You accept an offer on your home. Everyone is delighted. Then, a few weeks later, the buyer’s lender sends a surveyor to assess the property and it is valued at less than the price you agreed. Down valuations can feel like the ground has suddenly shifted beneath a sale, but they do not necessarily mean the deal is over.
If you are selling your home, it helps to understand what a down valuation actually means, why it can happen and what you and your buyer can do next.
What is a down valuation?
When a buyer needs a mortgage, their lender will usually arrange a valuation to check that the property provides sufficient security for the amount being borrowed.
A down valuation occurs when the lender’s surveyor values the property below the agreed sale price.
This matters because the lender bases its mortgage offer on its own valuation rather than the price the buyer has agreed to pay. If there is a difference between the two figures, the buyer may need to find additional funds or the parties will need to agree on another solution.
Why do down valuations happen?
There are several reasons why a property may receive a lower mortgage valuation, and it is rarely personal.
A cautious market
When property prices are relatively flat or market conditions are uncertain, surveyors may take a more conservative approach to valuations.
Limited comparable sales
Surveyors use recent sales of similar properties in the local area as evidence. If there have been few comparable sales, there may be less evidence available to support the agreed price.
An optimistic asking price
Sometimes a property has simply been priced above what recent evidence supports. An ambitious asking price might attract an offer, but it can cause problems when the lender’s valuation takes place.
The condition of the property
Defects, maintenance issues or work identified during an inspection can affect the surveyor’s assessment of the property’s value.
What should you do after a down valuation?
First, do not assume that the sale is going to collapse. There are several ways sellers and buyers can respond to down valuations.
Renegotiate the price
One of the most common solutions is for the buyer and seller to renegotiate, perhaps agreeing on a figure somewhere between the original sale price and the lender’s valuation.
Ask the buyer to make up the difference
If the buyer has sufficient savings and remains committed to the property, they may choose to cover some or all of the difference themselves. Depending on their circumstances, they may also be able to adjust their deposit.
Challenge the valuation
If there is strong evidence from recent comparable sales that the surveyor may not have considered, it may be possible to challenge the valuation through the lender. Your estate agent can help identify relevant evidence, although there is no guarantee that the lender will change its decision.
Consider another lender
Valuations involve professional judgement, so another lender’s surveyor could reach a different conclusion. However, buyers should consider the potential costs and implications of making another mortgage application before doing so.
Remarket the property
If an agreement cannot be reached and the figures simply do not work for either party, remarketing may be the most practical option.
How can sellers reduce the risk of a down valuation?
There is no way to guarantee what a lender’s surveyor will decide, but realistic pricing from the outset can reduce the risk.
Price using evidence, not hope
An asking price supported by recent comparable sales is more likely to withstand scrutiny during the mortgage valuation process.
Present your property well
Take care of obvious maintenance issues before putting your home on the market and make sure it is presented well when the surveyor visits.
Keep records of improvements
If you have made significant improvements to your property, keep details of the work completed. This can help demonstrate what has changed and provide useful context around the property’s value.
Choose an agent who can justify their valuation
The highest suggested asking price is not necessarily the best valuation. Look for an estate agent who uses local knowledge, market data and comparable sales to explain how they have arrived at their figure.
Frequently asked questions
Does a down valuation mean my house is not worth the agreed price?
Not necessarily. A mortgage valuation is carried out for the lender’s purposes and reflects the surveyor’s professional assessment at that point in time. A buyer may still believe the property is worth the amount they offered, but the lender will base its lending decision on its own valuation.
Can you challenge a down valuation?
Yes, although a challenge will not always be successful. Strong evidence is important, particularly recent sales of genuinely comparable properties that may not have been considered during the original valuation.
How common are down valuations?
They can occur in any market, particularly when property prices are changing, there is limited comparable evidence or surveyors are taking a cautious approach. Evidence-led pricing from the beginning can help reduce the likelihood of one affecting your sale.
Selling your home?
A down valuation can be frustrating, but it does not automatically mean the end of your sale. With clear communication, realistic expectations and good advice, there may be several ways to keep things moving.
If you are thinking about selling and want a valuation based on local knowledge and genuine market evidence, get in touch with our team. We will be happy to talk you through your options.
If you know someone currently selling their home who may find this useful, please share this guide with them.
About the Ethical Agent Network
We are members of the Ethical Agent Network (EAN). Membership cannot be bought. Every agent must pass an independent assessment covering honesty, service and the way they treat people.
When you see the EAN logo displayed by an agent, it provides an additional indication of the standards they have been independently assessed against. If you would like to learn more about the Ethical Agent Network, please get in touch or visit their website.
Book a Valuation
Visit our Royston Facebook Page
Visit our Newmarket Facebook Page
View our Ware Facebook Page
