Property down valuations - what does it mean and what can you do about it?

If the bank doesn't agree with you about a property's price it can cause the purchase to collapse.

There’s no question that the mortgage process is a stressful one. It’s difficult enough working out which deal to go for and then going through the reams of application documents, but that isn’t even the scariest part.

No, the real worry comes when the lender sends out a valuer to check that the property is really worth what you have suggested. And if they disagree, instead arguing that it is worth less, it can cause all sorts of problems.

What’s more, these 'down valuations' appear to be a growing issue.

How common are down valuations?

Just how likely it is that the property you are looking to borrow against will be downvalued – i.e. the bank won't agree with you over its value – will vary according to who you speak to, but it’s clear that plenty of people within the industry are concerned about it becoming more common.

Hybrid estate agent Emoov reported last month that as many as one in five of sales through the firm are currently experiencing a down valuation, compared to less than one in twenty just two years ago.

Mortgage brokers have also flagged down valuations as a growing problem, with mortgage trade titles reporting cases where properties have been downvalued by six figures. One broker described the process as “pot luck”, arguing “there’s no consistency between surveyors”.

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Perhaps unsurprisingly, the surveyors themselves are not convinced about this. The Royal Institution of Chartered Surveyors, the industry’s trade body, published a blog earlier this year suggesting that valuations are actually a myth.

It said: “When house prices are falling or rising at a faster rate than typical as they are in some areas of the country, or when transaction levels are perhaps not what they might be, surveyors have to be very certain they can evidence the value on paper (as they can be sued for overvaluing properties by lenders).”

Down valuations are a growing problem (image: Shutterstock)

Why a down valuation matters

Having the property you want to buy downvalued can cause chaos in a housing chain.

Let’s say that you want to buy a property which is on the market for £250,000 and have a £25,000 deposit. As a result, you’ll need to arrange a mortgage at 90% loan-to-value. That should be simple enough, there’s plenty of those.

But if the valuer comes out and decides the property is actually worth £200,000, then you have a problem. The lender may only be happy lending up to 90% of this new valuation, which would be £180,000.

Combined with your deposit, that means a shortfall of £45,000.

What to do if a property chain collapses

What are my options?

If you find that the property you want to buy has been down valued, then you have a couple of options.

The first is to try to find that extra cash which, let’s be honest, is a lot easier said than done. If you had that spare £45,000 lying around, chances are you’d have used it on top of the existing deposit in the first place.

The other option is to go back to the vendor to try to renegotiate the price, but again this is not quite as straightforward as it may seem.

If the vendor has already found the property they want to buy, they may be open to accepting a lower price if it avoids delays. However, if they are reliant on every penny from the sale to cover the purchase of the next property, then taking a lower price may not be possible.

If neither of these is a possibility, then you could always try with a different mortgage lender though there is a danger that they may use the same surveyors that delivered the initial down valuation. You will have to shell out for another valuation too.

Valuations are just one of several mortgage fees: read more about them here.

Can I appeal the valuation?

Some lenders will allow you to appeal against the valuation, though this certainly isn’t the case across the board. You will need to provide evidence of other homes selling in the local area for higher prices than the surveyor has suggested the property is worth.