Mortgage valuation lower than offer

When a homeowner decides to sell their property, one of the first things they do is find out how much it’s worth. Most people invite several estate agents to visit their homes to conduct a valuation before deciding on an asking price they feel comfortable with.

When you accept an offer on your home, if the buyer requires a mortgage to buy the property, the lender will conduct their own-valuation. This will be done by a RICS-certified surveyor appointed by the lender and is done at the buyer’s expense.

If the surveyor values the property lower than the offer that has been accepted, it is called a ‘down-valuation’ – and this has implications for both the buyer and the seller.

Unfortunately, down-valuations are very common. Recent analysis by Bankrate UK found that almost half of all properties are down-valued often by as much £10,000 to £20,000.

This guide outlines what to do if the house valuation is less than the offer.

What is a down-valuation?

If the surveyor valuation is lower than offer you have accepted, the difference between these two figures is the down-valuation.

For example, if you accept an offer of £200,000, but the surveyor’s valuation is £180,000, you have received a £20,000 down-valuation.

If the property isn’t down-valued, does it mean the buyer’s mortgage is approved?

Although property valuation is an important step in the mortgage approval process, it’s not the only factor. A favourable appraisal gives lenders confidence about the property’s value in proportion to the loan amount, which enhances the argument for mortgage approval.

But getting a mortgage approved requires a thorough evaluation of other variables too, such as the borrower’s income, debt-to-income ratio, creditworthiness, and general financial stability. Although it’s not the only factor, a positive property valuation helps with the lender’s risk assessment.

Are surveyor valuations accurate?

Because surveyor valuations are carried out by qualified experts with experience in property appraisal, they’re typically regarded as accurate and dependable. These experts assess a property’s value using standard industry procedures, taking into account elements like size, condition, location, and comparable sales in the neighbourhood.

How common are property down-valuations in the UK?

Recent analysis suggests nearly half of all agreed property sales experience a down-valuation. Higher value properties and those in competitive markets look like they are the most likely to be affected. But properties where there are fewer comparable sales, or where issues are identified during the survey are also likely to see a down-valuation.

Can I appeal a down-valuation?

Yes, however success rates vary significantly and lenders rarely make big changes to the surveyor’s recommendation. You can submit recent comparable sales data and request your lender to review it.

Why do down-valuations happen?

The most common reasons for a down-valuation are:

• Over-optimistic asking prices are one of the most common reasons for a down-valuation.
• Property condition issues identified during the survey are another common reason.
• Lenders being more cautious about property values, particularly during times of economic uncertainty.
• In times of drastic fluctuations, rapid market changes can make your property worth less now than when the offer was first made.
• Limited comparable sales data can also make it trickier to determine your property’s current value.

What happens if the bank valuation is lower than the purchase price?

The lender will base their mortgage offer on the surveyor’s valuation, not the offer that has been made. So when a property is down-valued, the buyer will either have to find a new mortgage lender who values the property more highly, or pay the difference between the down-value and the selling price.

If neither of these is an option (or the new mortgage lender also values the property at less than the agreed price), the buyer will have no choice but to try and renegotiate the offer or pull out of the sale. Some lenders will allow a borrower to appeal their valuation.

What happens if the mortgage valuation is higher than the agreed sale price?

A less common, but more favourable, scenario is when the mortgage valuation comes back higher than the agreed sale price. If a surveyor values the property above what the buyer has offered, the lender is effectively confirming that the home is worth more than the purchase price.

For the buyer, this is reassuring: it strengthens their mortgage application because the loan-to-value (LTV) ratio will be lower than anticipated, making the purchase less risky for the lender. In some cases, a higher valuation may even open the door to more competitive mortgage rates or improved mortgage terms.

For sellers, a higher mortgage valuation doesn’t have too much bearing on the transaction, as the sale price has already been agreed. However, it can reduce the risk of delays or failed financing because the lender is unlikely to raise concerns about the property’s value. It also provides peace of mind that your home is highly valued.

What can you do if your property is down-valued?

As the seller of the property that has been down-valued, you have a few options to consider:

1. Find another buyer
2. Wait for the buyer to find a solution
3. Renegotiate the sale price
4. Sell to a Quick House Sale Company

Find another buyer

If your buyer has to pull out of the sale because they can’t secure a suitable mortgage, you could wait for another buyer to come along and hope their lender doesn’t also down-value the property – or, if this happens again, that the new buyer is in a position to make up the difference. However, the downside of this approach is  that you’ll have already gone through a considerable chunk of the sales process with the initial buyer – so you might not be keen to delay the sale further.

Wait for the buyer to find a solution

If the buyer wants to resolve the problem (by applying to a different lender, finding additional funds from other sources or appealing the lower valuation) you may decide it will be easier and cause less delay to wait for them to find a solution.

Renegotiate the sale price

The buyer may try to renegotiate the sale price to cover the difference between their offer and the valuation provided by their lender. If you’re part of a chain and have your heart set on buying another property, it might be worth forfeiting some of the proceeds on your current property to avoid losing your dream home.

If you are in a chain, you could speak to your estate agent to see if the difference could be shared across the chain to keep everyone’s sale progressing.

For example, if your property has been down-valued by £20,000 and there are 4 properties in the chain you could negotiate for everyone in the chain to accept £5,000 less which would allow you to accept a lower offer from your buyer. The alternative would be that the chain collapses for everyone.

Sell to a quick house sale company

If you lose your buyer and can’t afford to delay the sales process or start again from square one, a quick house sale company can help you sell your house in line with your preferred timetable. Whether you need to relocate in a hurry for a new job or don’t want to lose out on buying a new property, House Buyer Bureau can provide a simple, hassle-free and fast service.

How to avoid a down-valuation

While you can’t control the housing market, you can reduce the likelihood of a down-valuation by preparing your property and pricing strategy carefully. Steps that may help include:

Price your property realistically

Overpricing is one of the biggest triggers for down-valuations. To avoid this happening to you, review recent sold prices (not the asking prices) for comparable homes in your area, to help you set a realistic figure asking price.

Choose the right estate agent

Go for an agent who has strong local knowledge and a reputation for accurate valuations – rather than one that promises a higher sale price to win your business. A realistic listing price reduces the risk of an over-optimistic offer that a lender later disagrees with.

Fix obvious defects

Surveyors take condition seriously. Issues like damp, damaged roof tiles, outdated wiring or structural concerns may lead to a lower valuation, so tackling these before listing your home can help it avoid being down-valued.

Provide useful information

If you’ve made improvements, such as a new boiler, rewiring, extensions or planning permissions, then be prepared to share the relevant certificates, receipts or plans. Surveyors can use these documents to justify a higher value during their assessment.

When do I find out about a down-valuation?

Unfortunately, down-valuations only happen when a house sale has already progressed, which is why they can be so problematic and often result in delays, lost money and failed sales.

Although a buyer generally has a mortgage in principle before making an offer, they won’t apply for a mortgage until after a sale price has been agreed upon. The mortgage in principle indicates how much the buyer can borrow (which gives peace of mind to the buyer and the seller), but it isn’t an official mortgage agreement.

Once an offer has been accepted, the buyer will have to start the mortgage application process, which can take between 18 and 40 days to complete. A down-valuation will only come to light at the mortgage-valuation stage when a surveyor values the property.

You could be almost two months into your house sale when the disagreement on how much the property is worth comes to light, which is why a down-valuation can be so problematic for both parties.

Why is a down-valuation a problem?

The problem for sellers

Down-valuations can result in a failed sale.

If your buyer’s mortgage provider values your property at a lower price than the accepted offer, it will affect the amount of money they are willing to lend. This is because the size of the mortgage that’s available to a buyer is a percentage of the purchase price or the lender’s valuation, whichever is lower. When a property’s estimated market value is less than the agreed sale price, the loan-to-value (LTV) ratio effectively increases. The higher the LTV, the more reluctant lenders are to approve a mortgage because it represents greater risk; LTVs over 75% are considered high risk by most lenders.

If your buyer can no longer secure the mortgage needed to purchase your property, they may have no choice but to pull out of the sale.

The problem for buyers

If you have agreed to pay more than a valuer says a property is worth, you may be unable to proceed with the purchase, even if you want to.

If you’re a cash house buyer, there’s no problem. However, if you need a mortgage to buy your dream home, you’ll struggle to secure the loan you need. You may be willing to take on the risk of paying above market value for a property, but most mortgage lenders won’t. If you receive a down-valuation, then the loan you’ve applied for will probably exceed the lender’s maximum LTV amount and they’re unlikely to approve it.

Negotiating after a down-valuation

If your buyer receives a lower valuation from their lender, the sale may collapse, unless successful negotiations take place. Both the buyer and seller have to reassess their expectations and compromise.

Renegotiate the price

Buyers will often ask for a reduction in the sale price to match the surveyor’s valuation. As the seller, you’re under no obligation to agree, but reducing the price (even partially) can stop the sale from collapsing entirely. This is especially important if you’re already committed to another purchase and don’t want to lose your onward property.

Split the difference

A common solution is for both sides to meet halfway. For example, if the down-valuation is £20,000, the buyer may increase their contribution by £10,000 while the seller reduces the price by the same amount.

Allow time for a re-mortgage or appeal

Buyers may choose to challenge the valuation or apply to a different lender. If you’re not under any immediate time pressure, giving them some time to do this can save the sale. However, it’s worth noting that appeals rarely succeed – unless the original valuation is clearly flawed.

Consider incentives

Some sellers offer to leave certain fixtures, fittings or appliances behind instead of reducing the price. While this won’t influence the mortgage valuation, it may bridge the gap in perceived value for the buyer.

Down-valuation advice for sellers

A down-valuation can feel frustrating, especially when you’ve already invested time, money and emotion into progressing your sale. Here’s how sellers can protect their position and make informed decisions:

Stay objective and look at the evidence

Ask to see the surveyor’s report or valuation notes (you’ll likely need to ask the buyer via the estate agent). This helps you understand why the property was down-valued, i.e. whether it’s market conditions, specific defects or an overly ambitious listing price.

Review your pricing strategy

If the new (down-valued) figure fits with sale prices for local comparable properties, it’s most likely that your property was overpriced from the start. Adjusting to this lower price can either keep your current buyer interested or attract new potential buyers.

Act quickly to keep the chain together

If you’re in a property chain, delays may put your onward purchase at risk, so be mindful of not slowing things down too much.

Consider a guaranteed-sale route

If time is running out or the uncertainty is causing significant stress, selling to a professional house-buying company like House Buyer Bureau can eliminate the risk of down-valuations entirely. Your sale is guaranteed once you accept the offer, and completion can happen in as little as seven days.

How accurate are bank property valuations?

An estate agent will consider similar factors when valuing a property as a surveyor will. However, the two can come up with very different figures. This happens for two reasons:

Firstly, estate agents often inflate their valuations in a bid to secure business.

Secondly, surveyors conduct their mortgage valuation on behalf of the lender and are typically bound by rigorous inspection criteria and conduct a more thorough valuation than estate agents.

The Royal Institute of Chartered Surveyors (RICS) applies the International Valuation Standards when surveying a property. A RICS valuation of a property will take into account:

• The property’s condition
• Supply and demand in the local area
• Comparable prices for similar properties sold locally
• The current property market

This, along with differing perspectives of the prevailing market, can lead to discrepancies and down-valuations. Because of the standards surrounding lender valuations, a bank’s valuation of a property will be more accurate than that of an estate agent.

Read our practical guide on How to value a house to get an idea of the realistic market value of a property you want to sell or buy.

How can House Buyer Bureau help?

If you experience a down-valuation during the selling process, we can help. We specialise in buying houses quickly, allowing you to complete quickly and eliminate the risk of losing out on the property you’re looking to buy.

We can complete the entire sales process remotely. All we need is a little information from you, and we’ll take care of the entire sale.

You won’t receive the full asking price for your property — we make our income from buying houses at a discount and selling them — but you’ll save on estate agents and legal fees, not to mention enjoy a hassle-free guaranteed sale.

We have the funds to buy any type of property in any location and can offer completion in as little as seven days — once you have accepted our formal offer, the sale is guaranteed.

If your house sale is delayed or fails due to a down-valuation, we can help keep your moving plans on track.

Get an offer for your property today.