Sellers: are you up-to-speed with down valuing?
Down valuing is something hardly ever spoken about in estate agency but here at Move Places, we think every seller should be aware of the practice.
Did you know properties are valued twice?
A property’s first valuation is provided by an estate agent. They will use a valuation visit, current demand, historical sold prices, similar ‘on market’ property values and data from the Land Registry to suggest a figure they think the property could sell for.
A second valuation comes later on, as banks and building societies want to know the property they are lending against is worth what the purchaser has agreed to pay for it. To ensure there is no disparity between the price agreed and the property’s real value, the lender will send out a surveyor to the property between a memorandum of sale being issued and exchange. The surveyor will look at recent transactions of similar property types - and at the local market and the wider economy - before filing a report back to the lender with their recommended property value. This figure will determine whether the lender is happy to proceed with the home loan.
What is down valuing?
Down valuing is when the surveyor acting on behalf of the mortgage lender doesn’t think the property is worth what the purchaser has agreed to pay. If they lend more than a property is worth, a bank or building society may suffer a financial loss if the house is repossessed to resold.
Why does down valuing happen?
It’s only natural to want to sell your property for the highest amount possible. Another person also wanting you to sell for as much as possible is a High Street agency, as most agents work on a commission basis – usually a percentage on the final selling price. The higher the sold price, the more they earn, which can be an incentive to over value a property.
Down valuing also happens in a ‘hot’ property market when competition is high and multiple offers keep pushing the asking price up. Analysis of Bankrate’s devaluation reports in the 12 months to August 2021 estimated that around 400,000 properties had been down valued in that period, with an average overinflation of £7,500.
What happens if my property is down valued?
Your buyer’s reaction to the down valuation will influence your next step. They may reduce their offer to the same figure as the surveyors and ask you to accept this, or they may withdraw from the sale – especially if they can’t borrow the full figure and or personally finance the gap between the mortgage amount and the asking price.
The seller can also relist their property for sale, hoping another buyer using a different mortgage lender will make an offer and achieve a more positive outcome, or they can sit tight and hope their home rises in value enough to catch up with the surveyor’s figure – although a buyer may not be prepared to wait that long.
How can you avoid your valuation being downgraded?
Move Places has worked with a number of sellers whose sale has collapsed because of a down valuation. We take the valuation back to the drawing board, using our live data, industry knowledge and expert valuation skills to reprice a property that will please even the most cynical of surveyors.
Pricing to sell and pricing to make money are two different things. Move Places place emphasis on honesty and transparency, reducing the risk of down valuing scuppering the sale. Start the valuation process with us online – simply fill out this form and we’ll get back to you with a valuation.
Another sure-fire way of avoiding a down valuation is by selling to a professional property buyer, such as our sister company, Open Property Group. It has immediate access to cash funds and therefore doesn’t need a lender’s surveyor or a mortgage to buy a property.
If you’re selling a property and would like it to be sent to our database of thousands of national investors and property companies – people who don’t register with High Street estate agents – contact us now.