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Undervalued property mortgages

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 6, 2023

Property undervalued by your bank or lender?

Many have enquired about mortgage valuation survey results that undervalued the house they are looking to buy on the property market.

For several reasons, it can be pretty standard for the buyer’s mortgage surveyor to value the property price lower than the asking price.

To discuss house prices and down valuations and find a mortgage lender, click the link below.

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What happens to my mortgage if a surveyor undervalues the property?

The most crucial stage in the application process is the mortgage valuation. A mortgage company undervaluing the house you are buying can potentially cause the entire sale to be stalled.

Keep in mind that the mortgage lender is not only looking out for its safety but also to protect the buyer by giving them an accurate valuation of their house and not just agreeing to an estate agent asking price.

What is the reason a mortgage lender would undervalue the property I want?

It is easy to believe that something is worth more than someone is willing to pay. Mortgage lenders are not able to share that view. They must prioritise protecting their debt and be aware of how difficult it might be to recover that debt if the house is overvalued.

Two factors will determine the value of a mortgage lender:

  • Recent sales of similar properties have been completed in the immediate vicinity
  • The current condition of the house that you are looking to purchase

“Recently completed” is defined as a house built in the past six months in a similar area. A mortgage valuation can be affected by subsidence and dampness.

A surveyor might need to revise the price if it is higher than the cost of comparable houses recently sold or if the condition is not as expected.

What mortgage options are available if the property’s value is low?

The following options are available to you if a lender has undervalued the house you wish to purchase:

  • Renegotiating with the seller
  • Appeal against the value
  • Choose a different lender
  • Contact a whole-of-market broker by clicking the link below.
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Re-negotiate with seller

Many buyers can be encouraged to approach sellers with a valuation from a bank, building society or other institution. This will allow them to attempt to negotiate a lower price.

These negotiations may be possible if a seller is already part of a chain and wants to move into their new home or if the house has been on the market for some time. A seller does not have to lower their asking price. They may opt to walk away if the original amount is not paid.

Appeal against the valuation

Appeal appeals are not always successful. However, lenders may consider it if the buyer can show clear evidence of comparable sales prices for properties in the same area within the past six months.

A more detailed valuation may be requested if the buyer is willing to pay for it and believes it will make a significant difference.

Use a different lender.

A buyer may apply again in the hopes that the mortgage lender can view the property differently. If multiple mortgage credit checks were completed within a short time, it could affect other stages of an application.

If you use a whole-of-market broker, such as the ones we work with to help you, formal inquiries can be kept to a minimum. This will give you the best chance of finding a lender that matches your expectations.

A panel of surveyors is what lenders will use for their work. A different mortgage provider may use another forum, but the result could be different if the new surveyor has more experience in the area.

Can a mortgage company still lend me that amount if the property is undervalued?

A mortgage lender that has undervalued a property will use the new value to make a mortgage offer to a buyer. The original loan amount may be modified.

The property’s value determines the amount a buyer can borrow. Reduced valuations can affect the whole package, including the amount you can borrow and the deposit needed. This makes it more difficult to agree on terms.

Take, for example:

The property is sold at £250,000. The buyer requires a deposit of £50,000 (20%). The remaining £200,000 can be borrowed from a mortgage lender.

According to the mortgage valuation, the property is undervalued from £20,000 to £230,000. This leaves a gap of £16,000. If the lender advances only 80% of the new value, this is a loss of £20,000 to £230,000

The seller must accept the revised valuation and lower their asking price before the sale can proceed with the reduced amount.

The buyer can apply for an additional amount if the seller refuses to re-negotiate their price. If the buyer’s application is strong enough and fits within their lending criteria, the lender might agree to the additional amount. However, the possibility exists that the interest rate could be higher to offset the higher loan to value (LTV) risk.

If my house is not valued correctly, what can I do to get remortgage approval?

Remortgages are similar to the options above, except that there is no seller to negotiate. You would need to talk with the lender about this situation.

If your lender has evidence that your recent sales match your valuation, you can appeal the remortgage value. You could also consider remortgaging to a different lender, whose surveyors might view your property’s value differently.

The undervaluation of a property, whether for a mortgage or remortgage, can cause stress. A mortgage broker with the market knowledge and an in-depth understanding of the mortgage valuation process may be something you should consider.

We can help you find a mortgage broker who will introduce you to a lender who works with down valuations daily. Click the link below if your buyer’s mortgage surveyor values the house below market value.

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Why you should talk to a mortgage broker

We have access to the most knowledgeable brokers in the industry. We offer a free of charge, no-obligation service and can help with any residential mortgage.

  • Access to all markets specialist lenders.
  • Establish good relationships with lenders who we use daily.
  • The financial conduct authority regulates all.
  • Can provide bespoke, tailored advice on down valuations.


What is a “Down-Valuation”?

The down-valuation is when your buyer’s mortgage specialist values your home at less than what you accepted with the estate agent.

If you accept an offer for £200,000, but the surveyor’s value is £180,000, you will receive a £20,000 down-valuation.

What are the Common Down-Valuations?

It is difficult to do an accurate valuation in today’s climate. Valuers don’t know what a property will sell for in a few months because of COVID uncertainties. Due to buyer demand, often, it is more about how much someone will pay for a property than what it is worth. Estate agents might be more comfortable giving a low valuation as they are less likely to take risks. A lender can sue a surveyor for overvaluing a property. They must be able to show evidence of their valuation. Surveyors will be more inclined to underestimate a property in uncertain times to lower the likelihood of being sued by a lender if they feel the property has been overvalued.

How do I find out about a down-value?

Down-valuations are only possible when a house sale is in its final stages. This can make them very problematic and lead to lost sales, delays and loss of money.

A buyer will have a mortgage in principle before they make an offer. However, they won’t apply for a mortgage until the sale price has been agreed upon. Although the mortgage in principle shows how much the buyer can borrow, it does not constitute a mortgage agreement. After an offer has been accepted, the buyer must begin the mortgage application process. This can take from 18 to 40 days. Only a surveyor can determine the property’s value and will inform the buyer of a down-valuation.

It is possible to be nearly two months into your house sales when discrepancies in property valuations are discovered. This is why down-valuation can prove difficult for both the seller and the buyer.

Problem for Sellers

A down-valuation can lead to a failed sale.

The mortgage provider of the buyer may value your property at a lower amount than the accepted offer. This will impact the amount they are willing to loan.

The mortgage amount available to buyers is either a small percentage of the buyer’s valuation or the price of purchase, whichever of those values is lower.

The loan-to-value ratio (LTV) increases when a property’s market value is lower than its agreed sale price. LTVs above 75% are considered high-risk by most lenders. This makes it more difficult for lenders to approve mortgages.

Your buyer may have to withdraw if they cannot secure the mortgage necessary to buy your property.

The Problem for Buyers

You may not be able to purchase a property if you agree to pay more than the valuer estimates it is worth.

It won’t be a problem if you are a cash buyer. However, if you require a mortgage to purchase your dream home, it will be challenging to get the loan you need.

While you may be willing to take on more risk by paying more for a property than a surveyor estimates, most mortgage lenders won’t. If the down-valuation is received, the maximum loan-to-value amount of the lender will be exceeded, and the loan won’t be approved.

What can you do if your property is down-valued?

A property that has been down-valued will require the buyer to either find a new lender or to pay the difference between the selling price and the down value. The buyer cannot sell the property if neither of these options is available or if the new mortgage lender values the property lower than the agreed price. Some lenders allow borrowers to appeal against their valuation.

You can do a few things as the seller of a property that has been reduced in value.

  1. Find another Buyer If your buyer needs a mortgage, they can wait for another buyer and hope their lender doesn’t down-value the property again. You may not want to delay the sale as you have already completed a significant portion of the selling process with the original buyer.
  2. Wait for Buyer to Find a Solution If the buyer expresses the desire to solve the problem, you might decide that it is easier and will cause less delay to wait until they find a solution.
  3. Renegotiating the Sale Price — A buyer might try to negotiate the sale price to make up the difference between the lender’s valuation and their offer. To avoid losing your dream property, you might consider selling some of your property’s proceeds if you are part of a group.Click the link below to begin your mortgage journey today:
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