By Jo Eccles
We’ve seen mortgage down valuations returning to the market in recent weeks, which is when a property purchase is agreed at a certain price but, when the mortgage lender’s valuation surveyor visits the property, they decide that it is worth less than what the buyer has agreed to pay.
For example, the buyer may have applied for a 50% loan on a £300,000 property which would mean that the bank is to lend them £150,000. However, if the bank deems that the property is only worth £250,000, they will still lend 50% – but it will be 50% of the £250,000 purchase price which is a loan size of £125,000, meaning the buyer is now £25,000 short.
We have had a scenario where one of our clients’ properties was down valued, but we provided lots of evidence to the bank which supported the price being paid, and the bank revised their valuation. This doesn’t tend to be an option for an independent buyer as it’s unlikely they will have enough pricing information to provide to a mortgage company. So, they will need to either bridge the gap with their own money (if they have the excess cash) or go to the seller and explain the situation. If you’re going for the latter option, your performance as a buyer to date will play heavily on the outcome.
Your seller may agree to reduce the price by the amount of the down valuation, or meet somewhere in the middle. However, If you’ve been a flaky and difficult buyer, it’s likely that your seller may take a much harder line and refuse a price reduction, opting to put the property back on the market instead. If your seller is taking this approach, you could highlight to the estate agent that other buyers may also be down valued, so it’s probably in their interest to stick with you, rather than start an entire new buying process which will be time consuming and add extra expense to the seller.
Remember that most buying processes hit a few bumps along the way, so we always advise purchasers to be conscious of their behaviour and performance from the outset (even when just viewing the property initially) as relations play a big part in a property transaction’s success – or failure.
If you have a question you’d like Jo to answer please email firstname.lastname@example.org or tweet her @joeccles.