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Is it possible to renegotiate if the mortgage valuation is lower than our original offer?

30 July 2021

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Whether buying or selling a down-valuation can cause issues for both parties. True Solicitors explain what a down-valuation is and what action you can take to mitigate any arising issues.

What is a down-valuation?

Put simply a down-valuation is when your buyer’s mortgage surveyor values the property for an amount less than the selling price that you agreed.

For example if you agreed a sale price of £170,000 but the mortgage valuation comes back at £160,000, this is a down-valuation of £10,000.

When will I find out about a down-valuation?

Unfortunately you will only get to find out a down-valuation once the surveyors mortgage valuation comes back. This can be up to 4-6 weeks after you have agreed to an offer. This is because once the buyers mortgage is approved it can take a while for their lender to arrange for a surveyor to visit the property to conduct an independent mortgage valuation.

What is the impact of a down-valuation for sellers?

If your property is down valued at the mortgage valuation stage, in the worst case scenario this could mean that you may lose the sale, putting you back to square one of having to find a new buyer.

The buyers may try to renegotiate a lower selling price with you, based on the surveyor’s valuation. You are not legally obliged to have to accept a lower offer, however if you are in the middle of a property chain and have had your offer on your next home accepted you may decide to accept a lower offer in order to move.

What is the impact of a down-valuation for buyers?

If you’re buying a property and receive a down-valuation this can be problematic when purchasing with a mortgage. This is because your lender will not be willing to lend you the amount of money that you offered to purchase the property. In order to avoid this issue you may have to do one of the following:

  • Renegotiate a lower offer with the seller.
  • Increase your cash deposit.
  • Negotiate a higher loan-to-value mortgage, which will include a higher rate of interest.

How are properties valued?

The Royal Institution of Chartered Surveyors (RICS) use the International Valuation Standards to conduct a mortgage valuation on a property. This takes into consideration factors including:

  • The overall condition of the property
  • The current supply and demand of property in the local area
  • The sale price of at least three similar properties in the local vicinity
  • An understanding of the prevailing market

It is important to note that a mortgage valuation is for the benefit of the lender (bank or building society) and not the seller or buyer.

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