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  • Property-a-holics

    Insights: Lender's survey & down-valuations

    Re: {Property Address}

    I hope you are well.

    We are progressing well with the conveyancing and have the property searches, property survey and mortgage valuation complete. We have however encountered a challenge that we are going to need your help with.

    The Mortgage Lender has returned their assessment of the property valuation and they state it is only worth £x,000. This falls £y,000 under our offer price of £z,000.

    The challenge we face is that the mortgage lender won’t lend me the required mortgage to fund the purchase at the current agreed price. This also means that any other buyer getting a mortgage isn’t going to be able to buy the property at this price.

    This is very disappointing because I was happy to pay the asking price, however I am sure you’ll appreciate that I can’t purchase a property that exceeds its current worth in the current market.

    I do want to continue to buy the property and have invested a lot of time and money to date to achieve this. In order to proceed could you discuss the mortgage valuation with the seller and confirm if they’d be happy to proceed at the current market value of £x,000.

    If this can be agreed then we can move to exchange over the next couple of weeks.

    I look forward to hearing from you.

    Kind regards

    YOUR NAME

    So down-valuations can work in your favour although it is worth bearing in mind, if you are very keen on the property, to try and create a win/win situation that works for the vendor as well.

    In this video with Alan Milstein, Chairman of the Residential Property Surveyors Association, we discuss the different types of surveys landlords can access:



    This article was inspired by this:

    What to do if the bank undervalues your property

    It would be interesting to hear from the tribe if you are experiencing down-valuations in your area.

    SEE ALSO  -       Down valued - still proceed with purchase?

    UP NEXT -           What matters with a valuation ?

    DON'T MISS -      7 reasons a property might not achieve a higher valuation after refurbishment.

    NOW WATCH:

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    The important thing here is, exactly as pointed out in the second sentence, that the lenders valuation is not a survey and is not intended to give the buyer information about the condition of the property.

    Every buyer, even those who consider themselves to be experienced and knowledgeable, should invest in a thorough survey. Why? Because a qualified surveyor inspects the property in a methodical and careful way to ensure that you are made aware of the key issues that may affect the property. And if you rely on your own judgement, or that of your builder friend, what happens if you, or they, miss something important? You have no redress whatsoever. All RPSA surveyors are covered by Professional Indemnity insurance in the very unlikely event that they miss something significant.

    But, more importantly, the RPSA Mi Buy To Let Survey takes things much further than any valuation would ever consider. Issues affecting the way the tenant lives in the property are is important as the condition itself. Maybe even more so, as fines of up to £30,000 can be imposed where tenant safety is compromised.

    So, is it worth spending another £400-£600, over and above the valuation fee for a Mi Buy To Let Survey? Firstly, the valuation is not a survey, so that doesn't help you. Secondly, you get a professionally prepared survey report, carried out by a qualified and quality assessed surveyor who carries Professional Indemnity insurance. Thirdly, you get the review of the health and safety issues that can affect the comfort of your tenants, and which can attract significant fines for infringement.

    The value of peace of mind is difficult to assess, but recognising that the valuation will not appraise you of the condition or safety of the property you are buying makes independent and impartial advice a key ingredient of a successful BTL investment.

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    I have this exact issue right now.

    I’m buying a house that was on the market at 165. Offered 155 and got it accepted. Valuer comes back with 150 which I use to negotiate the price down to 150. Funny thing is, the house immediately next door in the terrace is now on for 170! Let’s hope the valuer turns out to be wrong, eh?!

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    Yes, if it sells for £170K, then you've made £20K of instant equity. Smile

    There's a strong chance that the valuer who comes out won't be aware of your purchase price, unless they see a board outside the property you have bought, and then contacts the agent.

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    That would all be very welcome! You were also correct to say that the lenders/valuers wouldn’t even consider entertaining a price debate. They shut down all conversation as soon as the valuer had given his verdict. Still, I saved another 5k on the purchase I suppose... ?

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    Useful article here:

    What is the point of a property surveyor? 

    Excerpt, including a comment from Alan Milstein would is part of this thread:

    The latest Which? Mortgage Advisers survey of movers shows that, of the buyers who commissioned a survey, 42% found a problem with the property. While this sounds extreme, the issues raised are increasingly helping buyers to renegotiate prices.

    “The surveyor acting for one of my buyers found dry rot in a part of the cellar, and the cost of treating and making good — approximately £32,000 — was paid for by the vendor,” says James Greenwood, a director at the buying agency Stacks Property Search. “If a survey reveals problems that weren’t evident, the buyer should seek a price reduction or ask to have the problem fixed prior to purchase.”

    Mark Lawson, an agent at the Buying Solution, says a recent survey for a client looking at a £7m country house flagged up asbestos. “We got a specialist survey done and negotiated £150,000 off the price.”

    Sometimes, however, a survey prompts a rethink. “I surveyed a house overlooking open land, and found there was a planning application for a refuse incinerator site immediately to the rear,” says Alan Milstein, chairman of the Residential Property Surveyors Association. “Unsurprisingly, the buyers decided not to proceed.”

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    There has been a "significant" rise in homes being valued at less than what buyers have agreed to pay, the UK's largest mortgage advisers have said.

    These "down valuations", by lenders, can mean buyers having to pay thousands of pounds extra, up front, to avoid the sale collapsing.

    Estate agents Emoov said it reflected surveyors predicting a financial crash.

    UK Finance said lenders, which it represents, were right to ensure property values were realistic.

    The organisation said borrowers also benefited from houses having an "independent valuation".

    Full/source article - BBC

    See also - Stunned by Down-Valuation in 2018

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