I don't agree with the valuation; what can I do?
Posted on: 9 Jun 2022 by James Brook, MRICs

Getting a property valuation that’s lower than expected can be a nasty surprise whether you’re buying or selling, but it doesn’t have to mean the end of the transaction. Options will vary depending on the type of valuation and your role in the deal, so what can you do?

What is a down valuation?

As demand for properties in many areas remains buoyant, high asking prices are resulting in down valuations affecting more purchases. A down valuation occurs when a property is valued, but the valuer concludes that it isn’t worth the amount that a buyer has agreed to pay. So, for example, if a prospective buyer has agreed to pay £500,000, but the valuation comes back at £480,000, the property has been down-valued by £20,000.

It’s difficult to know whether this is happening because lenders are being cautious or buyers are offering more than a home worth to secure the purchase. Still, either way, it can significantly affect a sale.

Different types of valuation

There are several different valuations that can have an impact when buying and selling property.

First up is the estate agent’s valuation. This will involve an agent coming to visit the property with a view to them listing it. They’ll look at the condition of the property itself but also consider the local area and amenities and recent activity in the area to see how much similar properties are selling for. Of course, the estate agent will likely be keen to have the property on their books, so they may over-value to entice the seller. In the valuation letter, they may also include a suggested price to market the home and the price they think it’ll sell for, two numbers that can vary quite significantly.

Once an offer has been received on a property, the next step will be the mortgage valuation. This is a relatively quick check that the property is worth the amount offered, so the lender can be confident that their investment is safe. If this comes back lower than expected, it can be an issue as it means the lender won’t be willing to give the buyer the total amount they need to secure the property. Some lenders will let the buyer appeal if this happens. They may have the valuation reconsidered if they can provide information such as similar properties going for the higher amount. Otherwise, it’s a case of the buyer trying to find the extra cash or renegotiating with the seller. It should be noted that this valuation is carried out for the lender’s benefit to ensure they aren’t taking an unnecessary risk and will not offer any impartial information on the property’s condition.

One of the best ways to avoid a down valuation is for the buyer to arrange an RICS market valuation before arranging their mortgage. This will involve an RICS-qualified professional who is entirely impartial and isn’t swayed by the amount offered, assessing the property to determine its value. This valuation report will be much more thorough than the mortgage valuation. The surveyor will look at the style and construction of the property, its size, location and condition. They will also consider how the property compares to similar homes recently sold nearby and how active the market is. Any major issues or defects that affect the value will also be highlighted. As the valuation report is evidence-based, it will include clear documentation showing how the valuation was reached. The surveyor will also note any assumptions they made and any limitations to their valuation.

How does a down valuation affect buyers?

The biggest issue for buyers is that they may no longer be able to afford the property if the lender isn’t willing to cover the amount offered. At this point, it’s important to keep channels of communication open with the seller. If they’ve already had an offer accepted on another house or need a quick sale, they may be open to renegotiating the asking price, particularly if you’ve had a RICS market valuation, as this is unlikely to change for another buyer.

If this isn’t the case, you could see if the lender is willing to offer you a higher loan-to-value, so they give you the amount you need, but you will have to pay more back. Remember that higher LTV mortgages tend to have higher interest rates, so be sure to do your sums before agreeing to this. The other option is to use any savings or available funds to make up the difference. There’s also the option of finding another lender, but be aware that this will delay the sale as you’ll need to reapply for a mortgage. There’s no guarantee that the outcome will be any different.

Of course, it should be noted that if a professional valuation comes back lower than expected, it could be a positive as it means you won’t be overspending on a property. It could be that the market valuation identifies unexpected issues that mean it’s no longer the right property for you, in which case pulling out of the sale may be the only option.

How does a down valuation affect sellers?

The seller’s options will primarily come down to what the buyer decides to do. If they attempt to renegotiate, you can either accept the lower amount and get on with the transaction or decline and see if they can find the money or put the house back on the market. Similarly, if they decide to apply for a new mortgage, it will be up to you to decide if you’re willing to give them more time to do this or if you’d prefer to look for another buyer.

The Novello Approach

At Novello, our focus is on determining the true market value of a home. We want sellers to be able to plan their next move with confidence, knowing how much they’ll likely get when they sell their homes. We also want buyers to know they’re paying a fair price that reflects a property’s real value.

Whether you’re buying or selling, you need an impartial expert you can trust to help you along the way, and we’re here to make sure your transaction runs as smoothly as possible.

We’re convenient, fast and extremely high value, and we’re here to advise and guide you as you make what could be one of the biggest decisions of your life. We’ll send your valuation directly to your inbox within five days of inspecting your property, and we’ll be on hand to explain anything should you need further clarification. We’re experienced, professional and responsive, and we’re here to help.

Contact us today or book a free consultation to find out more about our valuation services and the range of surveys we offer.