When you’ve found the right buyer and they’re happy to pay the asking price, it may be tempting to think of it as a done deal, But what if the bank says your new home isn’t worth the price tag?
To help you out, we asked 504 UK homeowners* to share insight on their experience with down valuations and gathered some top tips on what to do if it happens to you:
What is a down valuation?
Down valuations can happen when the mortgage surveyor comes to check your property for any issues which impact the value of the property. If they find anything, your property can be valued for less than the price the buyer has agreed to pay.
Home valuations are carried out by estate agents and the asking price will be based on factors including the size, condition, and location of the property. Once the asking price has been set, buyers can decide how much they’re prepared to pay for the home, and sellers can decide the minimum figure they’re willing to accept.
But, if the buyer needs a mortgage to afford your home, their lender (the bank or building society) will need to carry out a mortgage valuation. This is largely for the lender’s benefit as it ensures that the property is worth the agreed sale price.
What happens if my home gets down valued?
If you’re selling a house and it has been down valued, you will most likely need to lower your asking price, especially if the alternative is losing your buyer.
From our study, we found that 24.8% of the homeowners polled would consider doing this if a property was down valued, with 59.7% revealing they have negotiated a lower price for a property in the past.
However, this will all depend on personal circumstances. For example, if buying your next home is dependent on your sale going through, then you have good reason to adjust your asking price in favour of keeping the sale from falling through.
However, if you are not prepared to lower your price and your buyer won’t or can’t proceed with the sale after your home is down valued, then you’ll need to find a new buyer. Our research shows that only around half (48%) of respondents would be willing to pay more than the property’s valuation amount.
While the same issues could apply to the next buyer, you could try and find a cash buyer who does not need a lender to value the property.
Alternatively, if the down valuation was due to resolvable issues with the property, you may choose to pay to have them fixed.
How to avoid a down valuation
Sometimes down valuations are completely outside of your control, but there are measures you can take to lower your chances of this happening.
Improve before you move
If you’re aware of any issues with your property, they will need to be disclosed from the offset, otherwise the buyer will discover them in their survey and reduce their offer - or worse, drop out of the sale if they feel deceived.
But if you really want to get the best out of your home, spend some time resolving issues and making overall improvements before your home is on the market.
Interestingly, 15.7% of UK homeowners revealed they have had a property down valued due to home improvement issues that were not fixed before a valuation, while a further 17.9% said they had tried to conceal issues without disclosing from the get-go.
Set an accurate and realistic sale price
Working with a local and experienced agent is integral when it comes to setting the right asking price.
It’s important to use an agent who is familiar with the area, as they will need to give evidence to the mortgage surveyor of the current local market activity. It’s also worth noting that it takes between 3-6 months for sold prices to be recorded with the land registry.
76.29% of those surveyed stated they would always use estate agents from the local areal area, as they understand this can help get a far valuation. That said, almost one in five (17.76%) said they would prefer to get an online valuation.
While an online valuation tool can be a great way to get a rough estimate of how much a property is worth, you’ll get a much more comprehensive valuation by having a local agent inspect the property. Online tools should be used as a starting point when you are thinking about selling but should never determine the final asking price.
Having your property accurately valued is the first step, then you can speak with your agent about setting a competitive yet realistic asking price. Alongside current local market activity, this also factors in the size and condition of your home, and any other special features that the property has to offer.
Related: What to ask your estate agent during a valuation
Watch out for sealed bids
Sealed bids can also lead to getting your home down valued. Sealed bids are when the buyer submits their offer in a ‘sealed envelope’ by a set time and date.
In some cases, the buyer might offer too much in order to get the winning bid, which could cause your house price to inflate to a figure which does not reflect the value of similar properties in the same area.
This will likely result in a down valuation later down the line, so be cautious about offers far above the asking price.
Consider your offers carefully
If you’re selling your home, it can be hard to resist accepting the highest offer that comes in.
However, to help ensure a smooth sale, patience can sometimes be key. If you have more than one offer, ask your agent to explain the deposit to mortgage ratio to you, and give their advice and on who they think feels like the most secure buyer. Work together to analyse the data and accept an offer based on the buyer’s position, not just the monetary value.
Get in touch with one of our branches for more information today.
Methodology and Sources
* Martin & Co conducted a survey in December 2023 of 504 UK homeowners to share insight on their experience with down valuations.
