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Down Valuations: What Can Be Done?

  10 Aug 2018

The valuation process of a property deal is hugely important, and some deals have collapsed based on the findings of a survey. However, in the summer of 2018, there are concerns about what has been classed as a significant rise in the number of homes that are being valued at a lower value compared to what buyers have already agreed to pay.

The outcome of these down valuations is that many prospective buyers have had to find additional sums of money, sometimes equalling thousands of pounds, to prevent the collapse of the property deal.

There are various opinions on why this is taking place. According to one estate agents firm, this move is being carried out as surveyors are wary of another financial crash compared to the one which occurred in 2008. UK Finance says that lenders are keen to ensure that property values are set at a realistic value although of course, UK Finance also represents lenders, which may influence their opinions on this matter.

Independent valuations are important in the property market

There is no denying that an “independent valuation” is of merit in the property market. Everyone is looking for the best deal that suits their needs so having a truly independent advisor provide a valuation that represents the genuine worth as opposed to meeting expectations will be of benefit to all parties.

In a report carried out by the BBC, one sestate agent stated that one in five of their sales results in a down valuation whereas in 2016, the figure was classed as one in twenty.

The process involved with a down valuation runs as follows:

  • A buyer agrees a price with the seller
  • The mortgage lender arranges for a survey to be undertaken at the property to determine its worth
  • The surveyor, working on behalf of the mortgage lender, examines similar sales prices, market conditions and the property itself
  • If the surveyor holds the opinion that the property is worth less than the sale price which has been agreed, it is classed as a “down valuation”

This has created a situation where many buyers have been forced to renegotiate the price of the house or find additional funding to make up the shortfall between the amount the lender will provide and the agreed price of the house.

Down valuations can have a terrible impact on buyers

Down valuations have the biggest impact on people who have re-mortgaged their home after carrying out improvement work or who can only afford a small deposit and it is believed that down valuations have been responsible for the collapse of many housing chains across the country.

As agents, we are at the mercy of the valuations surveyors place on these property, which is unfortunate because a down value can significantly change the progress of a property transaction. However, with anecdotal evidence, as shared on the BBC website, of surveyors not even entering the property before creating a valuation, this figure is not always a complete representation of the property. In these cases, there is very little the agent can do to prepare their client for what will unfold, although with down values occurring more frequently, professionals are planning for this outcome.

This is an issue that we take very seriously at Jezzards and we understand that many of our clients would like clarity on this matter. Ross Jezzard prepared this statement on down valuations;

“There has been a steady rise in property prices over recent years with some properties rising around 10-15% in some of the areas we cover in the past 3 years. When we think that the average property prices are around £500,000.00 that is an increase in £50,000 in a short space of time. This was always going to become unsustainable to continue at this pace and I don’t think anyone is surprised by this news. This is a sign that mortgage lenders are also becoming cautious to these huge differences and also the huge variances between marketing prices and sold prices that some agents have achieved. Sellers should remember to get the advice of a professional estate agency such as those, like us, who are NAEA Propertymark Protected, to ensure that you are being qualified advice based on your local property market.”

Try our instant online valuation tool or speak with one of our valuation specialists, to get an honest valuation based on local comparable properties where you live. Remember that all valuations are locally based in the roads around you and not the national average or any other news you may have heard about a new supermarket or coffee shop coming to your high street.


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