Sometimes surveyors will inspect or investigate a particular property that’s up for sale and decide that a price agreed with a prospective buyer is higher than it should be.
There are several reasons why a so-called ‘down valuation’ might happen but fundamentally it will be because the surveyor believes a property is worth less than a buyer has been quoted.
Reasons for down valuations can include:
- A property being in a less good condition than was previously assumed – this might happen if a surveyor finds problems with damp in a property’s roof, for example, or Japanese knotweed in the garden.
- A surveyor deciding that a property needs extensive repair work that would cost significant amounts of money to complete to an acceptable standard.
- Tangible shifts in property values within a specific area might also mean surveyors decide to down value a given property.
Implications for buyers and sellers
If a surveyor determines that, in their view, a previously agreed property deal is overvalued then that can create certain challenges both for sellers and for buyers.
For sellers – the worry will be that a deal might be more difficult or impossible to conclude in the short term. A seller might need to accept a lower fee to move a deal forward, or their deal might fall though, if their buyer is unable to come good on their earlier offer because the revised valuation impacts their financing arrangements.
For buyers – the concern will be that their mortgage deal will not give them enough money to complete the purchase of the property they’d agreed to acquire. As such, they might be unable to fund their acquisition, or they might need to find some other way to meet the price that’s being asked of them.
What can be done in the event of a down valuation…
1 – Renegotiate the property price
From a buyer’s perspective, an ideal outcome in the event of a down valuation would be for the seller to accept the surveyor’s perspective and to agree to a deal based on a correspondingly lower price.
It might not be possible to get your seller to lower their asking price but it is nevertheless worth seeking to renegotiate a deal that takes account of the new valuation that you’ve been given as a buyer.
Even if a price reduction that the seller agrees to does not match the surveyor’s downgraded valuation, any lowering of the price could make your renegotiation efforts worthwhile.
From a seller’s perspective, there will be a potentially tough decision to make around whether to accept a lower offer or not, or where to draw the line and to start looking for other potential buyers.
2 – Challenge the valuation with supporting evidence
For obvious reasons, people with properties on the market will generally be reluctant to reduce the price at which they’ve agreed to a sale.
Therefore, in the event of a down valuation, providing supporting evidence and making a strong case to relevant parties that a property you hope to buy is genuinely worth less than you initially thought, could help keep your deal on track.
In essence, the aim should be to convince the seller than any other surveyor would conclude similarly that the initial price you previously agreed on was inflated and that your revised offer still represents a good deal for all parties involved.
Example 1 – The kind of evidence that might be taken as persuasive in these situations would be, for example, demonstrating that a problem with mould in a loft conversion can be fixed for closer to £500 than £5,000.
Example 2 – You might be able to show that while property sale values in a local area have been falling in recent quarters, sale prices associated with precisely comparable properties in that area have continued to increase.
3 – Consider increasing your deposit to cover the shortfall
If your mortgage provider takes the surveyor’s price estimate as being broadly accurate, and your seller will not budge on the price, but you still want to go through with the deal – then you will need to make up the shortfall between your mortgage and the quoted price.
You can do that by increasing your deposit amount, either by using your own savings or by borrowing (or otherwise receiving) money from elsewhere. This would involve a degree of risk in the sense that you might be paying more for a property than it is currently worth on the open market.
Over time, if you live in a property for an extended period that risk might seem unimportant, particularly if the value of the property goes up. However, it might, in hindsight at some point, come to look like a mistake financially, if the property is subsequently worth significantly less than you paid for it.
4 – Get solid advice from reliable experts
As is generally the case with any property transaction scenario, it is wise to retain a balanced perspective when potentially important issues like down valuations arise. It is also a good idea to seek guidance from experts on these kinds of issues as early in the process as possible, to give yourself the best chance of reaching your desired outcome.
Property deals happen every day across the UK, but the details of each transaction can vary greatly and unpredictable problems can all too easily arise. Getting the right guidance at pivotal moments during your property transaction journey can be crucial to protecting your investments and your interests.
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