What can I do if my house is down valued?

Down valuation is when a property is valued by a mortgage valuer at a lower figure than the agreed purchase price. It does not mean that the valuation is too low.


When a house is down valued, this can cause frustration to a buyer and problems in a chain.  This article will explain what down valuation is, the reasons why a property may be down valued and suggests paths a buyer may consider if the house they plan to buy has been down valued.


What is down valuation?

Down valuation is when a property is valued by a mortgage valuer at a lower figure than the agreed purchase price.  If a house is down valued it does not mean that the valuation is too low.


Reasons why a house is down valued

A property isn’t strictly “down valued”, it is more accurate to say that it has been “valued” by the mortgage valuer, but the valuation figure just happens to be lower than the agreed purchase price.

The valuer will arrive at the valuation figure “Market Value” after considering the actual sale prices of several similar properties in the area.  Sometimes there may be recent sales of a number of similar properties, for instance for a house on a large housing estate.  Other properties may be more difficult to value, particularly if there is nothing similar in the area.  However, the valuer will still look at the actual sale prices of other properties in the area and make adjustments for size, condition, saleability and desirability of a property, the date previous sales took place and any other relevant factors.  The mortgage valuation would generally be prepared by a valuer with experience of valuing properties in the area. The valuer’s decision will not be made lightly as there may be consequences if a house is valued negligently.


Problems which can occur when a house is down valued

One of the most common problems a buyer might experience during the house buying process is down valuation.  Often a buyer is unable to proceed without the required funding from the mortgage lender.  Also, a lower valuation by the mortgage valuer may alert the buyer to the possibility that they may have agreed a purchase price that is too high.  Either of these factors may result in a buyer not proceeding with the purchase, which may in turn lead to a chain falling through.


Steps to take if a house is down valued

If a buyer is unable to proceed without the anticipated funding from the mortgage valuer, a buyer could pull out from the sale and look for another property, or they could try to negotiate a lower purchase price.  However, the seller is under no obligation to agree to a reduced selling price, and it is possible that the seller may not be in a position to reduce the price particularly if they have a high mortgage or need the funds to purchase another property.  If a buyer tries to negotiate a lower price and if there are other potential purchasers who are in a position to proceed, eg, a purchaser who does not require a mortgage, or a smaller mortgage, the seller may decide to sell the property to one of the other buyers.  This is a risk the buyer must consider.

If a buyer discovers the agreed purchase price is too high, they may choose to withdraw from the sale.  Many buyers consider this to be a nuisance but in many cases the abortive cost of the valuation will outweigh the benefit of paying too much for a property.

In a situation where a buyer wishes to purchase a property for a particular reason, for instance the property is close to family, a preferred school, or the property may be in an area where houses rarely come onto the market, then the buyer can still purchase the property, they simply need to find the shortfall in funding, eg, from savings or money put to one side for improvements.  The buyer may decide to still buy the house even if it means making sacrifices such as making do with the old kitchen or bathroom fittings instead of replacing them straight away.

While down valuation is viewed as a problem by many people during the house buying and selling process, it is sometimes an issue which can be resolved.

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