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Old 21.05.2019, 21:38
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Bank says home worth 90k less than asking price

Hello again - Wondering if you all can help shed some light on a few things regarding a home purchase here.

Backstory
We have been searching the vicinity of Baden for close to a year with little luck when 2 weeks ago we found a place that matched basically all of our criteria accept for the fact that it hasnt been remodelled since 1995, and its about 5km outside of Baden. Upon going through the purchase process we first contacted MoneyPark, who told us the house was worth 100k less than what they were asking for it. This seemed odd to me because we have seen dozens of homes in the area, I have a background in real estate and finance myself, and have been closely studying all areas of Baden for close to a year, we thought if anything the home we were looking at was underpriced, as it had a yard and was not part of a homeowners association / shared utility policy, not to mention close to a dozen people looking at it in under 4 days of being on the market. So, we went to UBS for a consultation and they basically advised the same but said it was more like 90k overpriced.

My questions to everyone here:
1. Is it common that the home does not appraise for the asking price here? This is about a 10% difference in asking/versus what the bank states its worth.
2. Anyone been in this situation? What did you do? The sellers are not budging, but I dont see how they will ever sell it when the banks state its overpriced by 100k, unless someone is coming with cash and to be honest I think someone with that much cash wouldnt overpay either, and would be looking for something new/modern etc.
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Old 21.05.2019, 21:42
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Re: Bank says home worth 90k less than asking price

The seller doesn't care, cash or mortgage, he gets his money either way.


Maybe he doesn't need to sell........A lot of people here don't need to sell and are in no rush to sell.



The bank will usually give up to 80% finance based n THEIR estimate, any more, you pay from your pocket, increasing the down payment amount that you have to bring to the table.
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Old 21.05.2019, 21:59
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Re: Bank says home worth 90k less than asking price

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The seller doesn't care, cash or mortgage, he gets his money either way.


Maybe he doesn't need to sell........A lot of people here don't need to sell and are in no rush to sell.



The bank will usually give up to 80% finance based n THEIR estimate, any more, you pay from your pocket, increasing the down payment amount that you have to bring to the table.
So in that case, how does one determine what the home is REALLY worth? If the bank states its only worth 1m, then ide be stupid to pay 1.1m. But if 1.1m is what it will sell for irregardless then how are people actually determining the real value of homes here?
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Old 21.05.2019, 22:19
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Re: Bank says home worth 90k less than asking price

The sale price of the very first house we placed an offer on was higher than the bank valuation by 60k and we were one of 10 couples who agreed to pay the asking price. House subsequently sold for 150k more than asking price so 210k higher than bank valuation. Demand outstrips supply here and conventional market wisdom doesn’t seem to exist. For us it was third time lucky in terms of finding somewhere. You either have to suck it up or walk away am afraid...
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Old 21.05.2019, 22:19
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Re: Bank says home worth 90k less than asking price

The price is usually determined by what a potential buyer is willing to pay. If they won’t sell at asked price then they will reduce it until someone serious comes around and puts a significant offer in front.

Why won’t you bargain with them to get it for 1 million instead?

Last edited by jacek; 21.05.2019 at 22:31.
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Old 21.05.2019, 22:20
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Re: Bank says home worth 90k less than asking price

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The sale price of the very first house we placed an offer on was higher than the bank valuation by 60k and we were one of 10 couples who agreed to pay the asking price. House subsequently sold for 150k more than asking price so 210k higher than bank valuation. Demand outstrips supply here and conventional market wisdom doesn’t seem to exist. For us it was third time lucky in terms of finding somewhere. You either have to suck it up or walk away am afraid...
Thank you!
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Old 21.05.2019, 22:21
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Re: Bank says home worth 90k less than asking price

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The price is determined by what a potential buyer is willing to pay. If they won’t sell at asked price they will reduce it until someone comes around and put a significant offer.

Why won’t you bargain with them to get it for 1 million instead?
Price is non-negotiable, based on the amount of interest they have had in the first week since it hit market, and how many people were there before/after our appointment to see it, we believe this to be factual.
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Old 21.05.2019, 22:29
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Re: Bank says home worth 90k less than asking price

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So in that case, how does one determine what the home is REALLY worth? If the bank states its only worth 1m, then ide be stupid to pay 1.1m. But if 1.1m is what it will sell for irregardless then how are people actually determining the real value of homes here?
As someone with a background in real estate, you should appreciate that there are different valuation models... there will also be a valuation set for tax purposes etc... and it is likely to be different too.

The bank takes the long term view, the market is just what people are willing to pay at this moment in time. Your in that business, what do you think it is worth?
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Old 21.05.2019, 22:39
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Re: Bank says home worth 90k less than asking price

Swiss banks, especially the big ones, are under significant pressure from Swiss National Bank to tone down the size and riskiness of their mortgage portfolio. Hence the bank valuation models are run on ever conservative parameters.

You are thrown off because you cannot arrange the financing on top of what the bank is offering? or are you scared in your choice now that "knowledgeable" Bank says the house is not worth that much? Former is indeed a problem, latter not so much, if you know what you are doing.
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Old 21.05.2019, 22:43
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Re: Bank says home worth 90k less than asking price

Our place was actually worth more, as they gave us an interest only mortgage with only 30% down.

Thus, YMMV.

Tom
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Old 21.05.2019, 22:58
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Re: Bank says home worth 90k less than asking price

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As someone with a background in real estate, you should appreciate that there are different valuation models... there will also be a valuation set for tax purposes etc... and it is likely to be different too.

The bank takes the long term view, the market is just what people are willing to pay at this moment in time. Your in that business, what do you think it is worth?
To be clear I dont currently work in that area, but use to, and my entire family does although not here. From my perspective, the comps (recently sold comparable homes), support the price they are asking, however the difference in appraisal with what the bank says its worth versus what they are asking, is whats scaring me. Especially considering just last year UBS was saying they anticipate a correction of around 10% within the next 3 years. I think there are so many people jumping on the home-buying bandwagon right now because the interest rates are so low that people arent thinking about the long term ramifications of overpaying by 10% amortized over 1m or they simply dont care as they plan on staying for eternity, but thats not me. I didnt come from wealth and busted my ass to get to where I am and have this kind of money for a deposit at my age, so I need to do what I can to protect my investment. If this doesnt work out then the money will just go into a hedge fund where ill contribute every month and watch it compound as a hedge against throwing away money for a rental property. :-/
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Old 21.05.2019, 23:03
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Re: Bank says home worth 90k less than asking price

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Swiss banks, especially the big ones, are under significant pressure from Swiss National Bank to tone down the size and riskiness of their mortgage portfolio. Hence the bank valuation models are run on ever conservative parameters.

You are thrown off because you cannot arrange the financing on top of what the bank is offering? or are you scared in your choice now that "knowledgeable" Bank says the house is not worth that much? Former is indeed a problem, latter not so much, if you know what you are doing.
Thanks! Didnt realize this about the SNB but great to know, do you know since when they SNB has been giving this directive? The financing we have, for me its more so about protecting the money we are investing into the property.
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Old 21.05.2019, 23:12
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Re: Bank says home worth 90k less than asking price

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So in that case, how does one determine what the home is REALLY worth? If the bank states its only worth 1m, then ide be stupid to pay 1.1m. But if 1.1m is what it will sell for irregardless then how are people actually determining the real value of homes here?



To the seller, it is worth the price he is asking, if he doesn't get it, maybe he doesn't care, just leave it on the market until it sells or doesn't


It is not always black and white and that's exactly what you are trying to make it.
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Old 21.05.2019, 23:27
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Re: Bank says home worth 90k less than asking price

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so I need to do what I can to protect my investment. If this doesnt work out then the money will just go into a hedge fund where ill contribute every month and watch it compound as a hedge against throwing away money for a rental property. :-/
So what are you actually trying to do, buy a home or make an investment. It is not the same thing. If it's an investment then you are breaking pretty much every guideline and you should expect the consequences.
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Old 21.05.2019, 23:38
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Re: Bank says home worth 90k less than asking price

When I sold my apartment, first couple of offers were below the asking price (set by the agent) mainly because the apartment was apparently evaluated at a lower price by the banks.

Then I started to get better offers, and finally, to my surprise and delight, sold it higher than my asking price. Some people just have the cash...
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Old 22.05.2019, 08:34
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Re: Bank says home worth 90k less than asking price

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So what are you actually trying to do, buy a home or make an investment. It is not the same thing. If it's an investment then you are breaking pretty much every guideline and you should expect the consequences.
Thats arguable but I get it, the Swiss have a different view on this. The fact of the matter is right now I am shelling out 25k a year for a small flat 45 min outside of town, and to rent a place the size of the I am planning on buying would be upwards of 35-40k a year. I would rather that money be going toward principal on a loan than in the trash. So either I pay 4k in interest plus maintenance a year on a house, or 25k+, the math is pretty simple, so although its not exactly an investment, its a vehicle that helps protect the money from being wasted.
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Old 22.05.2019, 08:34
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Re: Bank says home worth 90k less than asking price

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When I sold my apartment, first couple of offers were below the asking price (set by the agent) mainly because the apartment was apparently evaluated at a lower price by the banks.

Then I started to get better offers, and finally, to my surprise and delight, sold it higher than my asking price. Some people just have the cash...
Good to know, seems this the consensus. Thank you.
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Old 22.05.2019, 08:39
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Re: Bank says home worth 90k less than asking price

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Thats arguable but I get it, the Swiss have a different view on this. The fact of the matter is right now I am shelling out 25k a year for a small flat 45 min outside of town, and to rent a place the size of the I am planning on buying would be upwards of 35-40k a year. I would rather that money be going toward principal on a loan than in the trash. So either I pay 4k in interest plus maintenance a year on a house, or 25k+, the math is pretty simple, so although its not exactly an investment, its a vehicle that helps protect the money from being wasted.
If you come for example from an Australian mentality which has the ideal of owning your own house then yes its crazy this Swiss rental thing. But here very few own the house outright. Paying it off in one lifetime is not the goal because of the tax burden. Yes its still in the feudal times here!!

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Old 22.05.2019, 09:12
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Re: Bank says home worth 90k less than asking price

Yes, it‘s normal for a lender - a bank in our case - to undervalue (or tell you the price is too high) of a property. It happened to us and we were able to scrape the money together...
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Old 22.05.2019, 10:03
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Re: Bank says home worth 90k less than asking price

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But if 1.1m is what it will sell for irregardless then how are people actually determining the real value of homes here?
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