done for the good of the Lender not the Buyer & very basic, sometimes desk based).

Just wasn’t familiar with the concept that the Lender can force you to get a second survey ( the RICS one).

You can’t get a mortgage valuation from a mortgage lender you’ve not applied to.

@Twiglets1 no, you’ve got the wrong end of the stick. The lender is doing a second valuation survey (first was desk based and as it came in under the offer they’re now sending a surveyor to value it in person). We haven’t even booked our RICS survey yet- we don’t want to waste money if we need to back out due to the valuation.

Oh I see @Toto21 sorry I found the first post confusing.

The vacation done in person may or may not change. It depends on the condition of the property as @StandingSideBySide says, and whether it is better or worse than they are expecting it to be based on an average house of that type.

We ported with natwest to a cheaper house. They allowed us to port our entire mortgage which made it a 100% mortgage. That would help to mitigate a lower valuation? £20,000 is nothing compared to moving costs etc

I honestly think this comes down to the actual price of the house. If you are buying an £800K home, then £15.5K is not very significant. If you are buying a £200K home, then it's clearly a bigger percentage so it would in theory take longer for the houses to rise in value to surpass the current deficit.

However, I think the planning discovery is the bigger deal here. A village doubling in size will put stress on local amenities - doctors, transport, schools etc. I would say it's a reason to avoid many villages right now as there will be more and more of these developments. We need additional housing but if I were you, I'd look to buy somewhere that has already been developed so you know what you are getting and that the amenities are sufficient for the local population.