Mortgage Valuation Lower Than Offer – What To Do

Mortgage valuation lower than offer is a common problem at the moment, with many buyers experiencing this issue. Luckily, there are a few options available to you if this happens, including renegotiating the purchase price with the vendor and putting down a larger deposit on the property.

In this article, we’ll talk you through all of the options that are available to you if you find that your mortgage valuation comes back lower than the offer you’ve made on the property.

What Is A Down Valuation?

If you’re planning to buy a property, it’s important to be aware of the potential for down valuations. A down valuation occurs when the lender values the property at a lower price than the agreed purchase price. This can happen for a number of reasons, but is usually due to market conditions changing between the time that the offer was made and the time of the valuation, or an offer being made that is more than the house is worth.

What Happens If House Is Down Valued?

The house market is currently moving quickly, meaning that many buyers are having to offer over the asking price to secure their dream home. However, if the mortgage valuation values the property at a lower price than you’ve offered, you’ll find that you’ve hit a stumbling block, so the lender may not be able to lend you enough money to buy the property.

If this happens, you have a few options available to you. The first is to try and renegotiate the purchase price with the vendor, which may be easier if the market has slowed down since you made your original offer.

If this isn’t possible or you’re not happy with the idea of renegotiation, another option is to put down a larger deposit on the home. This will mean that you’re borrowing less money from the lender and may make them more likely to approve your mortgage.

Another option is to look for a different mortgage deal with a different lender, which may allow you to borrow a higher amount of money. However, this option can be time-consuming and may not be possible if you’re close to exchanging contracts.

Whatever option you decide to go for, it’s important to remember that you don’t have to accept the mortgage valuation and can negotiate with the lender if you think it’s unfair.

What To Do If Your Mortgage Valuation Comes Back Lower Than Your Offer

If you’re in the process of buying a property and your mortgage valuation comes back lower than your offer, don’t panic! There are a few options available to you, including:

• Renegotiating the purchase price with the vendor
• Putting down a larger deposit on the property
• Appealing the valuation
• Find another lender

Let’s take a closer look at each of these options.

1) Renegotiate With The Vendor

This is probably the most common option and involves going back to the vendor and asking them to lower the price of the property. This can be a tricky negotiation, so it’s important to be prepared and have a good reason for why you think the property is worth less than the offer you made.

For example, if you’ve found that there are serious structural problems with the property that will need to be fixed, you’ll have a stronger case for renegotiation.

Whether the vendor chooses to accept a lower price will depend on how much of a hurry they are in to move and how much interest they had in the property when it was on the market.

2) Put Down A Larger Deposit

If you’re not able to successfully renegotiate the purchase price with the vendor, another option is to put down a larger deposit on the property. This will lower your loan-to-value ratio and may make it more likely that your lender will approve the loan.

For example, imagine you are buying a property for £200,000 and your mortgage lender has offered you a 90% mortgage. This means you’re paying a deposit of £20,000. If the property is down valued by the lender to £190,000, this means they will only lend you £171,000 – 90% of the value of the property. However, if you’re still paying £200,000 for the property, you’ll need to find that extra £9,000 from somewhere, putting down a deposit of £29,000 instead of the original £20,000 to make up the shortfall.

3) Appeal The Valuation

If you don’t think the valuation is accurate, you can always appeal it. This process involves getting a second opinion from another professional valuer. If the second valuer agrees with your original assessment of the property, you may be able to use this to get your lender to approve the loan.

4) Find Another Lender

If you’re not able to renegotiate the purchase price, put down a larger deposit, or appeal the valuation, your last option is to find another lender. This can be a time-consuming and frustrating process, but it may be the only way to get the loan you need. The best thing to do in this situation is to consult with a mortgage advisor who can talk you through your options and find out whether there is another lender available who will provide the funds that you need to complete the purchase.

How Common Are Down Valuations?

In the current property market, down valuations are becoming increasingly common. This is because there is a high demand for properties, but a limited supply. This means that prices are rising quickly, but valuations are not keeping pace with these increases.

If you’re in the process of buying a property, it’s important to be prepared for the possibility of a down valuation and to have a plan in place for what you’ll do if this happens.

Remember, a down valuation does not mean that you won’t be able to get a mortgage or purchase the property. It simply means that you’ll need to be prepared to negotiate, put down a larger deposit, or find another lender who is willing to lend you the money you need.

Can You Renegotiate A House Price After Valuation?

If the property that you are buying has been down valued, you might be wondering whether you can renegotiate the purchase price.

You can renegotiate a purchase price right up until contracts are exchanged, so there is plenty of time to have these conversations.

Of course, whether or not the vendor is willing to accept a lower price will depend on a number of factors, including how much they need or want to sell the property and how much interest there is in the property from other buyers.

If you’re considering renegotiation, it’s important to have a good reason for why the property is worth less than the original valuation.

Some common reasons for down valuations include:

• The property market has changed since the original valuation was conducted.
• The valuer made a mistake in their calculations.
• The property has been damaged since the valuation was conducted.
• The property was incorrectly described in the valuation report.
• The valuer did not take into account all of the features of the property.

If you have a good reason for why the property is worth less than the original valuation, you may be able to renegotiate the purchase price. However, it’s important to remember that the vendor is not obligated to accept a lower price and they may be unwilling to do so if they feel that the property is still worth the original price.

How Do You Avoid A Down Valuation?

If you’re worried about the possibility of a down valuation, there are a few things that you can do to try to avoid this.

1) Get A Good Mortgage Agreement In Principle

Before you start looking for properties, it’s a good idea to get an agreement in principle from a lender. This document shows how much they’re willing to lend you and can be used to show sellers that you’re serious about buying a property.

2) Use A Mortgage Broker

A mortgage broker can help you to find the best mortgage deal for your needs and can also give you advice on how to avoid a down valuation.

3) Get A Homebuyers Report

A homebuyers report is a survey that is conducted by a qualified surveyor. This report will highlight any potential problems with the property that could lead to a down valuation.

4) Get A Property Valuation

If you’re worried about the possibility of a down valuation, you can arrange for your own property valuation to be conducted. This will give you an independent opinion on the value of the property.

5) Make A Large Deposit

If you’re worried about a down valuation, you can try to make a larger deposit. This will reduce the amount of money that you need to borrow and could help to avoid a down valuation.

6) Wait For The Market To Recover

The property market is moving at record speed, so there is a lot of competition for properties at the moment. This is pushing prices up. Whilst there are no guarantees that the market will slow down any time soon, you may decide to choose to wait until the market recovers before moving house to reduce the chances of a down valuation occurring.

7) Don’t Overpay For A Property

The property market is currently extremely competitive, which can make it tempting to offer over the asking price to secure your dream home. However, this increases the chances that the property will be down valued and you will find it more difficult to get a mortgage.

Do Banks Undervalue Houses?

When you apply for a mortgage, the lender will need to value the property in order to determine how much they’re willing to lend you. The value that they give the property is known as the mortgage valuation.

In some cases, you may find that the lender values the property at a lower price than you have offered. This is known as a down valuation.

A down valuation can occur for a number of reasons, but it’s important to remember that the lender is not trying to undervalue the property.

How To Appeal A Down Valuation

If you think that the lender has made a mistake in their valuation of the property, you have the right to appeal.

To appeal a down valuation, you will need to write to the lender and state your case. You will need to provide evidence to support your claim that the property is worth more than the valuation.

If you’re unable to reach an agreement with the lender, you can ask for a second opinion from another lender.

The Bottom Line

If your mortgage valuation comes back lower than your offer, don’t panic! There are a few options available to you, including renegotiating the purchase price, putting down a larger deposit, appealing the valuation, and finding another lender.

The best thing to do in a ‘mortgage valuation lower than offer’ situation is to consult with an experienced mortgage advisor who can talk you through your options and help you find the best solution for your individual circumstances.