Research by property purchasing specialist, HBB Solutions, has estimated that almost half of pandemic property purchases across the UK may have been subject to a down valuation, meaning just shy of 867,000 sales would have hit a snag during their surveys.
What is a down valuation?
Down valuations occur when a surveyor acting on behalf of a mortgage lender considers a property to be worth less than the price already agreed by the buyer and seller. This means that they will not lend the full amount required by the buyer and, as a result, the seller will often need to lower their asking price to proceed with the transaction.
Down valuations generally occur when the seller enters the market with an over optimist asking price to begin with, if they are tempted by an agent claiming their home is worth more in order to win their business, if something comes to light during the survey that reduces the value of the property, or if the lender urges the surveyor to tread with caution because they themselves are worried about over-inflated market conditions.
Using the latest data available on the frequency of down valuations within the property market, HBB Solutions looked at just how many property sales will have been impacted based on the number of transactions to have completed since January of 2020.
Pandemic property down valuations
Welsh home sellers are most likely to see their property down valued with industry figures showing that 63% of all property transactions will hit this pricing snag during their survey stage.
However, in terms of the most pandemic property down valuations, the South East sits top of the table with HBB estimating that 129,394 of the 294,077 homes to have sold since the start of 2020 will have seen a down valuation.
The North West is thought to have seen the second largest volume of down valued property transactions at 118,694, with London the only other region to breach the 100,000 threshold (107,168).
Northern Ireland is estimated to have seen the lowest number of pandemic property down valuations, however, HBB Solutions still estimates almost 27,000 transactions will have been subject to a price reduction by surveyors.
What can you do about a down valuation?
As a seller, a down valuation doesn’t always mean your home isn’t worth what you think. Another buyer using a different lender may agree with the price you’ve set, although this requires repeating the process of finding said buyer to begin with.
You can choose not to budge and leave the ball in the buyer’s court for them to find a solution, or you can rectify any issues that have been highlighted as the reason for the down valuation.
Alternatively, you can renegotiate on price which is often the quickest path to a resolution, or you can play the long game and wait for house prices to rise so that the down valued price increases in line with your current expectation.
As a buyer, if the seller won’t budge you could try a different lender and ask them to carry out the survey. If this fails and the seller refuses to negotiate, you could take out a loan to cover the shortfall, or increase your deposit in order to negate the cost of the down valuation.
Managing Director of HBB Solutions, Chris Hodgkinson, commented:
“Down valuations can be an extremely frustrating part of buying or selling a property, especially when both buyer and seller have agreed on a price they are both happy with, only for the sale to be scuppered by a third party opinion.
Of course, in many cases these reductions are justified but in a market running as hot as we’ve seen during the pandemic, it’s not unheard of for lenders to influence this decision due to their own fears around escalating market values.
Unfortunately there’s not a great deal that can be done to immediately remedy the issue other than the buyer coughing up or the seller reducing the asking price. So it’s hardly surprising that many sales, and the wider chains they sit within, can be jeopardised due to a down valuation.”