Market Value of AH

I have accepted an offer with DCC for a 3 bed house. Its quoted MV is 385k, PP is 285k. I thought this was too high in the current climate but decided to proceed with mortgage approval, on the basis that prices are dropping and that given house is not yet complete, i may have more bargaining position when contracts are produced. I feel the recent decision of DCC to reduce AH prices should apply to me as I have signed nothing yet. Bank will not value the property until built. Should i get it private valued or is this a waste of time as bank will want to do their own anyway. I dont intend proceeding with this at the above MV price, should I talk to the Council at this stage or wait to see if contract has reduced its price and then push for it to be revalued?

Can you compare the house to similar new houses in the area?
When is the house due for completion? What prices are houses going for second hand in the area - could you put in a low offer on a second hand house instead?

Other people have been badly stung on affordable housing by putting down deposits on houses that are not finished yet, with huge MV drops following in the period before the house is finished. Personally I wouldn't touch a property that hasn't been built yet.

Even if the value comes in the same as the council's within months that could look very different.

As someone who works in this area the problem with Affordable Housing applicants looking for revaluations of their property is the time involved and the potential vicious circle that it can unleash.

Take a typical example were some one puts down a booking deposit in January and Contracts etc are sent out in February with a view to closing in March. In the present market by the time the Contracts have gone out the property will have decreased in value, at least marginally. The purchasers Bank will insist on a revaluation which can take up to 4 weeks. In that time the property can decrease in value again and whilst the Bank may be happy to proceed on the basis of the last vakuation the purchaser will seek a further revaluation and so on...Basically my point is that at some stage, if you're committed to buying, you have to bite the bullet and deal with the consequences. Some comfort can be taken from the fact (hopefully) that however much further prices may fall they will be much quicker to recover to current prices than the prices at the height of the market in 2007 which may take 10 years or more to be achieved.

If it's going to be your home and you want to ensure that you get it than you should bite the bullet rather than giving your bank the opportunity to move the goalposts on you as they are doing with very many AH purchasers at the moment for the weakest of excuses.

I understand what you saying and thats fair enough, you could keep seeking revaluations indefinately. I paid booking deposit last December, no contracts yet, house due for completion in Summer (roofing at present). MV of 385k put on house by DCC last Oct/Nov. Is it reasonable to expect that I should pay the MV on day contracts signed as opposed to value set nearly 6 mths ago, otherwise i am buying into negative equity from the outset. I dont think this is fair. I am willing to pay MV as at contract stage irrespective of the fact that price might drop further prior to move in. I just want to pay a fair price on day of signing. Is this reasonable?
Dumb Q but i will ask....re banks moving the goalpost, i dont understand, do you mean changing the amount they are willing to lend in spite of having mortgage approval. I realise that lending criteria might have changed but i dont expect my current employment situation to change so am a good bet, to make the repayments. Can the bank refuse the mortgage if BANK and CC dont come to an agreement re. MV?

There is no much new house development in the area, its inner city, more apartments. House is at roofing stage, due to complete in Summer. I have looked at 2nd hand houses, may be ok price wise but a lot smaller size and in need of refurbishment. This will be new, spacious with white goods included, etc.

I will see what DCC comes back with in the contracts. I would expect to see a reduction in MV based on fact that original MV of 385k put on house last Oct/Nov and to take account of councils announcement to reduce prices. I not feel under pressure to proceed with this as its a buyers market right now, my rent is reasonable so i can keep saving until something right turns up. As been living in inner city for years, would like to be able to buy centrally, used to not having to depend on pubic transport n couldnt face a 1/2 hour drive to work daily. So am willing to pay more for less for location, but at the same time the AH is a good size whereas most houses centrally are cottage type, small in size. The longer the contracts take the better in my mind as house will be close to completion, but I will continue to remain house less if a reasonable offer is not on the table. thanks for the advice.

Beebie said:

Dumb Q but i will ask....re banks moving the goalpost, i dont understand, do you mean changing the amount they are willing to lend in spite of having mortgage approval. I realise that lending criteria might have changed but i dont expect my current employment situation to change so am a good bet, to make the repayments. Can the bank refuse the mortgage if BANK and CC dont come to an agreement re. MV?

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No such thing as a dumb question when you're talking about such a big decision. The Banks approved under the AH Scheme, which are most of the big Banks or at least connected institutions, are, like all Banks availing of any opportunity to lessen their liability in relation to new Mortgages whether that be by not lending in the first place or continually trying to reduce the Capital amount.

The good news is, again for the most part, the Council's want to sell as much as you want to buy and so as long as the Banks are realistic in their re-valuations the Council's are generally willing to reduce the Market Value in line with the Banks valuation.

I have seen some of the Banks try to pull out for the pettiest of reasons but as I said, in general, if the Banks valuation is reasonable the CC's will come down to it so you should have no reason to worry assuming everything else is in order, job etc.

Best of Luck

Hi Beebie,
I'm going through the whole Affordable process at the moment with DCC and have come up against a couple of stumbling blocks. So here's a few points to bear in mind when making your decison

1on't bet on DCC's valuation coming down to anything like the current market value of the property. I've had my apartment valued twice by DCC....last time was about 3 weeks ago and was in fact a week after my lender valued it. DCC's valuation was 10K more than the lenders valuation.
DCC's valuations have and still are GROSSLY over-valued...so bear this in mind. It's probably the only property that's increased in valued this year in the whole country.....DCC are in cloud cuckoo land on this one! So their valuation isn't worth the paper it's printed on.

2: My lender valued the property at 290K, DCC at 300K and the purchace price was 255K....it seems that most lenders approving loans for Affordable applicants are only willing to give a max LTV of 80%...maybe this is depenidng on financial circumstance but put it this way, I'm not on the minimum wage! In short this means they'll lend me 80% of the purchase price which works out at 232k. For me to get this 232K I needed to get the price reduced by DCC to 232k....they came back with a reduced price of 240k....and an increased valuation of 300k. Effectively this leaves a shortfall of 8k between the new purchase price and the max that my lender can lend me.

3: Getting a price reduction is all well and good when it comes to securing your'e mortgage but bear in mind a price reduction may mean an increase in claw-back depending on what you're valuation is!

So I'm now at the point of trying to decide whether I use my furniture budget to fill the 8k gap or just wallk away.

Anyway thats just a couple of things to look out for, but the best of luck with whatever you decide.

FTB1975

Hi Stepinman,
When you say you work in this area....are you affiiliated with one of the councils? The reason I ask is because DCC never mentioned to me about reducing their valuation in line with my lenders??? Is this something they will consider???? I only went after a price reduction because they've re-valued my apt twice since Nov I honestly didn't think they'd entertain me!

No vendor is going to announce that their prices are dictated by the Banks valuations but as long as the Banks valuations correspond in some way with the Council's valuation they are usually willing to consider a revaluation. You have to remember that the Council have to protect their future interest in the property by ensuring that a reasonable Market Valuation is achieved at the time of sale.

Btw, the Council is not some big bad corporate entity ou solely to screw the man on the street, as this and other threads would make you think. If at some point in the future you or anybody else sells there home and a clawback is realised that money returns to the Council and is used for, amongst other things, provision of social housing, maintenance and upkeep of roads, parks etc!