Surveyors valuation significantly below agreed purchase price

[Melcl1987]

I am in the process of buying a house in london.

We have just received our survey report which values the property at over 7% less than the price we are paying for it (approx 850k)

However the mortgage valuation came back fine (based on a visit to the property). We do have a decent deposit (35%) so not sure if that influenced this.

We already thought we were overpaying for the house (based on after looking at other sold prices in the area) but 7% is more than we had anticipated. i have done a more detailed review of sold prices in the area since then and think its probably reasonable to say its worth 7% less.

The house was originally listed at a low price amd attracted a lot of attention and went to best and final the day we saw it and we ended up going quite a bit above what we had thought was our ceiling after being given a very short deadline to submit a final offer.

There are also a few condition issues raised by the survey which likely need dealing with and could amount to a couple of thousand but we could probably live with.

Just wondering if surveyors valuations tend to differ from mortgage valuations and whether they might be overly cautious?

And also whether anyone has any experience of negotiating any discounts on purchase price based on a surveyors valuation as opposed to condition issues?

Thanks

I only have experience of negotiating after a survey, I'm afraid but these are my thoughts.

I would be very loathe to over pay at present. You would be losing a large sum of money immediately (not to mention a very large amount of SDLT, etc too).
The sellers were very smart to set a low asking price. Their marketing technique clearly worked brilliantly.
You were unwise to offer above your ceiling price and are now feeling the consequences.
You have two choices. Either you accept that you are over paying and just decide to enjoy the new house and remain there long term. Or you try to negotiate and accept that you may lose the house if they say no.

I'm sorry if this is not v helpful but, unfortunately, you aren't in a great position.

I wouldn't pay more for a house than the surveyor valued it for. The surveyor is literally telling you what the house is worth.

It depends on the sort of work the survey is suggesting. If it was a low price initially and it accounted for some work and modernisation it’s a bit shitty for you to offer and then reduce it based on obvious things.
You attempt to renegotiate how but if they had a lot of interest they might not go down in price.

The reality is that a house is only worth what someone is willing to pay for it. You decided what you were willing to pay and your offer was accepted. Unless the survey has revealed some previously unknown defect which will cost a substantial amount to repair, then I don't think you've any basis on which to seek a reduction. You could give it a shot, but they might well refuse.

How long ago was it that it went to final offers?

What has materialised from the survey? Known/unknown issues?

The surveyors valuation will be based on completed sales prices of comparable properties. At the end of the day as someone else has posted, the market value of a property is the price a buyer agrees to pay for the property. Yes you have agreed a price higher than the surveyors report however in a competitive housing market, low stock and high demand this will happen. If you really don't want to now proceed with the sale you could try and negotiate lower if you are in good position however you may end up losing the house. It may be the offers were very close and you were only the higher offer by a small margin. Or you were maybe in deed in the best buying position and someone could have placed an offer higher than yours however they have chosen your offer based on your position.
Sorry don't have experience in negotiating after survey as I'm used to the Scotland system where it is compulsory for a home report (survey and condition report) to be carried out prior to the house going live onto the market. So buyers will always be aware of minor or major defects and the surveyors valuation prior to an offer being made.

The valuation by the surveyor doesn’t really
matter though. If the house was listed at say £830, but the sellers received several offers around £840, then went to best and final and accepted yours at £850 then that indicates that the house was worth £850 to you and £840 to at least one or two other buyers. So the house value is in the range of £840-850 since that’s what a number of buyers are willing to pay for it. It doesn’t matter if the valuation came at say £780 since you have buyers willing to pay more than this. That’s really how the market works.

Your options now are to pull out because the price doesn’t work for you or continue with the purchase. If you try to negotiate a lower price then you risk losing the house since there were other buyers that were clearly interested. In your seller’s position I would drop you very quickly if you tried to negotiate since I have other options and you are indicated you are having regrets and/or are not serious in proceeding. I think this is really down to how much you want this house. If this is more of a long term house then I wouldn’t worry too much about the valuation.

30 years ago when I bought my first home, I negotiated down on the price after the survey said the house needed a new roof. However, that was very much a buyers' market. You could possibly ask for the vendors to do some of the work indicated by your survey or get quotes for the work and negotiate accordingly. But if they refuse, your only choice is to pull out or pay.

The buyer determines what a house is worth and that is what you offered. However, in current market condition, I absolutely would not be overpaying. I would go back to the sellers, explain the situation and see if they will match the reduction in the surgery. If they refuse, pull out and find another property. It is going to take a decade for house prices to recover again and you don’t want to have overpaid throughout this period.

How rare is this property?

This!

Overpaying in a falling market could be a significant misjudgement unless this is a home you intend to stay in for a long time. The valuation absolutely is a valid reason to negotiate, and personally I would be doing that. It is of course possible that the vendor may not be open to that, but I'm sure you will find something else suitable if that's the case. Property in most areas is dipping - your vendor probably realises this and is just crossing fingers that you go ahead anyway.