Personally, I hate the phrase ‘down valued’ as there is no such thing! Just because you have agreed to purchase the property for a certain figure does not mean that is what the property is actually worth. Although not an exact science, all surveyors adhere to very strict guidelines to carry out a Market Valuation and have spent years training in order to let you know what a property is worth. A little known fact is Surveyors only have a 7% tolerance in either direction, otherwise, they are classed as negligent. This is applicable whether they’re undertaking a valuation on behalf of a lender or private individual, and valuers do not ‘down value’ when working on behalf of a bank as no-one wants a negligence claim!
If you find yourself in the situation where the valuer has valued at less than the agreed purchase price, you should carefully consider your position. Some individuals are happy (and able) to cover the shortfall but you should be aware you are paying more than the property is actually worth. Would you buy a car which is worth £10,000 for £13,000?
This has the potential to impact your loan to value rate (LTV), potentially altering the interest rate your lender has offered. Your lender may look to you to increase your deposit, especially if you’re looking at a high percentage of loan to value for the property. It’s always prudent to talk to your mortgage advisor as they would be able to let you know if your proposed lender is still the best option or if other lenders would be more suitable.
Additionally, most lenders will have a mechanism for you to raise a challenge against their valuation and they would typically ask you to provide ‘comparable’ information in order to do so. A comparable property should be similar in size, location and condition, i.e. you can’t compare a 5 bedroom house to a 2 bedroom flat! Importance is also placed upon the location and how recently the transaction concluded, so ideally within the last 6 months. The agent selling the property would be able to provide you with comparable information and you can also undertake your own research via sold prices on RightMove.
You can approach the vendor, usually through the selling agent, to try and renegotiate the purchase price, however this very much comes down to their personal situation. They might not be able to accept a lower figure due to their onward property. Even if they’re not willing to reduce to the Market Value, you may be able to reach a compromise, i.e. meeting in the middle. Hopefully, you’ve had a survey (not just a valuation!) carried out for you independently, which can also a powerful tool for you to negotiate the purchase price. At a worse case in the event they’re not willing to budge, you can ask them to carry out any repairs which have been identified to mitigate your costs.
In any scenario, we recommend having a chat with My Property PA on 020 3971 5758 or emailing us on email@example.com to talk through the options which are available to you and how you can confidently proceed.