Property market chaos

Many lenders are still using a desktop valuation in most cases, and where properties have been down-valued, we’ve had to request a physical valuation, only for it to then be overturned. This is after sending an appeal form with some property comparables. It seems like time will tell with property valuations – they are usually booked within a week or so of an application being submitted. I imagine a duel, with sellers on one side, buyers on the other. The sellers win and sell their property price for asking price or slightly more. Buyers win and put offers less than asking price on the property. Or does the surveyor come in and down-value the property to ease the risk of lenders, subsequently being frowned upon like a streaker on a football pitch from both the sellers and buyers.

We have encountered a number of situations as a business this past week. Some clients have felt unable to continue with a purchase after their potential mortgage costs increased £200 overnight. This sort of increase would normally be felt over a greater period of time and usually offset with increases in earnings, but the shock of the rate rises have simply made it unworkable. Other clients have progressed an application on a private sale ahead of having sold their existing property. With the market as it is, the benefits of acting now and securing a rate at today's offering outweighed the associated risks of not completing the transaction before their mortgage offer runs out. Fundamentally, clients are anxious over the future and angry due to feeling that the position they find themselves in has been inflicted unnecessarily by the government.

Uncertainty is crippling the market at the moment as many lenders withdraw all of their products whilst they weather the storm. One lender has just withdrawn all of their products above 60% loan to value and haven't honoured applications in process. That said, most lenders are continuing with submitted cases as normal. Every part of the process is being cautious and this includes surveyors who have shown they are not afraid to down-value properties to protect lenders from the increased possibility of house prices falling. Existing chains are not immune to the uncertainty either, renegotiations are taking place here and there but the most common outcome is the chain falling apart all together. Most existing chains are progressing as planned though, all be it on tenterhooks.

This week, we opened a dreaded email of a £40,000 down-valuation, which equates to a 12.5% reduction on the agreed purchase price. After extensive house price growth over the past 2 years and many buyers having to offer well in excess of the asking price, this was likely to happen at some point. Naturally, more and more people will soon get that cold feet feeling about whether they're going to be hit if house prices drop. This could lead to buyers pulling out of the transaction or could leave estate agents scrambling to get all parties involved to take a reduced price to save the sale.

Lenders have been consistent with valuations and fortunately I haven't seen too many recently. Mortgage lenders complete a basic valuation for their own purposes to ensure the property is fit for mortgage purposes. What I have seen is the majority of buyers taking it upon themselves to obtain a Homebuyers survey. More often than not this unearths potential issues that will affect the value, that the lender had no clue about. Buyers are then going back to the vendors to renegotiate the purchase price with solid evidence of work that needs completing. It may cost a few hundred pounds for the survey but I've seen £1,000's knocked off a purchase price. Then it's simply a case of amending the mortgage application to reflect the new purchase price and mortgage borrowing. As the rate of interest is secured at point of application, there is no detrimental effect on the mortgage originally offered.

We haven't seen many down valuations yet. We have had some people still look to proceed with the purchase as they don't want to hold off any longer. The fear is if they wait and rates go above 6-7%, they will have to re-assess and purchase at a lower level to fit their budget.

Not alot seems to have changed, people are still buying homes abeit being more cautious when it comes to what they can afford, however the process is still taking slower and slower, many clients taking their time to think about deals, and in this time losing products and having to fall for a higher interest rate