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Recently we have experienced property surveyors, on behalf of the mortgage lender, down-valuing homes based on the fact that the transaction price agreed by the buyer and vendor was too high. We question whether this is mainly down to lender caution…

Research by estate agent, Benham and Reeves suggests that a total of 390,285 homes were down valued by the surveyor on behalf of the mortgage lender.

The down valuations provided by surveyors can overall affect mortgage applications because lenders are requesting a ‘greater degree of caution’ from valuers given the rise in house prices recently.

“The past 18 months have been a busy time for the house market. Ever since the first lockdown in 2020, people have reflected on where they live and whether it still meets their needs / requirements. The reduction in Stamp Duty up to April 2021 also helped to get the housing market moving and allowed people to move, where beforehand some wouldn’t have been able to do so. The amount of buyers in the market hasn’t really changed in the last six months but the amount of properties coming to the market has massively reduced. This has meant that there are a number of buyers that are fighting it out for the same property and they are having to offer as much as 10% offer the asking price in some cases. There, however, is a potential issue with this, If you require a mortgage on the property, then Lenders will perform a valuation on the property (to make sure if the worst happened, they would be able to gain their money back). If they feel that the property isn’t worth what is being offered on it, then there is a deficit which is required to be made up one way or the other. This typically is either by the purchaser needing to find extra cash to cover the shortfall or having to try and negotiate the price.”

Iain Belcher, Regional Manager at Vision Properties.

According to the latest house price index from the Office for National Statistics, house prices grew by 13.2% in the year to June, the highest rate of annual growth seen since 2004.

It seems that lender caution, resulting from an increase in house prices was to blame for the significant number of transactions put at risk by a valuation that is lower than expected. The research suggested that the average down valuation will knock between £5,000 and £10,000 off the property price.

“Over the last year we have seen a really hot market emerge for certain types of property, in particular houses and those with outdoor space, with many buyers having to consider paying above the asking price to secure the property. With factors such as the cladding crisis and the ongoing impact of Brexit and the pandemic on the UK economy to consider, it is no wonder that lenders and valuers are taking a cautious stance at the moment however what we would ask them to do as well is ensure that this cautious approach does not in itself have a negative effect on the market.”

Chris Lees, Co-Founder of Resolve Financial Solutions.

If you are a seller then you can always look for a new buyer purchasing through a different lender or you can wait for the value to increase but you may loose your buyer. As a buyer, you can negotiate with the seller or lower your offer or alternatively get the property valued by a different surveyor and lender. If this didn’t work then the only other option would be another loan to cover the difference or an increase in your deposit to cover the cost.

If you have experienced the above and need to discuss your situation with us to see if we can help, please get in touch.

*Please note: Your home maybe repossessed if you do not keep up repayments on your mortgage.

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