Is your mortgage valuation less than the agreed purchase price?
A number of buyers purchasing a property with a mortgage see the mortgage valuation as a potential hiccup in their purchase. If a buyer is relying on a mortgage with a large loan to value they may not be able to proceed as planned if the lender’s Valuer provides a valuation lower than the agreed purchase price. Similarly, some buyers are concerned that the mortgage valuation may lead to a buyer pulling out (or making a lower offer) if they don’t get the mortgage offer they had expected.
If you had your heart set on a particular property and find you are unable to proceed (unless you use some of your own funds) then at minimum this is likely to be a disappointment. If you have to start and look for another suitable property this may cause a delay, which could possibly lead to problems with the chain and you may even lose your own buyer.
But is it really a bad thing if your mortgage valuation is less than the purchase price?
If you spend the time finding out why the property has been valued lower than the price you have agreed to pay, you may find there is a good reason. A Valuer will use details of similar properties which have recently sold or are under offer, in conjunction with their knowledge of the local area, to arrive at the valuation figure. It is possible that you have made an offer which is too high. Other factors which may affect value include:
- Condition of the property (remember that a valuation is not a survey).
- Works carried out without Local Authority approvals.
- Planning proposals which may affect the property.
- Detrimental use of land/property in the vicinity.
Once you establish the reason for the lender’s valuation being less than your agreed purchase price, you may wish to revise your offer, or even reconsider the purchase. So, unless you are happy to pay more than a house is worth, perhaps it is not such a bad thing if your mortgage valuation is less than you had been prepared to pay.