Mortgage valuation was lower than our original offer. Can we renegotiate?
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Anonymous from St Albans
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Buying a house questions and answers
Question
We want to purchase a house in St Albans which is on the market for £675k. We offered this, but were told that the seller had chosen to sell it to someone else.
The estate agent has now come back to us to see if we want to buy it. We have heard on the grapevine that the mortgage valuation was only £625k which is why the original buyers have pulled out. The agent says the owners will accept £650k. We could get a mortgage for £625k and then add the extra £25k from our savings. We like the house and have been looking for years but is it crazy to add the extra? Should we get our own independent RICS valuation done before progressing any further?
Answer
The simple answer is that you should offer what you feel the property is worth to you and no more irrespective of any valuation.
A valuation prepared by a surveyor will be on the assumption of market value. There is a very lengthy definition of this contained in a document called RICS Valuation and Standards commonly referred to as The Red Book. Essentially what this does is to ensure that all chartered surveyors are using the same premise to calculate their valuations. This doesn't mean that they will all be the same as the valuer's opinion and weighing of the facts will vary. Some houses are easy to value because there are plenty of comparisons available. A 3 bedroom semi-detached house in a road of 100 similar properties would fall into this category. In normal market conditions there shouldn't be a spread of more than about 5% in this scenario. Valuations of a barn conversion in a rural area may have a much larger variance.
What you have to remember is that the Market Value may not be the same as what it's worth to you. If you've been looking for years and perhaps spending money abortively it may be worth paying a bit more. You may particularly want to live in that road or that part of the road. There are always some personal factors involved in a property purchase unless you are doing it purely for investment. An independent valuation is still useful because it helps you quantify this.
A quick word about condition. This may or may not have an impact on value. If the property is in poor condition then there is nothing to stop you making an offer subject to contract and survey. If the survey identifies items that you had not anticipated you may then reduce your offer. Of course the seller is under no obligation to accept this but in my experience unless there is unreasonable behaviour most sellers take a view on it and it's often possible to nibble away at the price.
Assuming that your grapevine is reliable the difference between the valuation and the agreed price is 7.4%. Actually that's not much and the difference between the highest and lowest figures are in the negotiation range.
In summary:
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Market value is not the same as personal value
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Offers subject to contract are often renegotiated
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Mortgage valuations should not be relied on by purchasers
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Always obtain an independent survey
Donald Leslie
Donald Leslie & Co
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Gave some good quotes of which one we decided to go with.
Saz on 29/01/2024