Mortgages.scot

I have had a question from Lynda around a figure seen on her mortgage lenders valuation report suggesting what it would be worth if there was a forced sale after 90 days, what does it mean? The question was.

I was reading through the report sent by my mortgage company, the valuation of the property we are purchasing is £500k but there is a figure on there that says ‘Forced Sale, 90 day marketing period £475,000’, what does this mean please?

It is nothing to worry about, most lenders ask for this figure nowadays. For mortgage purposes, they will use the £500,000 figure. What the valuer is doing is simply telling the lender what the property would likely need to be sold for in the event the property had to sell at should it take longer than normal.

In a reasonably stable market with enough willing purchasers where the property sells relatively swiftly, the sale price will be at or around £500,000.

In a market where there are fewer willing purchasers or there are too many similar properties in the area, you may need to reduce the asking price to £475,000 to ensure a sale within 90 days.

Forced Sale, Why 90 days?

Selling a property at market value is most likely to happen when you put a property on the market then receive immediate attention from buyers that lead to an accepted offer within days or a couple of weeks at most.

The longer a property sits on the market, the fewer interested buyers there are, otherwise, they would have shown interest. It is therefore anticipated that if the property is still not sold as it approaches 90 days then the available buyers will know nobody is biting and that leads to lower offers.

So the £475,000 figure is what the valuer thinks it would need to be sold at in order to achieve a sale at or around the 90 day marketing period.

Bear in mind this is not something you need not be concerned about yourself necessarily. The lender is thinking ahead should they get into a position where the property is repossessed and they are in the position themselves. So if they did have to sell at £475,000 would they end up losing money as a result?

In my 20 years in mortgage lending, I have only seen a lender change their decision based on this figure once. The reason was due to the property being both very unusual in shape and location. Where the. valuer said it was valued at £1.1m but literally only a handful of people would want to buy it at best if it came to market again, so the 90 day forced resale value was stated as £550,000. As a result, the lender would only provide 75% of £550,000 in a mortgage rather than 75% of £1.1m. But a real outlier.

Hope that helps.