There are ways to fight back and preserve your property deal if a bank says you’re paying too much.
Mortgage brokers have warned that down valuing is on the rise, which could mean buyers paying thousands of pounds more to secure their dream home.
Down valuations occur when a surveyor, working on behalf of a bank or building society, values a property below the price agreed between the seller and buyer. It means lenders can withdraw or dramatically reduce their offer and cause sales to collapse.
Sales are beginning to slow after a year of huge house price growth, although a third of properties sold in July still went for more than the original asking price, according to Propertymark, a trade body for agents.
As the market cools a growing number of sellers will have price expectations not matched by a surveyors’ valuation.
But there are steps you can take to prevent your home, or the property you are hoping to buy, from being down valued.
Do your research
Surveyors will compare similar homes that sold in the same area in the past six months to value a property for a lender. This can easily shave tens of thousands of pounds from an agreed price – particularly if the property has had building work, such as an extension, which makes it bigger than comparable nearby homes.
There is no harm, therefore, in doing your own research to show the surveyor ahead of the valuation, said Carol Peett, managing director of West Wales Property Finders, a buying agent. http://www.westwalespropertyfinders.co.uk
Certain types of homes are more susceptible to down valuations, such as houses in rural locations with a lack of nearby and comparable properties for surveyors to base their valuation on.
Researching an area will also give buyers an idea if their purchase is overpriced, said Robert Payne, of mortgage broker Langley House Mortgages.
“While it could be argued the value of a property is simply how much someone is willing to pay for it, it isn’t always that simple. Sometimes people are prepared to pay over the odds for a property and lenders want to be confident that the value will maintain or gain, to avoid the risks of negative equity,” he said.
Ms Peett added: “Down valuing is a huge problem at the moment, particularly in coastal areas like west Wales where a property with a sea view is often worth at least double, if not quadruple, that of a similar property half a mile inland.
“Often lenders use a panel of surveyors who are from outside the area and so are unaware of the small nuances in the local market which makes one area so much more, or less, valuable than one a few miles away.
“I would suggest it is always worth both buyers and vendors doing their research, and pointing out to surveyors why the area is so desirable and asking to compare it with a similar location which is attractive for the same reasons.”
These reasons could include proximity to a train station in a commuter belt, in the catchment of a good school or in an area popular with second home owners.
A final decision can be influenced by so many factors that trade body the Royal Institution of Chartered Surveyors has challenged the term “down valuation”.
A Rics spokesperson said: “The market value is based on a range of transactional and economic indicators, such as sales of similar properties in the local area, and also the professional’s knowledge of the local market including supply and demand dynamics.
“For this reason, it is quite possible that the valuation for the lender – the market value – does not match the offer price.”
A down valuation does not always spell the end for a sale. “As a buyer you can use this as an opportunity to renegotiate the purchase price with the seller,” said Mr Payne.
Prospective buyers can also renegotiate with their bank or building society to secure a loan that fits with the surveyor’s valuation. Borrowers may be able to save the sale if they have enough cash to either cover the difference or offer a bigger deposit to the lender.
Mr Payne added: “The valuation is ultimately for the use of the lender and only determines which deposit bracket you fall into. So if you are confident with the price you are buying for then you can still proceed on that value, subject to rates and the amount you can borrow.”
Down valuations are so rife in some areas that Ms Peett suggested sellers in these locations should be wary of how reliant a buyer is on a mortgage when accepting offers.
“It is often better to accept a slightly lower offer from a cash buyer than one that is higher but dependent on a mortgage, even when the buyer has a mortgage offer in principle in place. Even where a buyer has a considerable cash deposit, they can come unstuck due to valuations,” she added.
Borrowers are not obliged to settle for the first valuation and often an application can be resubmitted to another lender, with a different valuation agreed. But this can also delay the transaction.
It is also possible to appeal a valuation with the original surveyor and lender, although Mr Payne warned this is usually a waste of time.
“Most lenders will ask for three comparable properties which have sold at the price you believe the home is worth in the last six months.
“It is unlikely a professional surveyor is going to overturn their decision unless there is something they have missed, like a hidden extension, for example,” he said.
Be sure to ask for a copy of the surveyor’s report too, added Mr Payne. Online valuations have become increasingly common, meaning surveyors never actually visit the property and instead a decision is made using an algorithm.
Buyers can ask for a physical valuation and negate the risk of a computer missing details of a property which could add to its value, such as recent works.
https://www.telegraph.co.uk/property/house-prices/do-house-valued/ The Daily Telegraph – Monday, 23rd August 2021
If you are looking to buy a property in Pembrokeshire, Carmarthenshire or Ceredigion, give West Wales Property Finders a call on 01834 862816. We can find your perfect property for you whilst saving you time, stress and often money too.