Overpriced Properties, Rejected by Mortgage Lenders

Overpriced Properties, Rejected by Mortgage Lenders

Clock  3 minute read

Carl Shave Carl Shave | November 17, 2020


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In the last few months, alarming headlines have implied that pent up demand and the Stamp Duty ‘Holiday’ is fuelling higher prices in some (usually the more expensive highly desirable) areas, which are unsustainable, making lenders nervous when assessing mortgage applications.

Estate agents can carry some of the blame, inflating prices to gain instructions to handle sales, whilst developers are keen to make a profit, and are supported by the Government’s Help to Buy scheme!**

So, sellers who are genuinely on the move and not just testing the market, should always seek 3 estate agent valuations prior to choosing an agent, and buyers need to be cautious, doing their homework, comparing prices on similar properties which may vary significantly, even if only a few streets apart. It’s also worth checking with the local authority planning department whether any redevelopment is proposed in your preferred neighbourhood, or if there are any restrictions on making improvements to individual properties, such as extensions.

scaffolding at a building site

Before making an offer on a property, paying a chartered surveyor for what’s called a ‘desk top’ valuation, which doesn’t require a site visit in the same way that a mortgage valuation does, can help in negotiations, but buyers should be prepared to walk away. Overpriced properties are usually reduced within about 6 weeks if they attract insufficient interest/offers; in such cases, patience is indeed a virtue!

In the housing market, fluctuations are commonplace following a sudden boost to activity. However, although a 5% differential between the asking price and independent valuation may be acceptable, 20% should ring alarm bells and even cash buyers should not allow themselves to be pressurised.

COVID-19 Impact on the UK Economy

The COVID-19 pandemic will inevitably have an impact on the UK economy, affecting business owners and employees, as vulnerable sectors, like hospitality, suffer, and jobs are lost either temporarily or permanently.

Fundamentally, the British economy is strong, but it will take time for full confidence to return, potentially resulting in lower house prices in some areas, to the benefit of those able and prepared to delay buying for a few months.

Financial Property Risk

This is not the time to take a risk with your finances. Lenders’ policies are designed to protect buyers, as well as themselves, which is why, on receipt of mortgage applications, they appoint independent qualified surveyors to verify valuations, taking account of any significant investment in improvements to a property which may contribute to a higher price. They also assess the likelihood of short or medium term price drops in any given area; if they refuse to sanction a mortgage on a particular property, the decision will be in your best interests.

Taking advice from our team at Just Mortgage Brokers at an early stage of your home search can provide peace of mind, confirming how much you could borrow, and your eligibility for Help to Buy** if you are planning to purchase a brand new property. Give us a call – we’re always happy to help.

** Help to Buy: Equity Loan – Terms and conditions apply. Applicants should seek independent financial advice, and get information and guidance on applying for a Help to Buy: Equity Loan at www.helptobuy.gov.uk.


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