The number of properties on sale has been rising for a couple of years. The property prices are rising; however, there is a difference between the number of properties coming into the market and available buyers. Homeowners are reluctant to sell their houses because the valuation doesn’t match what they believe they should cost.
Down valuation is where the buyer’s surveyor values your property at a lower price than what you agreed to sell it for. If you want to sell your house for £120,000 and the surveyor values it at £100,000, you get a £20,000 down-valuation. The surveyor also de-values the offer price, and what might seem like a disadvantage to the seller, the buyer benefits from the down valuation.
Why does down-valuation occur
The asking price and selling price determine the down valuation and the time taken to complete the deal determines how the property costs. The time the vendor takes to accept the offer, the sale completion and the property registration influence the property’s value.
Once the vendor accepts the offer, it will take time for the buyer to apply for the mortgage. The bank will instruct the surveyor to visit the property, which might take more time before they visit. The surveyor visits and files their report, and there might be delays before the bank reviews the report. It could take weeks for the vendor to find out their home is down-valued.
Factors affecting down-valuation
The rising cost of living has played a major role in down-valuation. The rise in food prices, gas prices and energy have caused inflation that hasn’t happened for a while. The conflict in Ukraine has caused a further surge in inflation, and more instability could cause further damage to the economy. The cost of living is soaring at a higher rate than wages, which will affect the interest rates for mortgages. Homeowners will experience a hard time paying their mortgages because of the added interest.
The uncertainty in the economy after Brexit and COVID-19 pandemic has caused people to be unsure of what to do next. After these two events, surveyors will err on the side of caution and value properties per the economic situation. With the economic uncertainty, mortgage lenders will be careful when calculating mortgage rates. You need to know that the rates will never be the same as they were in the 1990s. The increase in mortgage rates will continue rising and will impact how much buyers can afford to pay for a new home.
There is a conflict between surveyors and estate agents. The conflict is causing an increase in down-valuation because the surveyors want to proceed cautiously while estate agents want to overprice the property and get a bigger commission.
Effects of down valuation
The effects are different for both vendor and buyer. If you are selling the house, down-valuation could mean you lose the sale because the homeowner wouldn’t be interested in selling their house for a lower value.
For vendors, the down-valuation may cause them to be backed into a corner and take a financial hit.
For buyers, it’s a different struggle because they are willing to buy the property and re-negotiate with the vendor; the lender may not want to pay over the odds for the home. The buyer must find cash and add to the difference or negotiate for a higher loan from their lender.
How to avoid down-valuation
If you want your home to avoid down-valuation, you need to get an accurate valuation of your home before it goes on the market. Independent valuers could help you boost your property, and if it’s tricky to value your home, you should take advice from a qualified surveyor.
Always ensure your property is valued fairly under the current market, and don’t base your figure form an estimate from an estate agent. It is important to have your home in good condition to get the best value from the surveyor.
Use online valuation tools to get the value of your home before putting it on the market. The valuation tools will give you a figure to base your estimates on, and that’s a good platform to start with.
Getting the valuation you want for your home is difficult, but you can appeal the valuation if you have sufficient evidence. It is a long process, but you will be liable for additional inspection costs of the inspection.
Disclosure: This is a featured post.