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"Down-valuations are becoming the norm" as seller hit with 40% haircut

Journalist: Riz Malik

ended 04. September 2023

Mortgage and property experts have said they are seeing more and more properties being down-valued, in many cases significantly, and that successfully appealing the decision is extremely difficult in the current climate.

“I just reviewed a report for a 2-year-old new build that valued the property at over 40% below the client's expectation”, says Riz Malik, director of independent mortgage broker, R3 Mortgages. “From the report, it was clear that a shortage of comparable sales played a major role in this down-valuation.” Malik and his client are currently waiting, having appealed the decision.

Graham Cox, founder of the Bristol-based broker, the Self Employed Mortgage Hub, has also experienced down-valuations first hand recently, albeit not at such extremes: “Down-valuations are increasing, as lender caution takes hold. We recently had a client buying at £285,000, only for the lender's surveyor to value the property at £250,000.”

Darryl Dhoffer, founder of Bedford-based The Mortgage Expert, said that “down-valuations are becoming the norm” and warned that the chances of successfully appealing a down-valuation are slim at best: “As far as Surveyor Appeals go, you're more likely to catch a brick in a cobweb than win. They should call them No Chance Appeals.”

While agreeing that “down-valuations from surveyors are definitely on the rise”, Imran Hussain, director at Nottingham-based Harmony Financial Services, said that down-valuations do serve a purpose of protecting buyers: “We have to be realistic as the market is now in a radically different place compared to 12-18 months ago. When a property has no clear comparable evidence, expect surveyors to be bearish to prevent unforeseen harm should property prices slide even further. Surveyors being more cautious as the market slows is never a bad thing as I am sure no one wishes to borrow more than what the property is worth.”

In contrast to others, Justin Moy of Chelmsford-based broker, EHF Mortgages, said: “We haven't seen too many down-valuations this year although a high percentage of our business has been product transfers. Via the product transfer route, valuation figures have been more generous, given they index against local data that is about 9 months old, and not specific to any property but to a postcode area. We have helped many secure better rates through product transfers rather than remortgages for this very reason, especially those with higher loan-to-value mortgages or landlords.”  

Lewis Shaw, founder of Mansfield-based Shaw Financial Services, said the issue is often sellers being unrealistic: "There are very few genuine down-valuations: it's mainly overpriced properties. The problem at the moment is many sellers still failing to understand that houses are worth less as each month passes."

Meanwhile, Michelle Lawson, director at Fareham-based broker, Lawson Financial, believes that external forces may be at play: “Down-valuations are cyclical but always seem to be coincidentally in tune with when there is something economic happening or a hidden driver. I have always been suspicious that RICS and the Government control values by directives. I had a down-valuation last week of £25k on a flat in a university city in the South East from £175k to £150k, making that property the cheapest in the city. I could list endless stories of inconsistency and inaccuracy but we are always told that the lenders' hands are tied. The whole process needs overhauling and, in my opinion, this has to come from the lenders to a point. Valuers drive lender policy and challenging these is nigh on impossible while being detrimental to the client.”

Dhoffer agreed, saying that "while the surge in down-valuations could be legitimate in some cases, where sellers just expect higher values, I feel a sense of third party interaction with RICS and possible government intervention to stall the market". Meanwhile, Malik and his anxious client await the results of the appeal. 

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6 responses from the Newspage community

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Editor
Riz Malik
Independent Financial Adviser at R3 Wealth
I just reviewed a report for a 2-year-old new build that valued the property at over 40% below the client's expectation. From the report, it was clear that a shortage of comparable sales played a major role in this down-valuation. It's essential for homeowners to realise that their property's value might not be the same as it was a year ago, especially when it comes to refinancing. In an active market, current sales data can bolster a property's valuation. However, when the market slows down, as is currently the case, this task becomes more challenging.
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Darryl Dhoffer
Founder at The Mortgage Geezer
Down-valuations are becoming the norm. As far as Surveyor Appeals go, you're more likely to catch a brick in a cobweb than win. They should call them No Chance Appeals. My argument is once you have a solid appeal and it's refused, why are brokers unable to see the surveyor's comparables and report? We never do. While the surge in down-valuations could be legitimate in some cases, where sellers just expect higher values, I feel a sense of third party interaction with RICS and possible government intervention to stall the market. Index valuations are my first place of action, as "on the cusp" LTV bands could easily resort to a Product Transfer as opposed to a remortgage, for fear of a down-valuation, and we all know how well an "appeal" goes.
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Justin Moy
Managing Director at EHF Mortgages
This is where we need to coach our clients to be realistic, not optimistic, about property prices. We haven't seen too many down-valuations this year although a high percentage of our business has been product transfers. Via the product transfer route, valuation figures have been more generous, given they index against local data that is about 9 months old, and not specific to any property but to a postcode area. We have helped many secure better rates through product transfers rather than remortgages for this very reason, especially those with higher loan-to-value mortgages or landlords. This is another reason to engage with an experienced mortgage broker, who will look beyond comparison website data for your best options.
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Editor
Imran Hussain
Director at Harmony Financial Services
Down-valuations from surveyors are definitely on the rise. We have to be realistic as the market is now in a radically different place compared to 12-18 months ago. When a property has no clear comparable evidence, expect surveyors to be bearish to prevent unforeseen harm should property prices slide even further. Surveyors being more cautious as the market slows is never a bad thing as I am sure no one wishes to borrow more than what the property is worth.
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Editor
Michelle Lawson
Director at Lawson Financial
Down-valuations are cyclical but always seem to be coincidentally in tune with when there is something economic happening or a hidden driver. I have always been suspicious that RICS and the Government control values by directives. I had a down-valuation last week of £25k on a flat in a university city in the South East from £175k to £150k, making that property the cheapest in the city. I could list endless stories of inconsistency and inaccuracy but we are always told that the lenders' hands are tied. The whole process needs overhauling and, in my opinion, this has to come from the lenders to a point. Valuers drive lender policy and challenging these is nigh on impossible while being detrimental to the client.
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Graham Cox
Director at Bridging Hub
Down-valuations are increasing, as lender caution takes hold. We recently had a client buying at £285,000, only for the lender's surveyor to value the property at £250,000. Despite the Nationwide and Halifax attempting to put the best possible spin on where house prices are heading, it's likely we'll see a slow and steady fall in house prices for the next year at least.