With multiple bids on the table, negotiations for a lower purchase price in line with the surveyor’s report are not being accepted by estate agents leaving buyers to stump up the extra money themselves or walk away.
Meanwhile, some estate agents have been reported to be restricting sales to cash-only buyers to sidestep the valuer’s opinion.
The number of properties selling over the asking price has reached a record high, according to NAEA Propertymark. Last month, one in three homes sold for more than its listed price as supply fell to its lowest level since 2002. The trade body reported there were now 16 buyers for each property.
The hot market has led to mortgage brokers in the West Country reporting extreme buyer behaviour with one London purchaser gazumping a Cornish resident by £250,000 and first-time buyers bidding more than they can afford and asking parents to give bridge the gap between their offer and mortgage finance.
Emma Hamilton, mortgage and protection adviser, Blackdown Financial said she has seen three instances in the last two months where surveyors have returned valuation reports of between £10,000 to £15,000 less than the purchase price.
“One of my buyers had quite a big deposit so they were able to go ahead but it affected their loan to value and they ended up with a higher interest rate,” said Hamilton, who advises in areas including Taunton, Bridgwater, Devon and Somerset.
One of her clients as just been asked to put in a sealed bid for a property that has Japanese Knotweed, usually a deterrent to new buyers because of the destruction it can cause to the structure of a house. But after receiving four full asking price offers the vendors have asked for sealed bids leaving families to blindly guess how much their rival bidders are prepared to pay.
“The fact that we have sealed bids on a property with Japanese Knotweed in close vicinity to the property shows just how desperate people are,” she added.
Clare Coode of buying agents Stacks Property Search in Cornwall said several estate agents have reported mortgage valuations coming in significantly under asking prices in Cornwall and have used that as their excuse for only accepting cash offers in quite a few cases this summer.
In one case, Coode said they were able to supply enough research that backed up the amount offered by her clients such as comparable sold properties and the reasons why the price was unlikely to go down in the next five years. The valuer agreed with the research and backed up the bid.
Sami Bickford, managing director of The Mortgage Girl, who also advises families in the West Country and nationally, said estate agents are reporting having to manage “intense buyers,” and low stock levels.
“My client had an offer accepted of £350,000 and was gazumped by a London cash buyer, downsizing to Cornwall, who threw in an offer of £600,000. That’s the most extreme case of gazumping we have ever seen.”
Bickford said she’s also seeing cases of young buyers who fall in love with properties and are prepared to pay anything to secure them.
Her young couple clients had been offered a decision in principle of £140,250 and a maximum loan to value of 85 per cent. The saw a property on the market of £155,000 and ended up placing an offer of £165,000. The surveyor returned a value of £160,000 which mean the borrowers could now only raise £136,000 in mortgage finance and had to come up with the additional £5,000 they offered over the asking price, making them £9,250 short. Bickford searched for a 90 per cent LTV option but the interest rates were too high. The couple were able to proceed with help from their family.
“It goes to show people will do anything and everything to get the home they want, despite there be nothing extraordinary about that particular property,” she said. “There were no amazing views and they weren’t near the sea but they had fallen in love with the house and that was the end of it.”
Bickford said as part of her advice she goes through all options with her clients, including letting the property go and looking for a cheaper home.
Hamilton said in her experience buyers should try to renegotiate either by asking the vendor to reduce the price to the valuation amount or to meet them in the middle of the lower valuation and the offer but as the market demand for property is higher than the supply at the moment this was proving challenging.
Buying agents are already warning that there are likely to be some house price corrections in the future so those who don’t need to buy now are being urged not to.
James Greenwood, managing director of Stacks Property Search, said: “We’re operating in unprecedented times so there can be no certainty around the future of this market.
“Some of the price rises we have seen were due. Country prices had lagged well behind London for years and some re-balancing was required. Buyers need to reset their expectations about what their budget will buy, and they need to be determined and serious.
“We could of course plunge into a post-pandemic recession. Current predictions point towards a period of inflation, so buyers who are paying a little over the odds in today’s market should be protected.
“There will undoubtedly be some corrections. I wouldn’t talk the bears out of holding tight and seeing what happens in a year or two but if your life requirements involve buying now hold tight and get on with it.”