Mortgage Valuation - Housing Disrepair Claim
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Mortgage Valuation Lower Than Offer, Can We ReneGotiate?

Posted on: Wed Jun 22 | 6:24 AM by: housing

What Is A Mortgage Valuation?

A mortgage valuation is a particular kind of assessment carried out by the mortgage lender on a property to determine or confirm the value of the property. In other words, it is carried out to know if the property will be a suitable enough security for the loan you applied for or if the money you are offering is a fair value for the property.

Therefore, what happens at a house valuation is that the valuer will visit the said property with his surveyors to make a thorough inspection of the house. This is so that they can get an accurate impression of the condition of the house and thereafter give you what they think is a fair value of the property.

Most often, the estate agent would give a higher value for the house than what the surveyor will give. There are quite a number of reasons why this would happen.

Agents inflate prices because they know that when a property is put up on the open market, you are most likely to end up with offers below the asking price unless you specify that you want “offers in excess of”.

Again, estate agents know that the higher the price a property is sold, the higher their commission and so they will inflate prices to increase their chances of getting a higher commission.

Mortgage Valuation

Surveyors on the other hand are bound by a strict property valuation criterion and wouldn’t also want to have issues with the mortgage company if they overvalue the house. For this reason, they tend to be a lot more cautious with their valuation.

The following determines the value a surveyor will place on a property;

  • The condition of the property
  • Supply and demand of properties in the local area
  • Prices of similar properties sold in the area
  • The current state of the property market (i.e. whether it’s a buyer’s or seller’s market)

Down Valuation

A down valuation as the name implies means that the mortgage valuation is lower than the accepted offer on the property. It also means that the value placed on the property by the buyer’s mortgage surveyor is lower than the selling price you agreed.

The down valuation here is the difference between the two figures.

For example, if an offer has been accepted at £200,000 but the surveyor makes a valuation of £170,000, then there’s a down valuation of £30,000.

Sometimes, it may take up to 6weeks after you have made an offer for you to find out about the down valuation made by a surveyor. This is because it can take a while for the lenders to arrange for a surveyor to come and conduct an inspection on the property.

Unfortunately, these issues have become more common than they usually were especially with the uncertainty caused by the COVID-19 pandemic. Surveyors are now more cautious as they could be sued for overvaluing a property. They are required to show evidence of their valuation on paper but are more likely to undervalue properties, mainly to avoid being sued in future.

Again, in times like this, it is quite difficult to give an accurate property valuation because no one can be certain about the worth of a property in the future.

A research carried out by a mortgage comparison site Bankrate UK shows that in recent years, about 46% of property were down valued by lenders. This means that there is a high probability that the house you agreed a certain fee for will be down valued.

Down Valuation What To Do

When a house is valued less than offer, there is room for negotiating after a down valuation. However, there are certain implications a down valuation can have on both the buyer and seller especially if the buyer wants to renegotiate after the survey but the seller is not willing to do so.

The problem here is that as a buyer, you may not be able to secure the loan you need to pay for the house. This is due to the fact that mortgage lenders will be reluctant to take such risk of paying higher than market value since there is no guarantee that they will make the money back.

In the same vein, it is a problem for the seller as the buyer may be reluctant to pay the already agreed price. Also, even if he is willing to pay but needs a loan to do so, the mortgage lenders will be reluctant and so make it difficult for your buyer to buy your property.

This is what you can do;

Buyers:

  • As a buyer, you can find another lender whose surveyor will have to conduct another valuation. The new valuation may favor you or the new lender may be willing to risk it if you receive a down valuation again.
  • Again, you can also renegotiate the price with the seller to fall in line with the valuation.
  • You can also get a loan for the down valuation amount. Your lender will be more open to this as they don’t have to take any risk and you will have to cover the shortfall.
  • Furthermore, you can increase your deposit as this will help you get a smaller mortgage while you cover for the down valuation. However, many people do not really like this option as you may have to reduce your savings in doing so.

Sellers:

  • If on the other hand you are a seller, you can find a new buyer with a different mortgage lender. You may be able to find someone to work with what you think is the right valuation for your property.
  • Another option is to find a cash buyer who won’t need a mortgage and so won’t also need a property valuation to buy your property.
  • You can also look into the areas that caused the down valuation and make the necessary improvements. This way you can get another buyer and have a better valuation.
  • Additionally, you can be open to negotiate on the price to be in line with the valuation so as to get a deal over the line.

Can You Appeal A Surveyor’s Valuation?

This is very possible. Some mortgage lenders can give you the chance to challenge a valuation but you will have to provide some solid evidence to support your stance. For instance, you can present records of similar properties sold for prices similar to what you are asking for within the last 6months.

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Can You Renegotiate A House Price After A Down Valuation?

Yes, you can renegotiate the price if the mortgage valuation is lower than the offer. However, this can only be possible if both parties are willing to do so. For instance, as a buyer, you may want to renegotiate but the seller may not want to do so and there is no law that compels a seller to renegotiate. Most times, sellers have a certain range of price in mind and will not want to sell for less.

Does Valuation Mean Mortgage Is Approved?

Valuation does not really mean that a mortgage is approved whether it is done before a mortgage offer is received or after that. It is only a process that is taken by mortgage lenders. Therefore, you don’t have to get your hopes up after a valuation is made.

How Long Does A House Valuation Take In The UK?

A house valuation in itself does not take so long to carry out. Most times, a surveyor will request an hour’s appointment to look at the details of the property. Sometimes, it doesn’t even take that long, it only depends on the size and layout of the property.

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What Happens If Mortgage Valuation Is Higher?

This is usually very rare but if it happens, you may have a little problem as a buyer. This is because the seller will obviously not take whatever has been agreed previously. Therefore, you will have to up your offer. There is however always room to renegotiate.

How To Negotiate House Price After Survey In The UK?

There are a few tips as to how you can renegotiate after a survey;

  • Conduct a research and present evidence on the state of the property to the seller. This might sway him to renegotiate.
  • You can also hire another surveyor as a second opinion.
  • Also, you have to be very transparent and honest in your dealings with the seller. Don’t come across as impatient or aggressive in your negotiations.
  • Furthermore, following the advice from your estate agent and conveyancer can help you make the right decision.
  • Be willing to compromise and not stiff on your stance. This will help the renegotiation process to go on smoothly.

Do You Have Housing Disrepair Claims?

If you have any housing disrepair claims, you are in good hands as our firm has some of the best housing disrepair solicitors in the UK to help you with that.

Over the years we have become renowned in this area of law and have built trust in many of our clients who we have helped to secure deserving compensation amounts as well as seeing to it that the required repairs are done.

Your landlord has a duty to ensure that your house is in good repair so as not to constitute a safety risk, health risk or cause damage to your properties.

Therefore, should you have any disrepair claims, you can make use of our housing disrepair helpline to speak with our no win no fee housing solicitors as well as set up a free consultation session to discuss your concerns.

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