I am a First time buyer and have found a developer who is willing to provide 15% of the deposit (as a 'Head Start Scheme').

At first I though this was really nice, since I wanted to add another 15% and get a mortgage for 70% of the asking value.

But very soon I realized (called HSBC and Nationwide) that lenders are not keen on such offers and consider the developer to have inflated the price of the property by some % to be able to give the 15% head-start offer. So the real value of the property is much lower than the asking price (something that might show up after the survey).

A broker has recommended Halifax (who would accept the developers asking price - perhaps not really surveying the property - I don't know how!), but the morgage terms are much stricter and 2% higher than the best market offers (which at this time are about 3.7).

Does anyone here have any experience dealing with lender evaluations that end up being lower than the asking price of the developer? If so, how was the deal finally settled?

Many thanks in advance. Sam

samuel106:

A broker has recommended Halifax (who would accept the developers asking price - perhaps not really surveying the property - I don't know how!),

Everyone just passes a nod and a wink to each other that says "We've found a mug who is willing to pay over the odds for this property. Let's all make money". They all then pocket their commissions and go away happy. The only time this might cause problems for anyone other than the purchaser would be if the property had to be sold in the next few years.

If you pay too much, you will be in negative equity straight away and the excess that you pay will be lost to you forever.

Thanks maxstream

If the property has to be sold in a few years, how would that be a problem for the other parties involved?

Cheers

Sam

Sam

You should always obtain a decent survey to check on the build quality of the property and of course to estimate the market value of the property. You don't want to find out about any defects after the event, particularly when you come to sell and you need some reassurance that you are paying the right price.

The problem of buying an overvalued property (if this is the case) is that 1) you could be left with negative equiry, therefore a potential debt and delays in selling the property 2) anyone buying the property could struggle to get a mortgage for your valuation of the property, if their mortgage companies surveyor values it lower. Hence the delay in selling and being forced to sell at a potential loss.

This is of course a negative outlook. Nobody can predict what will happen in the next few years. Perhaps property prices will rise and none of these issues will apply. But it would be wise to get a surveyors valuation to provide some reassurance that you are paying the current market price.

Huckster

samuel106:

If the property has to be sold in a few years, how would that be a problem for the other parties involved?

Because the lender would struggle get their money back (unless the borrower had lots of savings) and they would lose faith in the particular scheme/builder/valuer.