Legal professionals share their view on significant rise in homes valued below sale price
The UK’s largest mortgage advisers have revealed a ‘significant’ increase in homes being valued below sale price.
Buyers who require a mortgage must instruct a surveyor who values the property they are intending to purchase as the banks are unlikely to loan the buyer more than the valuation price.
Surveyor’s valuations occur after a buyer and seller have agreed on a price, and if the value is less than expected, this results in buyers often having to pay thousands more than the property is worth in order to stop the sale from breaking down.
Digital estate agents Emoov have noticed a trend in homes being valued below sale price. Two years ago, fewer than one in 20 of its sales resulted in a down valuation, while today, one in five sales are being valued at least £10,000 below the agreed price and is the highest rate since the financial crash in 2008 – is this a precursor to another financial crash?
Paul Sams, Partner at Dutton Gregory Solicitors comments. He said: “At present, I would not say that we are seeing an awful lot of down valuations in relation to the residential properties we are dealing in which tend to be across the South of England. When they have occurred, it has tended to be in relation to new build properties where perhaps the developers have been slightly over ambitious but personally, I cannot say I have seen a down valuation of more than 4%. Because banks are taking the view that larger developers have a better “feel” for the market at where it is going and have always been hostile to smaller developers. This is shown by the larger banks not having the appetite to provide funds for smaller developers. Smaller developers who are needed to increase supply simply cannot raise the funds needed to build the homes this country apparently needs.
The fact that interest rates have risen today, in line with what is perceived to be a growing economy, would seem to counteract the doom-mongers who believe a crash is imminent. I am not suggesting that surveyors are affected by the heat I do find down valuations to be more prevalent at this time of year. The market, in general, maintains prices at the moment by a lack of supply so the basic laws of supply and demand will continue to control matters for the foreseeable future.”