It can be easy to worry if a surveyor devalues your home or the property you’re buying. Rest assured, there are steps to take if a Mortgage Valuation or Valuation Report undervalues your home.
In this article, we’ll explain why a property may be devalued and what to do if this happens from a buyer's and seller's perspective.
What is a Mortgage Valuation?
A Mortgage Valuation is carried out by your mortgage lender to determine if the property you’re buying is worth what you’re paying. This is required to secure a mortgage loan.
Many people confuse a Valuation Report with a Mortgage Valuation. A Valuation Survey (Valuation Report) is carried out by a RICS Valuer to determine the market value of your property or the property you plan to buy.
If you’re currently comparing house survey quotes for your home survey, consider adding a valuation report. While this may increase your Level 2 survey costs, it provides an official market valuation alongside the property condition report, which can be useful when negotiating or securing your mortgage.
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How are Homes Valued?
There are a number of things a surveyor will look for in a mortgage survey (mortgage valuation). These include:
Condition of the property
Sold prices for similar properties in the area
Property market in the area - what’s in demand/what isn’t
Property market in general
Why Would a Surveyor Devalue a Home?
We’ve listed the most common reasons a surveyor will devalue a home:
Seller Asking Too Much
The most common reason a surveyor would devalue a home is if the asking price is set much higher than what it should be. Estate agents will value the home and then it’s up to the seller how much they want to sell for. Many sellers may start with a higher price with the expectation of lower offers.
Estate Agent’s Valuation Too High
Your estate agent might have misjudged the value of the home. Sellers should get valuations from at least 3 different estate agents to get an accurate market value for their home.
The Condition of the Property
The surveyor will take into account the condition of the property and look for red flags during their house survey when assessing the value. If the property has serious structural issues or major repair work is needed, then this can negatively affect the value.
Desktop Valuations
Sometimes Mortgage Valuations will be carried out online without anyone visiting the property. An online valuation may miss important details such as a recent renovation or work that has added value. This is why it’s vital to get a RICS Valuation as well to confirm the market value of the property.
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What Can I Do if a Surveyor Devalues the House?
It can be disheartening if the surveyor or lender devalues your property or the property you plan to buy. However, there are certain steps to take to resolve this. Below we've listed what to do if the surveyor devalues a property as a buyer and a seller.
As a buyer:
Negotiate Price with Seller
The easiest option is to renegotiate the house price after the survey with the seller. As you’ll have an official mortgage valuation or valuation report confirming the house is worth less, they’ll have little to contest this.
Appeal Decision
Appealing the decision with your mortgage lender will only work if you have evidence of a mistake in market value comparisons.
Valuation Report
You can pay to get a Valuation Report by a RICS Valuer in addition to your mortgage valuation. This could be risky if you pay for the report to be given the same result.
Use Another Lender
You can switch lenders and have another mortgage valuation. However, you will likely get the same results for a lot of extra time, money and hassle.
Increase Deposit
To save time in the conveyancing process, you can increase your deposit so the mortgage lender will lend you the same amount.
As a seller:
Lower the Price
If you’ve set an unrealistic asking price, this can usually be resolved by reducing your price to match similar properties' sale prices. This will mean additional steps in the conveyancing process to update this in the paperwork, so ensure you’re asking price is not too high to begin with.
Fix Issues
If there are certain issues that are devaluing your property, figure out if you can fix them. These will be highlighted in the buyer’s property survey. You should expect the buyer to renegotiate their original offer if the property was overvalued.
What Happens with my Mortgage Loan?
If the property you’re buying has been undervalued, then the amount your mortgage lender originally said they’d lend you will now change. This will affect how much they lend you and how much deposit you need to put down.
If you’re after a fast conveyancing process, you can opt to put down a higher deposit so the amount they lend you will stay the same. You’ll have to work out if you can afford to do this, so it’s strongly advised to talk to financial professionals.
Can you Challenge a Valuation?
Most mortgage lenders will let you appeal your valuation. You’ll have to submit forms and evidence to back up your claim. For example, Halifax allow appeals and ask you to provide detailed evidence of sold prices of 3 similar properties in the last 6 months.
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Can I Reduce my Offer on a House after Survey?
Once your survey is done and it reveals bad results or a down valuation, you can use the results to attempt to reduce your original offer. The seller might not always accept this, but if you give evidence and fair reasoning for your renegotiation, you have a better chance of a reduction. Knowing what happens after a house survey can help you plan your next steps.
Can Japanese Knotweed Devalue a Home?
Japanese Knotweed can devalue a property between 5-15%, according to experts Knotweed Help. Your mortgage lender may not lend to you if the home you’re buying has a live infestation. However, if you can provide evidence that either you or the seller plans to remove this and solve the issue, it shouldn't be a problem.
Can I Remortgage an Undervalued Property?
If the property you’re remortgaging has gone down in value, this will make it difficult to remortgage to a better deal. This would mean you’re reducing the equity in your home and would need to increase your LTV (loan to value) when remortgaging. Before committing, it’s worth comparing remortgage quotes to see what options are available.
For best results, remortgage with a lender that uses a local surveyor to carry out the valuations. They’ll have the knowledge of the local property market to provide an accurate valuation.
However, you can appeal your lender’s valuation if you provide sufficient evidence. You’ll have to provide them with details of any improvements or alterations made to the property after you bought it.
Arrange a Valuation Survey
If the home you are selling has been "downvalued" by a mortgage valuation or independent surveyor, you can attempt to challenge it with your own valuation. This will likely need to be a RICS-registered valuer to be accepted by the lender for consideration.
At Compare My Move, we can connect you with up to 5 valuation surveyors. They can complete an independent and unbiased valuation, providing a report of their findings.
Simply fill out our simple valuation form to get connected with RICS-regulated valuers. In addition to being RICS-registered, all valuation partners must meet our strict verification process before joining our network.
