Some of the mortgage advisers at the forefront of UK lending are reporting a spate of home valuations under the agreed price. When a valuation for the lender does not match the price agreed between the seller and buyer, this is known as a “down-valuation”. This is problematic as it leaves buyers having to find cash to fill the deficit, thereby increasing the risk of sales falling through. Not only are buyers needing to find extra cash but they are also more likely to try and renegotiate a lower price thus devaluing the property.
House-hunters are in general quite particular and savvy when it comes to finding a home that they want to purchase, and sellers will know if their asking price is realistic or not by the offers that they receive on their home. When it comes to accepting an offer, this is an agreement that considering the particulars of the property and demand for the property at that time, both the buyer and seller have reached a consensus on the value that will satisfy the transaction.
It is important to understand that having a survey carried out on the property is not comparable to the valuation that is carried out by a mortgage company. A homebuyer's report will involve a visit to the property and detailed inspection inside, and outside, even looking at loft spaces and the roof. Conversely, there are many anecdotal reports that suggest it's very often not the case that anyone steps foot inside the property for a mortgage valuation. The accuracy of such a valuation surely must be questioned, when what's inside the property itself remains largely unknown. Surveyors down-valuations are in fact forcing the market lower and, due to their role in the transaction, create a self-fulfilling prophecy.
Banks now have very vigorous stress testing to ensure that buyers have the means to afford repayments on their property if market conditions do change, and banks have the resources to lend so that's also not an issue. Where people can afford and have their ideal home within their grasp, it's not right for surveyors to attempt to predict the future with limited valuations! Ironically, if the surveyors wish to depress the market then transaction numbers are likely to fall and this could then lead to a 2009-2010 outcome when a significant number of surveyors found themselves out of work.
Take gun, point at foot and shoot!