Mortgage Valuations - based on priced paid?

[tell-me-more]

I am trying to buy a house for �125,000 which has just had a sale fall through at �140,000.

To achieve a 90% loan-to-value ratio, I was hoping that the property would be valued at �132,000, but I've now been told by the bank that the valuer will almost certainly take whatever I pay for it as the value, and they will tell the valuer how much I'm going to pay for it. Is this the same with all banks, and all valuers, or are there some that are more flexible? The reason the buyer is considering my lower offer is because I have no chain, and he is waiting to move to Australia after the last sale fell through.

nethouseprices.com shows higher prices for similar houses (it's mid-terraced, so there are quite a few similar ones).

Does anyone have any suggestions that would allow me to save the sale?

[Ethel]

Yes. As a buyer it will be 90% of purchase price, LTV being the guide for remortgaging where the mortgage company value the home you already own.

With house prices falling there is very little hope of the lender being flexible on this.

[Eve]

On a purchase mortgage, lenders will normally lend the lower of their maximum percentage of loan to value or purchase price.

There are many schemes being pushed in the investment sector about non disclosure to lenders of the actual purchase price, however, this is essentially mortgage fraud as if the lender knew the full facts they would not have lent the same amount. Be very wary if you hear about any of these schemes.

There was a legit one using same day bridge remortgage on buy to let mortgage offers but the main lender doing it pulled it a while back. May be worth checking whether Mortgage Express can package you a good deal though.

Solicitors usually act for both the lender and the borrower/purchaser are under a professional obligation to disclose the true purchase price to the lender.

This includes most incentives and cash backs such as vendor gifted deposits or discounts as are common when buying a new build property off plan.

Be very careful and check things by your solicitor to make sure no rules are being broken.

It's currently not easy to get high percentage mortgage offers in light of the current credit crunch with properties losing value and lenders facing negative equity and a push towards more responsible lending.

You could try some of the sub-prime or more adverse credit lenders but make sure you get independant legal advice and a full illustration as they are often a lot more onerous with higher fees and harsher penalties.

[tell-me-more]

Thanks very much to you both.

Very frustrating as the bank in question is trying everything to wriggle out of the agreement they initially offered a few months ago, which was 95%LTV, as long as I found a property by 3rd September and a multiple of my current salary, whereas now they're taking my salary from 2 years ago because they suddenly need 2 P60s instead of just my last three months wage slips.

Back to the drawing board again...

[sandmaster]

What is 'market value'? It is the amount a purchaser is willing to pay. If you are the only interested party the amount you are offering is the market value. It does not matter how much simiar properties have been sold for in the past. Times change. Sorry to be blunt but this is the stark reality.

[tell-me-more]

Well, well, well. My bank has called today to apologise. They said they were wrong in what they told me before, and although not the usual case, if a seller is selling their property at a price for a quick sale, there is a special case - called a "transaction under value" I think - where they will not take the purchase price into account, but just value it without that.

I agree with some of what you say Sandmaster, but the price I pay is the market value to the _current_ seller. The market value to me and the bank will not be impaired by a necessity to sell so quickly.