Brokers warn of stalled purchases due to down valuations

Brokers warn of stalled purchases due to down valuations
 Credit: Anthony Devlin/Bloomberg

House price growth has continued to “beat expectations” according to the Halifax house price index for September, but brokers are seeing some properties being valued less than expected.

Chris Sykes, mortgage consultant at Private Finance, said in certain instances the firm was seeing down valuations of around 20 per cent.

He cited examples of a property under offer at £700,000, compared to a lender instructed valuation of £550,000, and a property under offer at £265,000 but valued at £210,000.

While one option for borrowers is to try and change lenders and hope for a better valuation, Mr Sykes said given current processing times, this could add weeks to the process.

He added: “Ultimately, if you are told the property you are looking to purchase is worth 20 per cent less, will you want to proceed unless it is your absolute dream home and you are not looking to move for a very long time, if ever?”

Adam Wells, director at Lloyd Wells Mortgages, recounted an example of a property priced at around £500,000, in line with an automated valuation the sellers received in July.

But when a valuer went out to view the property in September, the potential buyers, who have since pulled out of the purchase, received a valuation of £475,000 without explanation.

Jiten Varsani, mortgage and protection adviser at London Money, said he had come across a down valuation from £605,000 to £540,000.

According to Mr Varsani, the surveyor suggested there were no comparable sales in the area, although the client had seen around 30 properties of similar value.

He said: “In this instance the client negotiated £10,000 off the original agreed price - not a bad result. However not all clients will be as lucky to still be able to proceed.”

A RICS spokesperson said: “Valuers have a duty to report independently and accurately the market value of any property when asked to complete a valuation report by a lender or bank.

“The market value is based on a range of transactional and economic indicators, such as sales of similar properties in the local area, and also the professional’s knowledge of the local market including supply and demand dynamics. For this reason, it is quite possible that the valuation for the lender – the market value - does not match the offer price. 

“When facing economic challenges such as Covid-19, or when transaction levels are perhaps not what they might be, surveyors have to be very certain they can evidence the value and always follow relevant valuation guidelines in the RICS Red Book.”

An October survey by Bankrate UK found 46 per cent of buyers had their prospective property down valued by their chosen mortgage lender.

According to the mortgage comparison service, 44 per cent of homes included in its research were down valued between £5,000 and £10,000.

It also found that only a third of buyers had asked the seller to reduce the property price to cover the cost of a down valuation.