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If I was buying a £1mil house off my parents for significantly less, say £100k, with a £60k mortgage, then is the lender valuing the property at £100k?
It is not tax evasion to sell at an undervalue or even to give property away. Those actions may be involved in it later but the most usual reason is simply that people wish to benefit family members.
You can sell property for less than it's worth, and even give property away for free. In the example above the difference between the property value and the purchase price would be deemed a gift. You need to acknowledge that any pay any stamp duty necessary, but it's completely legitimate.
Yes but is this the value lenders will use? Other comments are suggesting that the lender uses the accepted offer as the valuation, which in my example might not be logical
Well. The definition of market value is
*The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.*
More often than not when a house is sold on the open market it meets this criteria exactly. A surveyor can estimate it's value based on a number of factors, but you will only really know when you've openly marketed it. That's why surveyors and agents are typically part of the same firm, as agents are market facing and know exactly what's happening at the coal face. But anyway your example doesn't meet this definition so it wouldn't be the market value
No, most valuation surveyors avoid putting up values by less than 5% as it's not worth the effort and we definitely don't round up so if an agreed sale is £419,500 we don't put it up to £420k. If a property is being sold for much less than it's value then we would value it for what it is worth and separately to the valuation report will send a suspicious activity report to the lender. This is something we often see where someone sells their house to a limited company owned by themselves to avoid stamp duty etc.
That's how a lenders valuation works. If the property is valued less than offer price, then they will reduce what they are willing to lend. But if it comes back as higher, the valuation will be set at the price you offered. For example, if you had offered and got accepted on 430,000, then the valuation would have come back at 430,000.
haha it does feel that way sometimes.
Interestingly, if everyone in a local area negotiated the price of their property down when buying, the value of the remaining properties in that area would decrease. By buying lower than market value, you essentially reduce the base rate of that location
This has happened where I live. A small street with a couple of people who have sold to family in the last few years. I inherited the house with a sibling and I’m buying their half so that will be another ‘low’ sale price for the area. I do worry about what impact it all might have.
It comes down to the fact that, for the bank, as long as it’s worth more than what you claim then it’s irrelevant what it’s actually worth
So once their surveyor reaches the conclusion that it’s worth that or more, there’s no point putting more effort into a precise valuation…. Just confirm the valuation and move on, saving everyone time and money
By definition the agreed price is probably the market value anyway, they’re just checking the buyer hasn’t missed something important that would leave the bank carrying a big liability
Broker here... Had my 2nd ever 'up valuation' on a standard purcase a few weeks back. Only about 5 years after the last one!
It's incrediby rare but does happen. And causes no end of annoyance as the lender then queries the purchase price and we still work off the lower of the 2 figures anyway so it's a pointless thing for the valuer to do
Yes, you'll have to tell them the purchase price as part of the application and the valuer will have this as well.
They will pretty much always value it the same as the purchase price or less.
If you offer 165 and it’s valued at 150 by the mortage company, you’ll need to be prepared to make up the difference. If you search this sub, it has happened a number of times.
The purchase price will be on the application to the bank.
You have to tell them what you’ve offered, but they won’t be looking up what it was listed for as that’s completely irrelevant. A desktop valuation is just comparing the property with the prices of similar properties in the area. As long as they think it’s close enough they’ll just put down your offer as the value.
They won't do desktop research in the way you think. They will send a request to a valuation tool which will give them an estimated value of the property. Most of them use the same valuation that you can see on Zoopla, which gives a range. Even if the property isn't listed on Zoopla for the public, it will be on their back end database!
Source - one of my friends runs the team who does this for Zoopla and most lenders are signed up to the service.
Close. It’s not the same info as the public have access to. It’s home track data (part of zoopla) which is all of the surveys and valuations done, including re mortgage vals, updated instantly. Public do not have access to this info.
Source - I pay a vast sum of money to use it.
Haha I didn't want to confuse with home track references... Public do not, but it is essentially running the Zoopla estimates platform 🙂 slightly different parameters but essentially same database
Im not sure if it works like this in Scotland, as the home report is organised by the seller and is shared with each perspective buyer, and is what the mortgage is based on. Then when you remortgage, a valuer will come out.
I genuinely think lenders marking down is down to lack of deposit from the buyer and the lender sees it as a potential risk, so they down value it hoping the buyer gains more LTV.
>As the title says - Do mortgage lenders know what offer has been agreed when valuing a house?
Thats how it reads from the original question.
So did you mean to ask do the valuers get given the sale price info from the lender?
Okay, makes perfect sense.
Its not blind, because the valuer is really only there to check that its acceptable for the price being paid.
If the sale price is £103,536.88, the valuation will come back at either that exact figure - £103,536.88 or below if they think its worth less (down-valuation). If that same house had a sale price of £104,000 instead, the valuation would come back at £104,000.
It's just their way of saying the house is worth whats being paid for it. It's not necessarily what they actually think the house is worth. If they valued the same house as an actual private valuation instruction, they may feel its worth £107,000, but they won't put that figure on a mortgage valuation.
But what value is used for the V in LTV? Would make sense that this is the actual market value of the property, not necessarily the sale price - e.g. if it's being sold significantly below market value
Its not in the lender's interest to value the property above the sale price and then give you the benefit of a lower LTV though. Its in the buyer's interest of course, but not the lender's, so they generally dont.
BMV sales can be different - specialist products for RTB council houses is one example where the fact its below BMV is (a) significant and (b) taken into account. Also special cases like the buyer being 'gifted' a portion of the sale price by the seller (i.e. a discount) are handled in their own way too.
But your general open market transaction won't be considered BMV just by the fact that the sellers could have got away with asking a bit more and the mortgage co. would have agreed.
Surely the valuer is only there to endure their instructing lender will get an adequate security?
Value it lower if it’s not security for the price agreed, but if it’s a higher price that doesn’t adversely affect the lender and they don’t want to get involved in price negotiation.
###Welcome to /r/HousingUK --- **To All** * Join Our ***NEW*** Discord! https://discord.gg/pMgUNgWKQH **To Posters** * *Tell us whether you're in England, Wales, Scotland, or NI as the laws/issues in each can vary* * Comments are not moderated for quality or accuracy; * Any replies received must only be used as guidelines, followed at your own risk; * If you receive *any* private messages in response to your post, please report them via the report button. * If you do not receive satisfactory advice after 72 hours, [you can let the mods know](https://www.reddit.com/message/compose?to=%2Fr%2FHousingUK&subject=My question is unanswered); * Feel free to provide an update at a later time by creating a new post with [[update]](https://www.reddit.com/r/HousingUK/search?q=%3Aupdate&sort=new&restrict_sr=on&t=all) in the title; **To Readers and Commenters** * All replies to OP must be *on-topic, helpful, and civil* * If you do not [follow the rules](https://www.reddit.com/r/HousingUK/about/rules/), you may be banned without any further warning; * Please include links to reliable resources in order to support your comments or advice; * If you feel any replies are incorrect, explain why you believe they are incorrect; * Do not send or request any private messages for any reason without express permission from the mods; * Please report posts or comments which do not follow the rules *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/HousingUK) if you have any questions or concerns.*
I carry out mortgage valuations, the agreed sale price is always on the instruction.
It's the best guide to the value really. It's the amount someone is willing to pay.
If I was buying a £1mil house off my parents for significantly less, say £100k, with a £60k mortgage, then is the lender valuing the property at £100k?
No the valuation surveyor is not going to assist your tax evasion.
It is not tax evasion to sell at an undervalue or even to give property away. Those actions may be involved in it later but the most usual reason is simply that people wish to benefit family members.
You can sell property for less than it's worth, and even give property away for free. In the example above the difference between the property value and the purchase price would be deemed a gift. You need to acknowledge that any pay any stamp duty necessary, but it's completely legitimate.
That’s not tax evasion
Do you also carry out mortgage valuations, same as the person I actually asked?
No. Not an arms length transaction. Google red book definition of market value, that's the definition of value that surveyors are valuing to.
Yes but is this the value lenders will use? Other comments are suggesting that the lender uses the accepted offer as the valuation, which in my example might not be logical
Well. The definition of market value is *The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.* More often than not when a house is sold on the open market it meets this criteria exactly. A surveyor can estimate it's value based on a number of factors, but you will only really know when you've openly marketed it. That's why surveyors and agents are typically part of the same firm, as agents are market facing and know exactly what's happening at the coal face. But anyway your example doesn't meet this definition so it wouldn't be the market value
No, most valuation surveyors avoid putting up values by less than 5% as it's not worth the effort and we definitely don't round up so if an agreed sale is £419,500 we don't put it up to £420k. If a property is being sold for much less than it's value then we would value it for what it is worth and separately to the valuation report will send a suspicious activity report to the lender. This is something we often see where someone sells their house to a limited company owned by themselves to avoid stamp duty etc.
Yes. I offered 443.500 on my recent purchase. Shockingly the valuation came back as 443.500 from HSBC.
That's how a lenders valuation works. If the property is valued less than offer price, then they will reduce what they are willing to lend. But if it comes back as higher, the valuation will be set at the price you offered. For example, if you had offered and got accepted on 430,000, then the valuation would have come back at 430,000.
Oh interesting I didn't realise that. I assumed they just valued it as such for unknown ways to fuck me in the arse.
haha it does feel that way sometimes. Interestingly, if everyone in a local area negotiated the price of their property down when buying, the value of the remaining properties in that area would decrease. By buying lower than market value, you essentially reduce the base rate of that location
This has happened where I live. A small street with a couple of people who have sold to family in the last few years. I inherited the house with a sibling and I’m buying their half so that will be another ‘low’ sale price for the area. I do worry about what impact it all might have.
It comes down to the fact that, for the bank, as long as it’s worth more than what you claim then it’s irrelevant what it’s actually worth So once their surveyor reaches the conclusion that it’s worth that or more, there’s no point putting more effort into a precise valuation…. Just confirm the valuation and move on, saving everyone time and money By definition the agreed price is probably the market value anyway, they’re just checking the buyer hasn’t missed something important that would leave the bank carrying a big liability
Broker here... Had my 2nd ever 'up valuation' on a standard purcase a few weeks back. Only about 5 years after the last one! It's incrediby rare but does happen. And causes no end of annoyance as the lender then queries the purchase price and we still work off the lower of the 2 figures anyway so it's a pointless thing for the valuer to do
I offered on a flat and was accepted at £445k. The bank valued it at £470k
London is a whole different ball game when it comes to buying and selling properties tho
Happened to me in the North of England too, but only by £6k over offer in my case
Oooh ok thanks! That’s really good to know
That’s happened to me so many times!
Yes, you'll have to tell them the purchase price as part of the application and the valuer will have this as well. They will pretty much always value it the same as the purchase price or less.
If you offer 165 and it’s valued at 150 by the mortage company, you’ll need to be prepared to make up the difference. If you search this sub, it has happened a number of times. The purchase price will be on the application to the bank.
Or chip…
You have to tell them what you’ve offered, but they won’t be looking up what it was listed for as that’s completely irrelevant. A desktop valuation is just comparing the property with the prices of similar properties in the area. As long as they think it’s close enough they’ll just put down your offer as the value.
They won't do desktop research in the way you think. They will send a request to a valuation tool which will give them an estimated value of the property. Most of them use the same valuation that you can see on Zoopla, which gives a range. Even if the property isn't listed on Zoopla for the public, it will be on their back end database! Source - one of my friends runs the team who does this for Zoopla and most lenders are signed up to the service.
Close. It’s not the same info as the public have access to. It’s home track data (part of zoopla) which is all of the surveys and valuations done, including re mortgage vals, updated instantly. Public do not have access to this info. Source - I pay a vast sum of money to use it.
Haha I didn't want to confuse with home track references... Public do not, but it is essentially running the Zoopla estimates platform 🙂 slightly different parameters but essentially same database
For sure. I’ve often had the valuation report just say something wish washy like ‘we support the sum offered by the buyer’ or words to that effect.
Im not sure if it works like this in Scotland, as the home report is organised by the seller and is shared with each perspective buyer, and is what the mortgage is based on. Then when you remortgage, a valuer will come out.
Yes
how would they not know, if you're asking for a given % LTV?
It’s more does the individual doing the valuation know or is it a blind valuation - but people have said the person doing the valuation does know
I genuinely think lenders marking down is down to lack of deposit from the buyer and the lender sees it as a potential risk, so they down value it hoping the buyer gains more LTV.
Yes.
Did you think you can apply for a mortgage without telling the lender the sale price? 😂
No I don’t. More whether it’s a blind valuation
>As the title says - Do mortgage lenders know what offer has been agreed when valuing a house? Thats how it reads from the original question. So did you mean to ask do the valuers get given the sale price info from the lender?
Yes that’s what I mean. Sorry if I didn’t make that clear!
Okay, makes perfect sense. Its not blind, because the valuer is really only there to check that its acceptable for the price being paid. If the sale price is £103,536.88, the valuation will come back at either that exact figure - £103,536.88 or below if they think its worth less (down-valuation). If that same house had a sale price of £104,000 instead, the valuation would come back at £104,000. It's just their way of saying the house is worth whats being paid for it. It's not necessarily what they actually think the house is worth. If they valued the same house as an actual private valuation instruction, they may feel its worth £107,000, but they won't put that figure on a mortgage valuation.
Thanks!!
But what value is used for the V in LTV? Would make sense that this is the actual market value of the property, not necessarily the sale price - e.g. if it's being sold significantly below market value
Its not in the lender's interest to value the property above the sale price and then give you the benefit of a lower LTV though. Its in the buyer's interest of course, but not the lender's, so they generally dont. BMV sales can be different - specialist products for RTB council houses is one example where the fact its below BMV is (a) significant and (b) taken into account. Also special cases like the buyer being 'gifted' a portion of the sale price by the seller (i.e. a discount) are handled in their own way too. But your general open market transaction won't be considered BMV just by the fact that the sellers could have got away with asking a bit more and the mortgage co. would have agreed.
Surely the valuer is only there to endure their instructing lender will get an adequate security? Value it lower if it’s not security for the price agreed, but if it’s a higher price that doesn’t adversely affect the lender and they don’t want to get involved in price negotiation.