# bank valuation less than agreed price, advice urgently required!



## avontuur (7 Dec 2009)

Hey everyone,
I have a family member in dire straits! She has contracts signed at the agreed asking price of 222,500 on a beautiful house, getting a 92% mortgage and she has her 10% deposit paid to the vendor. Everything was in place only the banks valuation left.
They came out last week and she was informed that they believe the house is worth 200,000 and hence could only give her 92% of that! She was told to renegotiate with the vendor.
What if the vendor doesn't agree to drop the price? What will happen to her deposit? 
Any advice most welcome, her stress levels are through the roof!!


----------



## Bronte (7 Dec 2009)

Does her contract have a mortgage clause in it?


----------



## sadie (7 Dec 2009)

How come the banks valuation is only being done now at this late stage??
The Bank is actually doing a favour by telling her she's overpaying fair market value by 25k. 

The vendors can't really argue with the Bank's valuation to be honest. 
But it might cause them to re-think about selling or something.

I would hope that the vendor wouldn't keep the buyer's deposit out of common decency, should they decide to look for another buyer. It'd be grossly unfair and I think people generally are fair. 

The deposit is still with the vendor's solicitor anyway, it doesn't go to their own bank accounts until the whole deal is complete.


----------



## avontuur (7 Dec 2009)

No her contract doesn't have a clause in it, she has full approval.
Sadie- this is the banks second valuation. The first time they valued the house it was unfinished (pretty much an empty shell) They said they'd revalue when it was finished. Thats the catch 22 though- in order for the house to be finished, she had to sign the contract to make it a sealed deal.
She's phoning her solicitor today, I'll let you know how she gets on


----------



## Bronte (7 Dec 2009)

The OP stands to lose her deposit unless she can acquire the money elsewhere.  She would be very fortunate if the sellors were to renegotiate down but it's hard to find buyers so she may be lucky.

What advice was she given by her solicitor when she signed the contract?  How is the contract signing linked to the house being finished?  Is the vendor a builder?


----------



## luckystar (7 Dec 2009)

can you not dispute the banks valuation? Would have thought if there was a discrepancy you would be able to get your own independant valuation?... Perhaps not. Leaves a lot of people at the mercy of the banks's valuer though


----------



## avontuur (7 Dec 2009)

No the vendor is not a builder. She spoke to her solicitor and broker earlier. Her solicitor contacted the financial ombudsman to see if they were in a position to help, they say they're not as it's a commercial decision! Her original mortgage approval ran out (through delays on the vendors side) and she had it extended for 3 months about 3 weeks ago.
She's done everything by the book in the whole process. If the vendor doesn't drop the price it's hard to believe that she'll lose all her money when it wasn't her fault.
The bank have her in a choke hold!


----------



## avontuur (7 Dec 2009)

Luckystar- she queried that option, she was told it wasn't an option!!


----------



## Complainer (7 Dec 2009)

avontuur said:


> No the vendor is not a builder. She spoke to her solicitor and broker earlier. Her solicitor contacted the financial ombudsman to see if they were in a position to help, they say they're not as it's a commercial decision! Her original mortgage approval ran out (through delays on the vendors side) and she had it extended for 3 months about 3 weeks ago.
> She's done everything by the book in the whole process. If the vendor doesn't drop the price it's hard to believe that she'll lose all her money when it wasn't her fault.
> The bank have her in a choke hold!


I know it is very hard for her, having been so close. But, it is possible that the bank are doing her the greatest favour she will ever recieve. The vendor will be very keen to sell, and this could give her a lot of leverage in the negotiations. Is it really in her interest for her to overpay for the property?


----------



## Colndas (7 Dec 2009)

By all accounts the valuer is supposed to be independent. 

That said, their livelihood depends on remaining on a lenders panel. Given that you will be paying for one valuation and the lender has the power over all valuations you will find that the valuer will, now, always err on the side of caution.

If contracts have been signed, the vendor is well within their rights to keep the conract deposit or sue for completion regardless of the loan amount being offered by the bank.

If I was in a similar situation, I would contact the valuer and vendor and explain the situation ask if there is a possibility that they could review. Ask them both if it is possible to split the difference.  i.e. vendor drop 12.5k and valuer go up 12.5k.

Valuers are usually given an allowance of a 5-10% swing on property values and have to justify their valuations with examples of similar properties in the area, if you could find something similar that has sold recently then you may be able to sway them.


----------



## avontuur (7 Dec 2009)

Thanks for all the replies, 
I'll pass on all the info. Is this kind of practice commonplace? 
She has left a voicemail with the vendor so they can meet up and hash it out. I feel so sorry for her, i know if i was her i'd be onto radio stations making a big song and dance about it!


----------



## Brendan Burgess (7 Dec 2009)

If I was the vendor, I would not reduce the price. 

I have a signed contract for €225k. That is the agreed price. If the shoe was on the other foot, and someone offered me €250k for the house,  the buyer would not release me from my contract. I couldn't claim that the house had gone up in value. 

Valuations are really just guesses. The bank's valuers are probably being overly conservative at the moment. From their point of view, what happens if they have to repossess the house and then sell it? They would expect to get only €200k for it. 

Can a family member remortgage to come up with the additional money required? Can someone guarantee the mortgage? (I don't know how banks are reacting to guarantees these days).


----------



## NorfBank (7 Dec 2009)

Brendan said:


> Can someone guarantee the mortgage? (I don't know how banks are reacting to guarantees these days).



A guarantee won't make a difference as the problem here is with the loan to value not affordability. The maximum the bank will lend will be 92% of the valuation regardless of the financial strength of the applicant.


www.moneybackmortgages.ie


----------



## avontuur (7 Dec 2009)

I see your point brendan, it's a very valid one. But 2 weeks before your supposed to get your keys?! Thats a bit much in my opinion! There isn't any member of the family in a position to help (we'd be delighted if we could)


----------



## TheBlock (7 Dec 2009)

Has she tried other banks? Valuations are subjective and another banks Valuer may place a different value on the property.


----------



## levelpar (7 Dec 2009)

Unless my maths are wrong, your relation would be 20,700 short for the purchase.  If that is so , then maybe the seller would be prepared to drop 10,000 and she might be able to raise 10,700. 

If ,as you say, its a beautiful house and the seller has a bird  in the hand coupled with the fact that its not easy to sell houses at present , it might be worth trying somewhere for the extra money.


----------



## senni (7 Dec 2009)

i have seen this before, this was the outcome... BANKS WILL NOT CHANGE THEIR MINDS, This Valuation stands. 

The solicitor contacted the vendors solicitor, who informed the vendor, of the new situation.In this case the builder nearly lost it, he rang the valuer who informed him calmly that this was the current valuation and he could not change same.The valuer calmly stated his reasons for the reduced valuation and backed it up with houses in the area of similar value. ( this Builder even threatened to remove the kitchen !! . The purchaser at this stage was crying !! ) The solicitors talked together again and agreed that the price had to be reduced as this house more than likely would not be sold at the higher price anyway as the valuation issue would raise its head again with a new client, the builder took advice from his solicitor and the new contracts were drawn up. The sale proceeded at the lower level. ( july 2009 )

update ,in case you are all thinking what about the poor builder, he took a reduction, well he has recently advertised these unsold houses again at 20,000 grand less than the new contract price !!!!!...so the builder won in the end and the client still was left with negative equity, but thankfully not as much as if he had completed on the first set of contracts....these are unchartered waters and everything can change at any time, especially when dealing with the banks!!


----------



## Bronte (8 Dec 2009)

avontuur said:


> ! Her original mortgage approval ran out (through delays on the vendors side) and she had it extended for 3 months about 3 weeks ago.
> !


 
What amount was the mortgage approval based on ?  Is this a different amount to what the bank is now offering?


----------



## avontuur (8 Dec 2009)

Just an update for ye,
She heard from the vendor yesterday evening and gave them her sob story. The vendor was contacing their solicitor today and would get back to her.
Bronte- The mortgage approval was based on 92% of 222500, after valuation they changed it to 92% of 200,000


----------



## Allen (8 Dec 2009)

avontuur said:


> Her original mortgage approval ran out (through delays on the vendors side) !


 
Was there any completion date in the contract?


----------



## avontuur (11 Dec 2009)

Hi everyone,
she finally got an answer today. The vendor is not budging on price, so she has to cough up the shortfall or lose her deposit. Not exactly the situation she wanted to be in.


----------



## Bronte (11 Dec 2009)

avontuur said:


> Hi everyone,
> she finally got an answer today. The vendor is not budging on price, so she has to cough up the shortfall or lose her deposit. Not exactly the situation she wanted to be in.


 
She may be sued for completion as well but it's unlikely. 

Neither the buyer nor the seller is winning in this situation though it might be hard for the buyer to see this. These are tough times.

Can she borrow the money from elsewhere?  Anywhere.  Can she afford the repayments, and well afford them?  Would it be better to let the deposit go?


----------



## avontuur (11 Dec 2009)

Hi Bronte, she's going putting her head down over the weekend to see if she can cover the shortfall.
On another note, when she started on the purchase of the property, she was given p.c. sums for tiling, fireplace and kitchen. She was asked by the vendor could she sort out her own tiling. So she paid for her own tiles and fireplace (including fitting). The kitchen is yet to be put in, she presumes she's supposed to cover the cost of this too! She was doing this to speed up the completion of sale!
Could this stand to her?


----------

