You’ve found your dream home, you are prepared to pay the full asking price and your offer has been accepted, and you are in the process of organising your mortgage but … the lender says that your potential new home isn’t worth the price tag and has been down valued.

Down-valuing is where a surveyor acting on behalf of a lender says a home is worth significantly less than the price agreed by the seller and the buyer and therefore they are unwilling to lend – in other words the lender won’t provide a loan to cover the seller’s full asking price. That’s because the valuation has revealed that the property isn’t worth what the seller is asking for and what the buyer has agreed to pay.

When carrying our a mortgage valuation the surveyor will take into account the following: –

• Condition of the property
• Sale price of similar properties in the area
• An understanding of the prevailing market

You may have found a buyer and agreed an asking price of say £500,000, it is then down to their lender’s surveyor to find evidence to validate the asking price.

The lender will want reassurance that the property is worth what the buyer wants to borrow for it. But if the surveyor then values the property at say, £450,000, then that is a hefty down valuation of 10%, which can leave the seller and buyer in a tricky situation.

There are a number of reasons why a down-valuation may happen

• The seller has set an overambitious price tag on their home
• The Estate Agent hasn’t priced realistically
• The Estate Agent has advised ‘offers over’ or ‘offers in excess of’ rather than ‘Guide price’
• The seller is over-optimistic about the amount of value their renovations have added to their property
• Lenders are being cautious about over inflated prices
• The surveyor has found problems with the property
• The surveyor has valued a property that’s outside their usual area (which may be geographical) which can mean that they may have been unfamiliar with the nuances of the local markets

Figures suggest that down-valuations are quite common, in fact Bankrate UK a mortgage comparison site found that in recent years, almost 46% of UK properties were down valued by lenders and homes valued between £400,000 and £500,000 have fallen victim to the most devaluations.

It is not unusual for properties to be down valued by lenders and whether you are a seller or a buyer, it is a situation that nobody wants to find themselves in but, there are ways around the problem.

If you are the seller

• Find a new buyer with a different lender willing to value your house at the price you think it is worth
• Be willing to lower the asking price
• Spend money to address the reasons for the down-value
• Wait to see if the property rises in value

If you are the buyer

• Buyers can get the property valued again by a different surveyor acting for a different lender
• Try to renegotiate the price with the seller – or simply lower your offer
• Get a loan for the shortfall
• Increase your deposit to cover the cost of the devaluation – though this may mean dipping into savings meant for other costs

Whilst down-valuations are far from ideal, there is a way out, so don’t lose hope if this happens to you.

If you are considering selling your home, choose an Estate Agent that has been undertaking market appraisals for over 30 years. David Phillip FRICS has 100% valuation accuracy according to @allagents – in times when the market is a little uncertain, you know that you are dealing with an Estate Agent who has local experience and knowledge, which is absolutely key.

01134 676 400 David Phillip Estate Agents 86, Leeds Road, Bramhope, Leeds LS16 9AN. W: davidphillip.co.uk

Covering Bramhope, Adel, Cookridge, Huby, Pool-in Wharfedale and Otley