How Your Buyer’s Mortgage Lender Could Veto Your House Sale
You thought you were super diligent when selling your home. You spoke with many estate agents, gained many valuations, and went with one of the higher ones. Finally, you received an offer, and after some negotiations, you settled on a figure you were both happy with. But now your buyer’s mortgage company won’t lend for the agreed amount – they say that the valuation was inflated, and that the real value is below what you were hoping for. What should you do? Here, we look at your options.
What are ‘Low Valuations’?
Known as not ‘valuing up’ or a ‘low valuation’, this situation is far more common than you may think. In part, this can often be due to the nature of the UK’s fluctuating property market (house prices are 10% higher than last year), however a more common cause is where estate agents compete for your business and put in an over inflated valuation.
I’m Selling and My House Didn’t ‘Value Up’ – What Now?
There are three possibilities:
- The buyer covers the difference by placing a bigger deposit
- You negotiate a lower selling price with the buyer
- The buyer pulls out
Which one of these you choose very much depends on your circumstances, and it may not be financially possible to accept a lower amount if you still have a sizeable mortgage on the property. If your buyer does pull out, you should note that it’s not a certainty that the next buyer’s surveyor will decide on the same value for your home, and it may be that the next offer is backed up by a lender who agrees that your home is worth the amount requested.
Re-Mortgaging – What Happens If You Don’t Reach 20% Equity?
As a working example – one home buyer in South London had purchased their home for £176,000. They then spent £24,000 on improvements, and invited numerous estate agents to value the property, receiving valuations of between £200,000 and £216,000. They then attempted to re-mortgage, but the lender’s surveyor valued it at a maximum of £160,000.
This problem resulted in the individual not being able to access the best fixed rate mortgages, as the value didn’t equate in a 20% equity in the home. In other instances, this would also have ruled the individual out of an interest only or a buy-to-let mortgage, as they also have similar requirements as to the equity you must hold.
In this example, you may find it difficult to overturn the valuation, although you can ask them to visit in person if they’ve only done a ‘drive by’ or ‘desktop’ valuation. Following this step, you could also research the local market for similar homes, and appeal the valuation, providing a minimum of three comparable homes in the price bracket you believe to reflect the value of your home.
While we can’t help with all of your home selling woes, we can certainly make sure your move runs smoothly once the big day finally arrives. If you’ve sold up, and have received your moving date, get in touch to discover how our York removals service can take you from A to B, without the stress.