A down valuation can cause significant disruption to your plans to buy or sell a home, leading to renegotiation, and in some cases the sale falling through. We look at why they occur, the impact on both buyers and sellers, and how to prevent this from happening, or overcome it if it does.
What is a down valuation?
A down valuation occurs when a lender’s appraisal of the property you plan to buy is lower than the asking price. Ensuring you have a Mortgage Decision in Principle in place before you begin your search can prevent you from offering sellers more than you’re able to borrow, but unfortunately, it’s difficult to guess whether your surveyor will value your chosen property at the same cost as the seller, or their estate agent.
Unfortunately, down valuations are often discovered 4-6 weeks after an offer has been accepted. If the mortgage valuation is lower than your offer price, it can affect your finance, as lenders will usually reduce the amount they will lend to you based on the perceived property value.
Why down valuations happen
There are a number of reasons a down valuation could occur:
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High original sale price - If the seller over-inflated their sale price, especially if they are not using an estate agent, the valuation won’t usually match
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Surveys uncovered issues - Issues with the property's structure, maintenance, or age can result in a lower valuation. From Japanese knotweed to damp, to faulty electrics, any additional costs taking on the property will cost you can impact its value unless sellers address any maintenance or repair needs before putting the property on the market
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AVM (Automated Valuation Models) - Some lenders rely heavily on AI-assisted valuation or AVMs. In some cases this type of model can miss subjective value that require human consideration, such as a premium interior finish or a specific local demand surge
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EPC requirements - Due to the RICS Red Book 2025 standards, surveyors now have to assess the EPC (Energy Performance Certificate) ratings and related risks, which may trigger a down valuation
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Cautious lenders - Fluctuations in the local or national property market and economic uncertainties can lead cautious lenders to undervalue properties to mitigate potential losses
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Limited comparable sales - Fewer property sales in an area or lower recent sales prices can impact the valuation
How are properties valued?
Usually property is valued either by an in-person inspection by a qualified surveyor, or by a desktop valuation using an AVM model based on recent local property market data. Both valuation models will consider comparable sales, the construction of your property, and lender concerns, where applicable.
If you opt for a full survey, rather than a simple mortgage valuation, this can often uncover issues that are not necessarily obvious during a normal property viewing. While this increases the possibility of a down valuation, a thorough valuation will also ensure you’re making a wise investment. To see how a mortgage valuation compares to a full survey, read our comparison article.
A down valuation won’t necessarily always be negative for a buyer, as it could provide you with the opportunity to renegotiate to accommodate the cost of repairing issues found during this process.
What happens when a property gets a down valuation?
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The lender may offer a lower mortgage amount
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The lender may pull out of the sale
Example Scenarios
These tables show how a down valuation can impact a property sale from the perspective of both the buyer and the seller.
The Buyer’s Perspective
|
Item |
Original Scenario |
Down Valued Scenario |
The Shortage |
Resolution Suggestion |
|
Purchase Price |
£300,000 |
£300,000 |
- |
- |
|
Property Valuation |
£300,000 |
£275,000 |
£25,000 |
Renegotiate price to £285k |
|
Deposit (10%) |
£30,000 |
£30,000 |
- |
Buyer adds £15k from savings |
|
Mortgage Loan |
£270,000 (90% LTV) |
£247,500 (90% LTV) |
£22,500 |
- |
|
Interest Rate |
4.2% |
4.8% (if LTV rises) |
+0.6% |
Challenge valuation |
The Seller’s Perspective
|
Item |
Original Expectation |
Down Valued Reality |
The "Shortage" |
Resolution Suggestion |
|
Agreed Sale Price |
£500,000 |
£465,000 |
£35,000 |
Offer a "Repair Credit" of £10k |
|
Equity for Next Buy |
£100,000 |
£65,000 |
£35,000 |
Seller renegotiates their own buy |
|
Chain Status |
Solid |
At Risk |
Immediate |
Seller pays for a second valuation |
|
Time to Completion |
12 Weeks |
16+ Weeks |
4 Weeks |
Accept a lower offer for speed |
|
EPC/Repair Costs |
£0 |
£5,000 |
£5,000 |
Fix damp/roof issues before relisting |
What to do when your mortgage valuation is lower than your offer
There are a few options to consider if your mortgage lender reduces the mortgage loan they are willing to offer:
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Renegotiate the sale price - Present the mortgage valuation to the seller and request a renegotiation of the price. If you’re able to secure a lower price that the mortgage lender is happy with this could help you maintain the sale
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Challenge the valuation - While buyers might be less keen on this option, if they are happy with the property as is, the seller may be able to provide evidence to support the higher price. If buyers obtain a revised valuation the lender may be swayed and agree to honour their original mortgage loan
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Alternative mortgage lenders - If your lenders have pulled out entirely, or won’t accept a renegotiated offer price or valuation, then it doesn’t mean all lenders will feel the same. A specialist lender may have more flexible criteria, so it’s always worth speaking to a broker like ourselves in these circumstances
Get your mortgage plans back on track today
The loan-to-value impact
When a surveyor’s valuation comes in lower than the agreed sale price and the lender reduces their loan offer, it can cause a reduction in the buyer's equity, potentially placing them in a higher loan-to-value bracket, unless they can increase their deposit to cover the reduction.
Being in a high LTV bracket can limit the choice of mortgage lenders available, and possibly increase the mortgage interest rates available to the buyer.
For Example: If you secured a 3.6% rate at 80% LTV, but a down valuation pushes your requirement to 85% LTV, your interest rate could jump significantly, adding hundreds to your annual costs.
How sellers can be impacted
Estate agents and surveyors both contribute to property valuations, albeit with some differences in their approaches.
Both estate agents and surveyors play important roles in property valuation, but their perspectives and methodologies differ. The significance of each valuation depends on the specific context and purpose of the valuation.
Overall, surveyor valuations are generally considered more accurate and reliable due to their objective approach and in-depth analysis of properties. They are commonly used for legal purposes, mortgage lending, and investment decision-making. However, estate agent valuations can still provide valuable insights into market trends and approximate property values, especially for sellers looking to gauge market interest.
Estate Agent Valuations
Estate agents specialise in the buying and selling of properties. They provide market appraisals based on their knowledge of current market conditions, recent sales data, and their expertise in the local area. Estate agent valuations are generally free and can help sellers determine a suitable asking price. However, it's important to note that estate agents may have a vested interest in securing business and may sometimes provide optimistic valuations to attract sellers.
They consider factors such as:
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Comparable properties: Estate agents often look at recently sold properties in the same area to compare their prices and assess the value of the property in question.
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Location: The location of a property plays a significant role in its valuation. Factors such as proximity to amenities, schools, transportation, and desirable neighborhoods can impact the value.
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Property condition: Estate agents take into account the overall condition of the property, including any renovations or improvements that may have been done. A well-maintained property is likely to have a higher value.
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Market trends: Estate agents consider the current market conditions and trends when valuing a property. This includes factors such as supply and demand, interest rates, and economic indicators.
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Size and layout: The size and layout of a property also influence its valuation. Estate agents will assess the number of bedrooms, bathrooms, living spaces, and overall square footage.
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Unique features: Any unique features or characteristics of the property, such as a garden, a stunning view, or high-quality finishes, can positively impact its value.
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Local amenities: The availability of local amenities like parks, shopping centers, restaurants, and recreational facilities can affect the value of a property.
It's important to note that estate agent valuations can vary, and it's recommended to consult with multiple agents to get a fair understanding of the property's value in the current market.
Surveyor Valuations
Chartered surveyors are professionals who assess properties' condition and value. They provide independent, impartial, and detailed reports that are often required for mortgage purposes or more accurate valuations. Surveyors consider factors such as property condition, construction quality, potential issues, and the local market. Their valuations are typically based on a thorough inspection and professional expertise. Surveyor valuations carry more weight when it comes to obtaining financing or making major decisions about a property.
Surveyor valuations are conducted on behalf of mortgage lenders and adhere to standards set forth by the Royal Institution of Chartered Surveyors (RICS). A surveyor valuation may include:
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Detailed property inspection: A surveyor valuation includes a thorough inspection of the property, both internally and externally. The surveyor will assess the condition, structure, and overall quality of the property.
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Market value assessment: The surveyor will determine the market value of the property based on various factors such as location, size, condition, and comparable sales in the area. This valuation is crucial for mortgage lenders to determine the loan amount.
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Property description: The surveyor will provide a detailed description of the property, including its size, layout, number of rooms, and any unique features or characteristics.
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Defects and repairs: The surveyor will identify any defects, damages, or repairs that need to be addressed. They will highlight issues such as structural problems, dampness, leaks, or other potential risks.
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Valuation report: The surveyor will compile a comprehensive valuation report that includes all the findings from the inspection. This report will outline the property's current condition, market value, and any recommended repairs or improvements.
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Comparable analysis: The surveyor will compare the property to similar properties in the area to assess its market value accurately. This analysis helps in determining the fair market value of the property and ensures consistency in the valuation process.
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Compliance with RICS standards: Surveyor valuations adhere to the standards set forth by the Royal Institution of Chartered Surveyors (RICS). These standards ensure that the valuation is conducted professionally and ethically, providing accurate and reliable information to mortgage lenders.
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Professional expertise: Surveyor valuations are conducted by qualified and experienced professionals who have in-depth knowledge of property valuation methods, building regulations, and construction practices. Their expertise ensures a thorough and accurate assessment of the property.
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Additional advice: In addition to the valuation report, the surveyor may provide additional advice regarding the property. This could include recommendations for maintenance, renovations, or any potential legal issues that may affect the property's value.
Please note that this list is a general overview of what is typically included in a surveyor valuation. The specific details may vary depending on the individual surveyor and the requirements of the mortgage lender.
How a mortgage broker can help
With access to the entire UK lending market, we can provide tailored solutions that meet your specific needs and financial goals. At Money Helpdesk, we help people like you to navigate the complexities of the property market and find the best mortgage deal for their situation.
Whether you're a buyer or a seller, we understand the importance of staying informed about market trends and can help you make informed decisions. Whether you’re trying to overcome a down valuation, or would simply like advice on how best to avoid the scenario, get started today for advice and to take the first step towards securing the right mortgage for you.
FAQs
Unfortunately, mortgage down valuations are relatively common, with figures suggesting that around 15 per cent of remortgages experience them. They can be particularly common on new build properties due to the premium, which typically depreciates the moment you move in.