Do surveyors undervalue property

What Happens if a Property is Undervalued?

A mortgage valuation is one of the most important stages during the application process. If you are trying to buy a property that is subsequently undervalued by the mortgage company, it could end up derailing the entire sale. It is worth considering that the mortgage lender is not only looking to safeguard themselves throughout the process but is also looking to protect the buyer by ensuring that they are provided with an accurate valuation of the property they want to purchase.

It is often quite easy to believe that something is worth what you are willing to pay for it, but mortgage providers do not share that view. When conducting valuations, they need to prioritise protecting themselves and consider how difficult it will be to reclaim a debt if a house is overvalued. The valuation that is carried out by your mortgage lender will be based on two factors, which are the current condition of the property that you are looking to buy and the recently completed sales of similar properties in the local area.

Do Surveyors Undervalue Property?

In some cases, the surveyor that the mortgage lender uses to value the home might undervalue the property for many reasons. This could be due to inaccurate information, not inspecting the property thoroughly enough, or other mistakes. If your lender’s mortgage application has undervalued a house that you want to buy, there are several options that you can consider.

What You Can Do if a Surveyor Undervalued a Property You Want to Buy:

1.     Renegotiating With the Seller:

An official valuation from your mortgage lender can give you the leverage that you need to approach the seller and attempt to get them to lower the asking price. In many cases, a seller will be willing to negotiate with you since they know that the next valuation survey for a new buyer is likely to bring up the same results. If the seller is already in a chain and wants to be able to move into their new home quickly, or the house has been on the market for a long time and they are hoping for a quick sale, they are likely to also be open to negotiations. However, bear in mind that sellers are not obliged to reduce their asking price regardless of how your lender has valued the property.

2.     Appealing:

You can appeal against the valuation. However, it is worth bearing in mind that appeals are rarely successful. Some lenders will consider this option if the buyer is able to provide them with clear evidence of the property’s value, which is often in the form of comparable sale prices for similar properties within the local area in the past six months. If you are prepared to pay for it as a buyer and are convinced that it will make a difference, you could also invest in a more comprehensive valuation.

3.     Changing Lender:

You may want to consider the option of applying for a mortgage with a different lender in the hope that they will use surveyors that will view the property differently. However, bear in mind that this could have an impact on other stages of your mortgage application, especially if several mortgage credit checks are completed in a short amount of time as a result. If you want to take this route, it is worth considering going with a whole-of-market broker who can help you keep formal enquiries to a minimum and be in with the best chance of finding a lender who will value the property in line with what you were expecting. Lenders typically use a panel of surveyors to carry out valuation work, so using a different mortgage lender who uses a different panel of surveyors might get you different results if the surveyor has more experience in that locality.

Will the Mortgage Lender Still Lend to Me if the Surveyor Undervalued Our Property?

If a mortgage lender has undervalued a property, the new valuation carried out by the surveyor will then become the basis of the mortgage offer that they will make to the buyer. As a result, it is likely that the mortgage amount that you have applied for will be changed.

A mortgage lender will determine the amount that a home buyer can borrow based on a percentage of the value of the property that they want to purchase. An undervaluation can change both the mortgage amount that you are offered and the deposit that is required, which can make agreeing terms more difficult if the seller will not re-negotiate the price.

What About Surveyors Undervaluing Properties to Be Re-mortgaged?

If you are looking to re-mortgage your property for any reason, the mortgage lender will again require a surveyor to value the property to ensure that it is worth the amount that you are looking to borrow. The options for a re-mortgage are very similar to the ones that are in place for purchasing a new home, except for the fact that there is no seller for you to negotiate the price with. If you are looking to re-mortgage and your home has been undervalued, you will need to negotiate with the lender. Alternatively, you might want to consider re-mortgaging your property with a different mortgage lender that uses surveyors who might place a different value on your property or are more experienced with the local area.

Undervaluation of a property can be a stressful situation when you are looking to re-mortgage, so it is a wise idea to use a mortgage broker who has experience of the local market and a solid understanding of the re-mortgage valuation process.

Why are Down Valuations on the Rise?

An undervaluation or down valuation of a property is not a new phenomenon, and they will typically occur when a house price is out of sync with the current market trends. They are often more common in markets where the house prices are falling or transaction values are low, but the property price has not been adjusted to match this by the seller.

In the current market, down valuations had been on the rise for some time with property sale levels cooling off and home values in many cities in the UK falling slightly prior to the pandemic. However, the COVID19 pandemic has led to a boom of people looking to purchases more suitable properties for family living and working from home. Coupled with the recent stamp duty holiday, which has encouraged more people to invest in property, this has reduced the number of down valuations.

Selling Your Property – How to Avoid an Undervaluation:

If you want to sell your property and a buyer makes an offer, their mortgage lender then coming in and undervaluing the property can cause a lot of hassle and stress. As a seller, you will want to get as much as possible for your home but hearing that it is not worth as much as you thought and that you will have to take a price cut when selling can cause issues with moving into your new property or getting your property sold quickly.

Simply put, if you are a seller, it is important to be realistic about how much your home is worth when you are putting it on the market. Along with the valuation provided by the estate agent, you may also want to consider hiring an independent surveyor who can visit your home and provide another valuation to ensure that the price you are asking for is actually in line with how much your property is worth, to avoid undervaluation problems in the future when you find a buyer. Aside from getting an expert opinion on your property, there are several things that you can do to avoid future down valuations. These include:

1.     Research:

Before selling your property, it is a good idea to spend some time researching the properties in your local area and looking at how much they have sold for over the past three to six months. Find properties that are similar to yours to get an idea of how much your home could realistically be worth.

2.     Check With Your Lender:

If you currently have a mortgage for your home and are looking to sell, you could check with your existing lender to find out what value they currently have on file for your home, which should be up-to-date and will give you a better estimate of how much you should put your property on the market for.

If you are buying a home, you can also keep some tips in mind for avoiding undervaluation. These include finding the right mortgage provider, especially if you are looking into buying an unusual or risky property, and making a realistic offer. Don’t be afraid to offer under the asking price if you have seen similar properties in the area sell for less recently.

Having a property undervalued can be stressful for both the buyer and the seller, but it is sometimes necessary. Whether you are buying or selling, consulting with the right experts and researching property sale prices in the local area can help you best determine the value of a home.