Valuation woes

hunted

Just gone sale agreed but the bank valued the property 21% less than the offer agreed. Quite a big difference really.
What should happen in this situation.. go back and renegotiate with the vendor, but possibly risk loosing the property? Or just bite the bullet. Any advice welcome. The agent is putting pressure on to sign. Like the property but I don't like the idea of voluntarily starting on negative equity.

Rew

hunted wrote: »

Just gone sale agreed but the bank valued the property 21% less than the offer agreed. Quite a big difference really.
What should happen in this situation.. go back and renegotiate with the vendor, but possibly risk loosing the property? Or just bite the bullet. Any advice welcome. The agent is putting pressure on to sign. Like the property but I don't like the idea of voluntarily starting on negative equity.

Id be surprised if the bank will give you the mortgage to be honest. Id go back to the vender with the valuation, if they don't budge walk away.

Sala

Agree with last poster. Unless you have in excess of the 21% to put down I don't think you'll get a mortgage. The bank won't want to be sitting on alleged negative equity either. Absolutely do not sign anything until it's ironed out.

Jen44

Go back to agent and be honest and say the banks valuer didnt agree on the sale price. If they want the sale they will have to lower the price by 21%. As others have said I doubt the bank will give you the mortgage otherwise. You wont be able sign contracts anyway without a loan offer from the bank

April 73

Check the property price register for similiar properties in the area - what have they been selling for? Do you feel it is over-valued? Was there a bidding war to get it up to the agreed sale price?

Even if you have a 20% deposit, with the low valuation the bank will look on it as a 100% mortgage & you're going to struggle. Was the valuer sent by the bank? Is there a process whereby you can ask for a second opinion?

TheDriver

What is the value of any house? Is it a rival EA acting the maggot?

Dardania

I had the exact same scenario a few years ago. I went back to vendor's EA, with valuation in hand, and advised them to revise the price closer to the valuation. As at that time, cash buyers weren't as strong, particularly in the market for hte house we bought, so the other bidders were as dependent upon a mortgage as much as I was, not to mention making up the difference between the 90% the bank would give out based on valuation....

And in fairness we did meet in the middle (sale agreed 235, valuation 212, we revised to 225) - my argument to the vendor was that if we gave the valuation to the bank as it stood, it would reduce the price they would receive substaintially, whereas by meeting in the middle, they felt they were getting above the market rate, and I felt we were getting something a bit cheaper than what we were happy with.

whippet

2005 is calling .. people are now trying to pay more than house are actually worth; with debt. Getting a 2nd opinion on a property advising you that you are paying too much is not something that should be ignored

Ri_Nollaig

whippet wrote: »

2005 is calling .. people are now trying to pay more than house are actually worth; with debt. Getting a 2nd opinion on a property advising you that you are paying too much is not something that should be ignored

If that is the case then what is the point in bidding?
Isn't a house only worth what someone is willing to pay, like if this is the case then shouldn't a house be put up only at what its valued at and once that is reached its 'sale agreed', otherwise you are increasing bids only to be brought back down if you need to use a mortgage, which I imagine the vast majority of sales are.

Honest question by the way!
I 100% understand the reasoning for limiting the risk of negative equity.

Dardania

Ri_Nollaig wrote: »

If that is the case then what is the point in bidding?
Isn't a house only worth what someone is willing to pay, like if this is the case then shouldn't a house be put up only at what its valued at and once that is reached its 'sale agreed', otherwise you are increasing bids only to be brought back down if you need to use a mortgage, which I imagine the vast majority of sales are.

Honest question by the way!
I 100% understand the reasoning for limiting the risk of negative equity.

Sounds like the Scottish system?

whippet

Ri_Nollaig wrote: »

If that is the case then what is the point in bidding?

bid all you want; but when using the banks money to buy it bidding over the value might well be a pointless exercise.

If using your own cash resources to buy .. bid all you want as the risk is 100% yours.


The point I am trying to make is that a situation like this should set off alarm bells in the head of any buyer .. some sections of the market are over heating and this will only end in tears all over again

SeanSouth

This is just the bank being cautious. The bank would prefer that the buyer holds more equity in the property and is hoping that the borrower will come up with the difference to bridge the gap.

What do you think a valuation is ? The agent comes out, takes a sniff around, checks the property price register for recent sale prices and then throws in a generous discount on that, which is what the banks want at the moment. There is no magic wand for valuing houses, there is no magic mysterious formula, its just a function of supply / demand and availability of finance.

Jen44

If that was the case then surely the bank would simply have offered less % LTV in the first place.