How should I deal with a down valuation?

by Readers Question

18:54 PM, 27th November 2013
About 7 years ago

How should I deal with a down valuation?

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How should I deal with a down valuation?

I operate in what I think is fairly straightforward way; buy a distressed property, add value, get a valuation, mortgage and then buy the next.

Recently I finished a 3 bed semi that I paid £60,000 for, I spent around £15,000 on the refurbishment and valued the finished product for around £100,000.

I let the property for £500 pcm and was hoping to get roughly £60-70,000 back on the mortgage.

When the valuation came back it was for £65,000 which left me a little shocked. I disputed the valuation and discovered from the tenant that no surveyor had been. When questioned they said a desk top survey had been done and that no visit was required and then backtracked when I pointed that they’d mentioned the decorative condition of the house.

A run down 2 bed terrace on the same street  was sold for £75,000 and coupled with the low purchase price of my own, appears to have provided the surveyor with enough information to give a valuation rather than actually go and conduct a proper inspection. This can’t be right surely?  How should I deal with a down valuation

Anyway the mortgage company isn’t for moving and are offering a loan of £39,000.

I’d be very interested to hear from any mortgage brokers or other landlords who have come across a similar problem and what they did about it.

Many thanks

Andrew


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Comments

Yvette Newbury

19:16 PM, 27th November 2013
About 7 years ago

Not in my role as a Landlord, but this happened to my parents. The Surveyor did not visit and valued their house based on 2 other houses that had been sold in the same street that had needed complete refurbishment and had sold for far less than others in the same street that had been sold previously. My parents argued, but the mortgage company of the purchaser would not budge, so they lost that buyer but did not move on the price for the house. When a new purchaser was found, the surveyor on behalf of the mortgage company valued it differently and the purchaser obtained the mortgage they wanted and my parents achieved the asking price for the house.

I think basically then the price will depend on what the estate agents are willing to list it at / what another surveyor confirms as the price for any prospective new mortgage on the property.

John Constant

19:24 PM, 27th November 2013
About 7 years ago

Andrew, I am a mortgage adviser with a company who are business partners with Property118.

This is a tricky one! In 12 years broking experience, I have managed to change the surveyors mind on just a couple of occasions. The trick here is to obtain 3 recent comparables (these should be near identical properties sold in the same street or very nearby). "Recent" in this case means properties sold within the last 3 - 4 months. And here lies the problem; the depressed market that we have at the moment means that it is very difficult to find 3 properties sold in the same street within the last 3 months. If you can surmount this problem, send your comparables to the surveyor, via his company or your broker. Assuming that the recent sales are considerably higher, there might be grounds for the surveyor to change his mind. The 2 bedroomed property that you cite, could be used as additional ammunition. Surely a 3 bed property in the same street should be more expensive than a 2 bedroomed one? How did you come to the £100,000 valuation yourself? Was it through seeing similar properties on Rightmove? Please remember that these are asking prices, and not sold prices. Having worked in an Estate Agency myself, it is not uncommon for someone to insist on what they wanted to sell their property for, no matter what the advice from the more experienced Estate Agents. The result, more often than not, is that the property will sit there unsold and un-viewed.

Mark Alexander

19:52 PM, 27th November 2013
About 7 years ago

You may be able to gather comparable evidence to put to the surveyor using our Property Research Tool - see >>> http://www.property118.com/property-research-tool/44395/
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Neil Patterson

19:58 PM, 27th November 2013
About 7 years ago

Hi Andrew,

Although I don't think the lender is being fair to you, from experience it will be a monumental task to turn them around as they tend to dig their heels in rather than admit they are wrong by that large an amount.

If it is possible and you have the time I would seriously consider choosing another lender.

Mark Alexander

20:02 PM, 27th November 2013
About 7 years ago

Reply to the comment left by "Neil Patterson" at "27/11/2013 - 19:58":

I agree, can't see that time is an issue other than wanting to put the deal to bed and move on. Remember he already own the property.
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Paul Edwards

20:25 PM, 27th November 2013
About 7 years ago

We are in the same position we bought a semi detached bungalow in Eastbourne last year . It was originally on the market for £150k but we bought it for £140k being very close to main line rail station to London and also very close to all local amenities we thought this a good investment for a BTL property. Having spent around 4k fitting a new kitchen and general refurb we were mortified when we changed mortgage lenders and they came back with a valuation figure of 140k even when prices here in the south of England have started to shoot up again.We have challenged their decision but they are refusing to budge saying that they will only reconsider if we can come up with proof of recent sales of similar properties that have sold within the last 3 months .This is proving to be nearly impossible as there are no other semi detached bungalows in that area and certainly none that have sold in this time frame.
I must admit our mortgage broker has been very good in trying to fight our corner but even with all his experience and know how we seem to be facing a loosing battle.
Like the previous comment posted we suspect that nobody even went around to look at the property but cannot prove this one way or another.

Mark Alexander

21:54 PM, 27th November 2013
About 7 years ago

The alternative to refinancing to get your money back out is to sell the property and take all of your profit out to recycle. That's what I would do if financing wasn't viable.

See >>> http://www.property118.com/sell-or-hold-after-completing-a-refurbishment/
.

Mick Roberts

8:02 AM, 28th November 2013
About 7 years ago

Sounds like u know what u r doing, when I was actively buying, used to do more or less exactly same as u, except my prices were roughly buy 48k, spend 2k, rent £550ish, value 70-80k, get my 50-60k back.

From memory, I think I have got the odd one up before, maybe 5k, by sending loads of high price houses in & work receipts done on the property.

But to avoid this happening in first place, I ALWAYS used to meet valuer there, don’t let him think he’s better than u buy him saying 2 hour appointment, tell him u same boat as him, u don’t live there & u also not got time to wait, so half hour phone call beforehand for u to meet him there.
Then get the most expensive dearest similar properties nearby printed off Rightmove, also HIGH rent valuations, let him know u are very experienced & cover mortgages easy with rents, & also I used to bull him ie. if I was getting 80% of valuation, I used to tell him only getting or wanted 70%. They otherwise panic & want to cover the backs, should you falter in the future. If he thinks you’re only borrowing way below what it would ever fetch at auction, he think he’s safe & don’t mind giving higher valuation, as long he can justify & is covered.
They used to call this tolerances, I think 10-15% was the differences in some valuers/surveyors.

And I can some experienced people comment above, so Oohhh dear, I may be getting slated for some of my rough & ready comments, but that is how I used to do it & it used to work.

Mark Alexander

8:18 AM, 28th November 2013
About 7 years ago

Reply to the comment left by "Mick Roberts" at "28/11/2013 - 08:02":

I'm with you on this Mick, anything you can do to make a valuers life easier can only help. Giving them comparable evidence of values is one such example, hence my reference to our Property Research Tool >>> http://www.property118.com/property-research-tool/44395/

Telling valuers you are borrowing less than you really are these days will backfire though. This is because mortgage lenders now tell valuers how much you are looking to borrow. If you say something different the valuer will smell a rat and will probably pay less attention to anything else you say or provide by way of comparable evidence.

Valuers must always do their due diligence as their PI is on the line every time they do a valuation. They need evidence to justify their figures so providing that evidence will help their justification. Obviously it needs to be realistic though, otherwise they will simply dismiss it.

Hope that helps 🙂
.

Joe Bloggs

9:08 AM, 28th November 2013
About 7 years ago

always expect some over caution. we had a ridiculous down valuation on a remortgage 2 years ago. the NLA broker told us to provide comparables, which we did, only then to be told that comparables by that lender (godiva) will not be considered! what a waste of time.

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