Down valuation is on the rise and involves lenders valuing your future home at a significantly lower price, when in actuality it is worth thousands more. It counts for 1 in 5 property sales compared to 2 years ago, when this was just 1 in 20. It leaves buyers having to find thousands of pounds or face losing their property.
This rise is the highest it has been since the UK’s financial crash in 2008. Emoov’s chief exec, Russell Quirk said he believed the problem is due to surveyors underestimating the value to “cover their backs” when dealing with the mortgage providers. The market value is based on comparable property market estimates and local supply and demand.
What is a Down Valuation?
A buyer agrees a price with the seller, the mortgage provider uses a surveyor to check the value of the property.
The mortgage broker’s surveyor looks at similar properties in the area, market conditions locally and the condition of the property.
If the surveyor says the house is worth less than the agreed sale price, this is a down valuation.
If the seller and buyer cannot negotiate a new price, the buyer will have to find the extra money up front or lose the property.
Those most likely to be affected are people who have small deposits or who have re-mortgaged their homes. Down valuations have increased housing chains breaking across the UK.
Those re-mortgaging their homes after renovating them, are most likely to be affected by down valuations. If a surveyor values a property without visiting it, which they often do, they will not be able to include any improvements made to the home and account for any increases to the value of the home these can make.
This could also mean sellers paying hundreds of pounds extra in fees when they have to go to another bank for a valuation.
UK Finance, which represents the banking industry, said: “Lenders have a responsibility to ensure that the value of property taken as security on mortgage loans is current and realistic.
“Although the valuation is carried out for the lender, borrowers also benefit from a realistic independent valuation, as it could help them avoid paying over the odds for the property they are buying.”