Mortgage/Valuation issue

toshj · 13 Jul 2010 at 14:59

Hi all - i was wondering whether anyone could advise on the following situation.

A friend and I had an offer accepted for a flat in London, however it all seems to be goinga bit pear-shaped.

Our accepted offer is at about £540,000, and our lender has just valued the property at £475,000 - as such, the lender will only give us a mortgage in line with this £475,000 valuation. Now we're really not too sure about what to do.

- the property isn't in the most upmarket location, and as such the valuer will base their valuation on local property prices (generally considerably lower than this place)

- I understand that the estate agents can now put together a case highlighting other properties that have sold at a similar amount in the area, however I have no faith in our estate agents and am quite sure they'll tell the vendor that we couldn't get a mortgage together and hope for a cash buyer or that a future valuation will prove more in line with the asking price.

- I also need to get this sorted fairly quickly as I'm pretty sure I'll only be able to get approved for a mortgage in the next few weeks. I work largely on a commission basis, which the lenders don't particularly like, and there's talk of this being switched to receiving no commission, but a dividend payment instead - therefore making me look even less attractive I believe. Also, the guy I'm buying the place with is on £18,000 salary (his parents are paying his deposit)

I really like this property, and see that my only chance to get my foot on the ladder will need to be within the next month or so. Do you guys have any suggestions that will help me secure this place?

Any help will be greatly appreciated!

SeriousPigeon · 13 Jul 2010 at 15:06

Your friend is on £18000 a year and you want to buy a £540,000 flat.
That is either one huge deposit, or a massive mortgage which your friend probably cannot afford.

toshj · 13 Jul 2010 at 15:08

30% deposit, interest only and a friend renting out the third bedroom. its all financially sound from our perspective, but the valuation has just totally screwed us!

Maccapacca · 13 Jul 2010 at 15:12

£540k holy £21.5k stamp duty :eek:

Sounds like it's either overvalued or the mortgage company need a second opinion, where is it? you do need to make sure you have some equity forsight i.e. up and coming area or in need of work, otherwise you'll be stuck there with two mates, let's hope your good mates and don't fall out

toshj · 13 Jul 2010 at 15:20

its in south east london, about 10 mins walk from london bridge, so fairly central. the area in general is going through a fair bit of modernisation with a few new blokes going up at the moment, plus there's development opportunities on either side of this property.

carvegio · 13 Jul 2010 at 15:26

It is a tough one. You can try to get the proof from your estate agent, or other websites, showing what similar properties sell for then ask to speak directly to the mortgage underwriter if possible and try to meet/speak/convince him of the value.

How much do you earn?

Can you not just borrow more from somewhere else, while waiting to see if you can get this sorted and just string the estate agent/solicitors along and say they are processing the application?

toshj · 13 Jul 2010 at 16:02

the estate agents are in the process of trying to find similarly priced properties, but given the state of the property market over the last couple of years and the location, I sincerely doubt they'll find anything to back up their case.

We're not really in the position to string anyone along at the moment, as all parties are aware of the situation. My initial thoughts are that if we pull out then any other buyer will come up against he same vauation issue, and therefore the vendor will have o drop his price but I'm not sure how likely that is.

Danthus · 13 Jul 2010 at 16:09

Are his parents giving 30% of the offer price as deposit or 30% of the value as deposit?

Either way the figure is £142,500 or £162,000, lucky lad!

Although you must have a pretty big salary surely to be able to a mortgage for circa £300,000

brummie · 13 Jul 2010 at 16:09

We had a similar problem with the lender Abbey. Even though we showed them several of what is lesser properties than ours going for more they refused to budge.

toshj · 13 Jul 2010 at 16:26

Yeah, I've been told by our mortgage advisor that the lender is very unlikely to budge, however I wasn't sure whether this was a good thing or not? My feelings were that it would therefore force the vendor to lower his expectations, as most other valuations would come in at a similar level.

OldCoals said:
Are his parents giving 30% of the offer price as deposit or 30% of the value as deposit?

Either way the figure is £142,500 or £162,000, lucky lad!

Although you must have a pretty big salary surely to be able to a mortgage for circa £300,000

My friend and I are splitting the whole thing 50:50, therefore we're each paying 50% of the deposit, so this whole process has pretty much relied entirely on my credit rating.

Danthus · 13 Jul 2010 at 16:28

toshj said:
Yeah, I've been told by our mortgage advisor that the lender is very unlikely to budge, however I wasn't sure whether this was a good thing or not? My feelings were that it would therefore force the vendor to lower his expectations, as most other valuations would come in at a similar level.

My friend and I are splitting the whole thing 50:50, therefore we're each paying 50% of the deposit, so this whole process has pretty much relied entirely on my credit rating.

My, bad, his parents are paying his half of the deposit.

AtticusFinch · 13 Jul 2010 at 16:33

Yeah, good luck with getting that mortgage. Your friend will be almost irrelevant in the scheme of the mortgage borrowing on a mortgage of that size with a very low income of £18K.

You would need to be very sure about the valuation a d the amount of debt you're taking on - ie - what happens if your friend renting the third bedroom changes his/her mind - it has to be affordable absent that and other outgoings etc.

Are you really comfortable in borrowing this money?

SeriousPigeon · 13 Jul 2010 at 17:03

If there are no similarly priced properties, doesn't this mean that the property is probably overpriced and you have offered too much.

cableguy2003 · 13 Jul 2010 at 17:13

All the deposit will be eaten away fairly quickly on an interest only mortgage, what a waste.

Rotty · 13 Jul 2010 at 17:17

toshj said:
30% deposit, interest only and a friend renting out the third bedroom. its all financially sound from our perspective, but the valuation has just totally screwed us!

don't even think about interest only, bad idea at best of times and government announced today that they are going to put pressure on banks to stop them

Drukk · 13 Jul 2010 at 17:17

SeriousPigeon said:
If there are no similarly priced properties, doesn't this mean that the property is probably overpriced and you have offered too much.

This tbh. Get a second estate agent to value it but if the mortgage company are valuing it so much lower then its overpriced. He won't be able to sell that property for what he is asking to anyone else I would n't think.

I'd be very wary about buying a place for so much with that much of an undervalue.

s0ck · 13 Jul 2010 at 17:21

sometimes when you want something a little too much you're willing to pay over the odds for it. could this be the case with you?
good luck tho

toshj · 13 Jul 2010 at 17:27

AtticusFinch said:
Yeah, good luck with getting that mortgage. Your friend will be almost irrelevant in the scheme of the mortgage borrowing on a mortgage of that size with a very low income of £18K.

You would need to be very sure about the valuation a d the amount of debt you're taking on - ie - what happens if your friend renting the third bedroom changes his/her mind - it has to be affordable absent that and other outgoings etc.

Are you really comfortable in borrowing this money?

we're going interest only as it works out at £450 per month each, which is quite affordable to be honest. the whole issue is that its an unusual property:

its not in the nicest part of town (not the worst, but hasn't got the greatest reputation) but its a 1,400 sq ft 3 bedroom warehouse conversion with a large roof terrace looking out over the city. given the prices of things we've been lookin at over the last few months it seems to be right in the middle of the scale, so we were happy getting it just under asking price.

since this issue has come up, it has certainly made me question the value, however unless the vendor wants to hold out for a cash buyer, this ultimately works in our favour. the mortgage has been offered to us, so its just a case of resolving this mispricing issue

the guy i'm going 50% with has his mum as a guarantor, and i'm comfortable taking on the debt given my current situation. all in all its not a bad situation to be in, i just want to make sure we don't lose the property

AtticusFinch · 13 Jul 2010 at 17:29

toshj said:
the guy i'm going 50% with has his mum as a guarantor, and i'm comfortable taking on the debt given my current situation. all in all its not a bad situation to be in, i just want to make sure we don't lose the property

That makes a LOT more sense to me - the Guarantor as without this I couldn't understand how there was a chance in hell of getting the mortgage!

Good luck with everything

toshj · 13 Jul 2010 at 17:31

s0ck said:
sometimes when you want something a little too much you're willing to pay over the odds for it. could this be the case with you?
good luck tho

yeah, i totally agree - i'm somehat impulsive. So far we've made offers on two other properties within the same price range so that's never really been the issue. i think i was surprised by the result of the valuation. to be completely honest, both our mortgage advisor and the estate agent were massively shocked to have £75,000 whiped off the amount.

Mortgage/Valuation issue

Tea Drinker