What To Do If Your Property Or The One You Are Buying Is Down Valued

Buying and selling properties can be a complex process at the best of times, what with all the legal requirements, negotiations, the risk of gazumping or buyers reducing their offers at the last minute and complicated chains there is more than enough to consider at the best of times. What, then, do you do when either the property you are selling or the dream home you want to buy is down valued by the bank?

What Is Down Valuing?

First things first, let’s explain what down valuing is. As part of every mortgage application, the lender for the purchaser’s mortgage will send out a surveyor, acting on their behalf to value the property being bought. Down valuing is when this surveyor says that the property is worth significantly less than the asking price. The upshot of this is that the bank will likely refuse to lend the full amount of the asking price as they would see this as putting the lender into potentially negative equity from the start of the mortgage.

Why Are Properties Down Valued?

There are a few reasons why a surveyor might down value a property:

  • The seller has set an overly ambitious asking price
  • The surveyor disagrees with the value that renovations have added to the property
  • The surveyor finds problems with the condition of the property that were not seen when the property was valued by the estate agent
  • The surveyor is not used to the local market and does not fully understand the local area
  • The lender is being overly cautious with property valuations

Down valuing is quite common in recent times and since the economy opened up after lockdown and the implementation of the stamp duty freeze, 46% of people have reported that a property they were buying was down valued. This does suggest a cautious approach by lenders to the boom in property price

What Can You Do?

There are no guarantees in a down valuing situation, but there are a few things you can try:

If you are a buyer

  • Ask the seller to reduce the price of the property
  • Challenge the valuation with the mortgage lender
  • Increase the deposit to cater for the shortfall between the amount being lent and the asking price
  • Move to a different lender who will potentially instruct a different surveyor who might have a different view on the property’s value

If you are a seller

  • Be prepared to accept less for your property and lower the asking price
  • If the surveyor has cited issues with the property, ensure that these are corrected and then get a revaluation
  • Hold out for another purchaser who might be with a different lender

Down valuations are difficult to deal with and can make the whole process of buying/selling a property much more stressful but there are some things that can be done to manage the situation and keep the transaction going through. Should this happen to you, then it makes sense to talk to your estate agent and/or your financial advisor and weigh up your options.