Bank down valuations

I was taken aback to receive a significant down valuation of £50k on a property that was originally valued at £350k and had been listed for sale at that price. My team was able to provide substantial evidence demonstrating that a comparable property with a smaller footprint had recently sold for £340k in December 2022. I requested that this information be taken into account and that the down valuation be reconsidered. Unfortunately, my request was declined by the lender's surveyor. I believe that this overly cautious approach does not reflect a reasonable and prudent evaluation of the property, and I hope that this is not going to become the norm.

I'm thankfully not seeing many reduced valuations currently, so I don't think it is widespread. In regards to lenders "revisiting" valuations, it is worth remembering that the lender is not setting the value, this is outsourced to a RICS (Royal Institute of Chartered Surveyors) professional, so it is a surveyor who is setting the value. Sometimes they will see an issue and ask for additional specialist reports, such as a damp and timber report, which they will review once completed. If the findings in that report are significant then a valuer may amend the figure they originally gave, apply a retention (i.e. £2000 should be held back until confirmation that the essential works highlighted in the damp and timber report are complete), or on rare occasions even advise the lender to not offer any mortgage at all.

The question of down valuations has plagued the industry for years. One of the biggest issues is that surveyors are looking only at historical data so they are slow to react to house price increases and can also be slow to react when house prices start to fall. In recent weeks, there has been a definite increase in the number of down valuations we have seen. The frustration comes in where there is no standardised process. I have had applications where one valuer has valued the property at 10% less than the purchase price only for another valuer to go out and value the property at the purchase price requested. Often there is no right to appeal either and even on the cases where I have appealed a valuation, I have never had a surveyor change their mind.

We've had a couple of down valuations recently affect clients. Surveyors are starting to see house prices fall in the areas they cover and are becoming more cautious in their valuations to lenders. I expect the next six months will see the steepest house price falls. More properties will come onto the market soon, increasing supply in a low-demand environment. In turn, down valuations will become more frequent.

We haven't seen many down valuations recently, and we're based in London where prices are relatively high. That said, we've had one particular property in the last year which had been rejected by the valuer completely, deeming the property 'unsuitable for lending, due to no owner-occupier demand in the area', which was an odd one considering it was located close to a school, shops and train stations. It's not the lenders that are valuing properties, it's the surveyors they instruct. You'll still also get different opinions from different surveyors. One might think a property is worth the money and another might think it's worth less.

The cross-over between lender criteria and independent valuation as instructed by the banks to ascertain security values has always been a bone of contention. Surveying companies working 'to price paid' or 'price obtained/requested' to appear to avoid open market valuations, is very frustrating when mortgaging or remortgaging a property. As a specialist in this area, the qualified valuer should give an open and honest reflection of value, taking into consideration all the variables, property construction, location and demand for resale. Residential borrowers can end up stretching themselves at this early stage due to the increased deposit level required after a low valuation is received on their dream home. These scenarios appear to have increased in the past six months, without sufficient price drops in the market.

Is it a down valuation or a projection of value at completion? If they are reading it right, maybe they just know more than others?