There has been a “significant” increase in the number of homes being valued below the sale price according to some of the UK’s largest mortgage advisers.
In England, buyers who need a mortgage must instruct a surveyor to carry out a professional valuation of the property they intend to purchase. And, banks and building societies are unlikely to loan the buyer more than the valuation price.
However, with these valuations occurring after a buyer and seller have agreed on a price, should the value be less than expected, buyers are often left having to pay thousands more than a property is worth to stop the sale from collapsing.
Mortgage advisers London and Country told the BBC that so-called “down valuations” were on the rise. Digital estate agents Emoov also said that while two years ago fewer than one in 20 of its sales resulted in a down valuation, today one in five are being valued at least £10,000 below the agreed price. This is the highest rate since the financial crash in 2008.
Speaking to The Telegraph, Ben Elder, global director of valuation at the Royal Institution of Chartered Surveyors blamed the increase in down valuations on estate agents overpricing properties to attract sellers. He said that agents had persevered with high valuations despite a cooling market.
He said: “They [estate agents] are often bidding against each other to get work so the price can get pushed up because of that and then do not reflect the hardening of the market.”
Supporting this view, The Royal Institution of Chartered Surveyors said: “The market value is based on comparable market evidence, usually a minimum of three sales transactions of similar properties in the local area, and also the professional’s knowledge of the local market including supply and demand dynamics.
“For this reason, it is quite possible that the valuation for the lender – the market value – does not match an asking price for a property that has been set by the seller or agent.”
However, Russell Quirk, Emoov’s chief executive, blamed surveyors, stating that they were “covering their backs” and “prophesying a [financial] crash.”
UK Finance, which represents the banking industry, said: “Lenders have a responsibility to ensure that the value of property taken as security on mortgage loans is current and realistic.
“Although the valuation is carried out for the lender, borrowers also benefit from a realistic independent valuation as it could help them avoid paying over the odds for the property they are buying.”
Mark Hayward, CEO of NAEA Propertymark, added:“We are seeing a bit of this at the moment. We are not predicting a crash, but valuers are being cautious. The market is in a nervous state at the moment. Valuers are erring on the cautious side.”