The so-called ‘down-valuing’ of properties is becoming an increasing issue in the mortgage industry, several brokers have testified, with calls for improved transparency in appeals and a review of the entire process.
The Covid-19 pandemic is said to have caused a surge in properties being valued at less than they are worth, while some say the problem is being exacerbated by a projected drop in house prices following the end of the government’s stamp duty holiday on 31 March.
Online broker PropertyMaster’s chief executive, Angus Stewart, says: “Down-valuations are becoming an issue for some of our customers and this is causing very real challenges.
“For our customers it comes as a shock as they have been reading how property prices are surging ahead of the stamp duty deadline, but we have been expecting something like this for some time [and] so far we have been able to place all the business.
“Lenders and surveyors are looking ahead to a difficult economic situation post Covid with the end of the furlough and other government support, and don’t want to leave themselves exposed on house prices that may not be sustained.”
In November a survey by Bankrate UK found that 46 per cent of buyers had seen their prospective new home down-valued by mortgage lenders in the preceding six months.
Fosters Financial managing director John Foster says, in his experience, appeals on valuations are never successful.
“Down-valuations are a constant headache,” says Foster. “When they are appealed, they are never reviewed with a view to finding a way to make them work. Instead, lenders and surveyors use their niche and antiquated criteria to provide further reasons as to why it does not work. But when we see down-valuations as low as £1,000, is it worth it?
“In my opinion, the whole process desperately needs to be reviewed and replaced with a more market-based system. As a property is only truly ever worth what someone is prepared to pay for it, we should be looking at its merits and desirability and not solely focusing on the core detail.”
Coreco managing director Andrew Montlake agrees that appeals do not amount to any change in valuations.
“This issue usually comes to the fore more during harder times like these, where there is not as much clarity in the future direction of values after a tough economic event,” says Montlake.
“It is all very well when there is a different opinion on what a property is worth, but the biggest issue is valuers who stubbornly stick to their guns even in the face of other evidence.
“It is a well-known ‘joke’ that few valuers ever change their mind, but they should not be ashamed to do so after receiving more evidence.”
Montlake says he experienced a property that had an offer at £3.3m, with a number of other buyers eager to purchase at that price.
“The initial valuer came in at £3m, with no discussion, no communication and, even when we provided evidence to the contrary, refused to be drawn. The fact that £1m was spent on the property over the past 12 months, and another property was close to selling at £2.9m needing lots of work, was ignored,” he says.
“We re-placed the case and another valuer promptly valued it up at £3.3m and the case went through.
“I never hold myself out as knowing better than a valuer and in many cases a lower valuation is a good thing for the client and stops them overpaying. But unfortunately it does tend to be the same valuer companies that have the most issues and their refusal to communicate in any way borders on rudeness.”
Montlake says he communicates with lenders regularly on this point.
“You can’t look into the future and think everything will be worse,” he says. “For example, we had valuation issues at the start of 2020 and house prices rose 7 per cent.”
Housebuyers4u marketing executive Paul Gibbens says the longer the lockdown continues, the longer the problem may go on.
“If no new incentive comes from the government after the stamp duty holiday ends, it could lead to demand falling and house prices falling, leading to down-valuations,” says Gibbens. “If new strains of the virus keep coming, it could result in more [remote valuations], which could lead to further down-valuations.
“Post Covid, if house prices start to tumble and the media keep reporting on it regularly, there are real concerns that down-valuations will keep happening.”
However, mypropertyadvice.com founder and managing director, and former estate agent Marco Helliwell says he has not personally come across much down-valuing. He says when down-valuing does occur there are reasons behind it, such as the estate agent being disorganised.
“The most common scenario is that the estate agent has not got the comparables needed for similar sold properties in the area, or perhaps they are lazy and have not put the best case forward,” he says.
“Perhaps the surveyor has not been told a property does not have a share of the freehold, or not been told about an extra bit of land or parking space. This goes back to the broker and the estate agent being organised and very clear about the property,” says Helliwell. “Sometimes it may be due to the applicant’s situation, whether they are self-employed or in a higher-risk profession where the risks for the lender don’t weigh up and they down-value as a result.”
All agree that things are not always as they seem in property valuations but that communication is key to ironing out the issues.
“There is a balance here and valuers do a tough job and are right far more than not. However, I would appreciate the chance to discuss these once in a while,” says Montlake.
