Buying a B2L - valuation lower than purchase price
Discussion
I have recently had an offer accepted on buy to let properly and have started a mortgage application. However the valuation has come back lower than the purchase price (130k vs 140k).
I am going to purchase with an interest only mortgage with a 25% deposit, the problem is that they will now only lend 75% of 130k which leaves me having to add an extra 10k which isn’t really viable and would make the return far less attractive.
I know the next steps which are:
Challenge the valuation
Try another lender
Try and renegotiate the purchase price down
However I am interested to know if anyone has had similar issues and if so how did it end? I may have to pull out but with £700 already spent I don’t really want to do this plus if I go for another property what’s to say this won’t happen again?
Many thanks in advance.
I am going to purchase with an interest only mortgage with a 25% deposit, the problem is that they will now only lend 75% of 130k which leaves me having to add an extra 10k which isn’t really viable and would make the return far less attractive.
I know the next steps which are:
Challenge the valuation
Try another lender
Try and renegotiate the purchase price down
However I am interested to know if anyone has had similar issues and if so how did it end? I may have to pull out but with £700 already spent I don’t really want to do this plus if I go for another property what’s to say this won’t happen again?
Many thanks in advance.
It’s not tight it’s just that I have moved the amount I needed out of savings and don’t really want to put and anymore down (I have a long term plan for investing that I would rather stick to). I do 5 year fixed mortgages so locking 42k away instead 32k is quite a jump. Plus it reduces my return by about 25% which, with the work that B2L can bring, makes it not worth the hassle.
I will buy something so I might have to just swallow it however if this is the case I will reduce the term to 2 years and hope that the valuation is higher then in which case I can pull the 10k back out.
I will buy something so I might have to just swallow it however if this is the case I will reduce the term to 2 years and hope that the valuation is higher then in which case I can pull the 10k back out.
Edited by Khonda on Tuesday 31st August 20:27
Fair. In my experience it’s quite often the case that the valuation for sale is higher than the banks valuation. The bank want to be able to get their money out if the s
t hits the fan.
Either you stump up the 10k, shop around for the mortgage, or you negotiate the price down. Those are the options.
t hits the fan. Either you stump up the 10k, shop around for the mortgage, or you negotiate the price down. Those are the options.
Yes I get where they’re coming from and it is more likely to happen when the market is strong ie now. However I haven’t had it happen before, plus the property seems pretty reasonably priced.
I’m hoping another lender might be less risk averse, however worry that could use the same valuer which would be a complete waste of time!
I’m hoping another lender might be less risk averse, however worry that could use the same valuer which would be a complete waste of time!
Sarnie said:
Renegotiating the purchase price is your best course of action.......
It does feel like it’s heading towards that Sarnie, however I can’t see the vendors shifting. It was originally list as oieo 140k and had quite a few viewing lined up. Plus it currently has excellent tenants paying top money for the area so they will be in no rush to sell for a lower price.Khonda said:
It does feel like it’s heading towards that Sarnie, however I can’t see the vendors shifting. It was originally list as oieo 140k and had quite a few viewing lined up. Plus it currently has excellent tenants paying top money for the area so they will be in no rush to sell for a lower price.
They can of course refuse to budge, but if another buyer uses a mortgage company who instructs the same surveyors, then they will be back into the same position.Ask the selling Estate Agent to provide three sold comparable properties within 0.5 miles within the last six months, as thats what the surveyor will ask for if you appeal the valuation. If they can't provide it then they should be explaining to their vendor how they arrived at the suggested asking price.......
Sarnie said:
They can of course refuse to budge, but if another buyer uses a mortgage company who instructs the same surveyors, then they will be back into the same position.
Ask the selling Estate Agent to provide three sold comparable properties within 0.5 miles within the last six months, as thats what the surveyor will ask for if you appeal the valuation. If they can't provide it then they should be explaining to their vendor how they arrived at the suggested asking price.......
I’ve had a look with my mortgage advisor and unfortunately there isn’t any that are comparable, you would need to go a bit further out or a bit further back. Taking that back to the estate agent is a great idea though, thanks for the suggestion!Ask the selling Estate Agent to provide three sold comparable properties within 0.5 miles within the last six months, as thats what the surveyor will ask for if you appeal the valuation. If they can't provide it then they should be explaining to their vendor how they arrived at the suggested asking price.......
Khonda said:
It does feel like it’s heading towards that Sarnie, however I can’t see the vendors shifting. It was originally list as oieo 140k and had quite a few viewing lined up. Plus it currently has excellent tenants paying top money for the area so they will be in no rush to sell for a lower price.
Out of interest want monthly rental are they paying? And are you buying with tenants staying in?I’ve got a rental house which i’m seriously considering selling and my preference would be for the tenant to remain in it
Khonda said:
I have recently had an offer accepted on buy to let properly and have started a mortgage application. However the valuation has come back lower than the purchase price (130k vs 140k).
I know the next steps which are:
Challenge the valuation
Try another lender
Try and renegotiate the purchase price down
However I am interested to know if anyone has had similar issues and if so how did it end? I may have to pull out but with £700 already spent I don’t really want to do this plus if I go for another property what’s to say this won’t happen again?
Recently a lot, when selling.I know the next steps which are:
Challenge the valuation
Try another lender
Try and renegotiate the purchase price down
However I am interested to know if anyone has had similar issues and if so how did it end? I may have to pull out but with £700 already spent I don’t really want to do this plus if I go for another property what’s to say this won’t happen again?
Here is how each option is likely to go:
1. Challenge the valuation - If you can provide comparable data not older than 3 months of very similar properties a decent surveyor may listen. I've been successful before. Recently we had 3 sales down-valued on the same day and the surveyor (who should have known better because he was an old hand) basically said "La, la, la, la, I'm not listening".
Two of the sales proceeded with the buyer putting in 75% of the difference. One faltered, more of which in a moment.
2. Try another lender. Sometimes successful. But it's a PITA and the next valuer may also value it for lower than PP. That said, if they do, you're getting a growing data set about true value.
3. Try and renegotiate the purchase price down. Sometimes works. Other times not. Sometimes in part.
The sale we had that faltered, we agreed a reduced sale price to the buyer. However, he pulled a stunt on us and at the last moment asked for a full structural survey, after which he tried to renegotiate back down towards the original purchase price. We declined and he left empty-handed with a wad of bills for professional services. We re-sold at a higher price to someone with more cash.
What would I do? Put in the ten grand and revisit the situation in years to come if and when you refinance.
maxest said:
Out of interest want monthly rental are they paying? And are you buying with tenants staying in?
I’ve got a rental house which i’m seriously considering selling and my preference would be for the tenant to remain in it
They are paying 675 and yes they are staying.I’ve got a rental house which i’m seriously considering selling and my preference would be for the tenant to remain in it
Every house I have viewed this time has been tenanted, I don’t don’t mind either way although in this case they are a bonus.
When I bought one 3 years ago it was less common as landlords tended to make them vacant before selling. It definitely seemed to bring the price down a bit as the market is more restricted and they would inevitably take longer sell.
This time the price is no different and the general line from the estate agent is that the vendors are not in a rush to sell as it is generating an income while they wait for the right price.
Zio Di Roma said:
Recently a lot, when selling.
Here is how each option is likely to go:
1. Challenge the valuation - If you can provide comparable data not older than 3 months of very similar properties a decent surveyor may listen. I've been successful before. Recently we had 3 sales down-valued on the same day and the surveyor (who should have known better because he was an old hand) basically said "La, la, la, la, I'm not listening".
Two of the sales proceeded with the buyer putting in 75% of the difference. One faltered, more of which in a moment.
2. Try another lender. Sometimes successful. But it's a PITA and the next valuer may also value it for lower than PP. That said, if they do, you're getting a growing data set about true value.
3. Try and renegotiate the purchase price down. Sometimes works. Other times not. Sometimes in part.
The sale we had that faltered, we agreed a reduced sale price to the buyer. However, he pulled a stunt on us and at the last moment asked for a full structural survey, after which he tried to renegotiate back down towards the original purchase price. We declined and he left empty-handed with a wad of bills for professional services. We re-sold at a higher price to someone with more cash.
What would I do? Put in the ten grand and revisit the situation in years to come if and when you refinance.
1 we will try but not too hopeful as apparently the lender won’t normally shift if even if the valuer will.Here is how each option is likely to go:
1. Challenge the valuation - If you can provide comparable data not older than 3 months of very similar properties a decent surveyor may listen. I've been successful before. Recently we had 3 sales down-valued on the same day and the surveyor (who should have known better because he was an old hand) basically said "La, la, la, la, I'm not listening".
Two of the sales proceeded with the buyer putting in 75% of the difference. One faltered, more of which in a moment.
2. Try another lender. Sometimes successful. But it's a PITA and the next valuer may also value it for lower than PP. That said, if they do, you're getting a growing data set about true value.
3. Try and renegotiate the purchase price down. Sometimes works. Other times not. Sometimes in part.
The sale we had that faltered, we agreed a reduced sale price to the buyer. However, he pulled a stunt on us and at the last moment asked for a full structural survey, after which he tried to renegotiate back down towards the original purchase price. We declined and he left empty-handed with a wad of bills for professional services. We re-sold at a higher price to someone with more cash.
What would I do? Put in the ten grand and revisit the situation in years to come if and when you refinance.
2 that is the step we are starting now, the point you make about more data is very true and, with what sarnie said earlier, gives us more leverage to reduce the purchase price.
3 tbh even if they met us halfway it would probably work for us as currently we stand to lose quite a bit if we pull out and an extra 5k wouldn’t hurt the return too much.
Thanks a lot for your input, as I said in my first post I know the next steps however never done it before. I now have a much clearer idea of what to back to the estate agents/vendor with if I can’t get a higher valuation.
surveyor said:
Perhaps you are just paying too much. No-one ever considers that angle.
You may be happy to pay over the odds, your lender less so.
Fair point!You may be happy to pay over the odds, your lender less so.
It expensive compared to a couple of years ago however all I really look at is the return. That stacks up so I am fairly blinkered to the actual price of the property!
The lender is only concerned about getting their cash back at the end of the term so I can see why they are hesitant. I just wish they would lend the full amount but with a less favourable interest rate. I guess it doesn’t work like this though…
Khonda said:
Yes I get where they’re coming from and it is more likely to happen when the market is strong ie now. However I haven’t had it happen before, plus the property seems pretty reasonably priced.
I’m hoping another lender might be less risk averse, however worry that could use the same valuer which would be a complete waste of time!
Slight update: I’m hoping another lender might be less risk averse, however worry that could use the same valuer which would be a complete waste of time!
We have applied to another lender that has free fees so won’t cost us anything. The valuer has applied for access to the property but it’s the same one! Thankfully the estate agent noticed and we should be able to request that a different one is used.
Khonda said:
Khonda said:
Yes I get where they’re coming from and it is more likely to happen when the market is strong ie now. However I haven’t had it happen before, plus the property seems pretty reasonably priced.
I’m hoping another lender might be less risk averse, however worry that could use the same valuer which would be a complete waste of time!
Slight update: I’m hoping another lender might be less risk averse, however worry that could use the same valuer which would be a complete waste of time!
We have applied to another lender that has free fees so won’t cost us anything. The valuer has applied for access to the property but it’s the same one! Thankfully the estate agent noticed and we should be able to request that a different one is used.
Down valued his second house too!
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