What To Do If House Valuation Is Less Than Offer: Avoiding A Down Valuation

Explaining what a down valuation is, how a house is valued and what to do if your house is valued at less than your buyer's offer...

Selling a house should be easy – choose estate agent, list on market, find buyer, accept offer and move. There’s nothing else that could possibly be added in, to make the process more confusing, right?

Not quite.

Between accepting an offer and moving, you have the conveyancing process to get through, during which there will be a valuation done on your house by the buyer’s house repayments lender.

The lender could come back and say your house is worth less than the agreed sale price, which really throws a spanner in the works.

If this is happening to you, do not panic! We’re here to talk you through all things down valuations, including how common they are and how they affect sellers.

We’re also going to talk you through what to do if your house valuation is much less than the offer – you’ll be glad to know you have a few options!

What is a down valuation?

A down valuation is where your buyer’s house repayment surveyor values your property at a lower price than you’ve agreed to sell your property for. The difference between the two figures (the agreed price and the valuation price) is the down valuation.

For example, if you agreed a sale price of £150,000 and the house repayment surveyor values the house at £130,000, then you have a down valuation of £20,000.

As a down valuation is a result of your buyer’s house repayments lender, you won’t find out about it until you’re a long way into the selling process, which does make things a little trickier.

The reason a down valuation would happen so far into the selling process is that once you’ve accepted an offer from a buyer, it then takes them a little while to apply for house repayments.

After that, it then takes time for a surveyor to visit the property, then there’s a delay before they write a report, which will also mean more delay until the report is read by the house repayment company and a valuation is then given.

How does a down valuation affect sellers?

Having a down valuation on your property can mean that the sale falls through, with your buyer no longer wanting to pay over the odds for your property and you unlikely wanting to renegotiate on pricing.

Or, as we’ve just hinted at, instead of losing your buyer, they may come back to you and ask to renegotiate on price. Of course, this will mean you have to take a price hit but should hopefully mean your sale will go ahead without further problems.

Another problem with receiving a down valuation for sellers is because you receive the down valuation so far down the line, if the likely happens and you lose your buyer, any initial potential buyers will probably have moved on and so you will have to start again and find someone new.

How is a house valued?

A house repayment lender will use a valuation process called the International Valuation Standards, which will produce what is known as a RICS-compliant house repayment valuation.

RICS is the Royal Institution of Chartered Surveyors and is a globally recognised professional body that offers qualifications to professionals, showing the standard of individuals with this qualification.

The following are taken into account when completing the valuation:

• The condition of the property

• The sold price of 3 or more similar properties in the local area

• The current market conditions

• The current levels of supply and demand in the local area

The survey and valuation done are completed on behalf of the bank, and not on the buyer or seller’s behalf. This means it won’t cover the same things you would expect in the homebuyer’s searches and shouldn’t be used in place of a full, in-depth structural survey.

The main aim of the valuation is purely to check the bank aren’t committing to lending too much on a property that isn’t worth it, as this would be too high risk and could lead to the bank being unable to get back the money lent on the property.

Ultimately, any valuation is the best guess of an individual as to what the property is worth and will differ across different people. The main aim is to get a rough idea that the property is definitely worth the agreed sale price, otherwise, it’s considered too risky to lend on.

Can you renegotiate a house price after valuation?

A buyer may look to renegotiate the purchase price with you, if their house repayment survey comes back at a lower value, meaning there’s a down valuation. For a buyer, this will mean that they will be unable to get a house repayment scheme and will therefore be unable to buy the property, unless they can renegotiate a lower price with you.

As a seller, you’re under no legal obligation to renegotiate house price but it’s up to you whether it’s in your best interest to take a price cut or to start fresh and try to find another buyer.

If you’re in a chain and are relying on your sale going through to be able to make a purchase, but don’t want to renegotiate and take a price cut, then we have a section coming up on ‘what to do if house valuation is less than offer’, which you can scroll down and have a read of.

How common is a down valuation?

It’s bad news for sellers as down valuations are actually very common.

In 2018, the BBC reported that down valuations were at their highest rate since the financial crisis in 2008, with online estate agent Emoov stating every one in five of its sales eventually experienced a down valuation.

As of 2020, house down valuations became even more common, with the COVID19 pandemic making lenders start to worry property prices may begin to fall in the coming future, especially as house prices have inflated large amounts over the pandemic, suggesting there’s soon going to be a fall in prices.

House prices are also selling at an average 13% lower than the asking price, making it more likely that a surveyor will undervalue a property to reduce the risk of the buyer struggling to make house repayments and the bank having to sell the property and not be able to make back the money they loaned out.

The reason homes are being overvalued when it comes to the asking price is because it’s in the estate agent’s best interest to give you the highest possible valuation for your property, in a hope that the property will sell for this price, giving them a better commission.

However, house repayment lenders have to take a more long-term cautious view, making it more likely they will be inclined to go towards undervaluing the property, which is what is causing more down valuations currently.

Worried about getting a down valuation, causing you to lose your buyer? Don’t panic – coming up next is what to do if house valuation is less than offer…

What to do if house valuation is less than offer

So, you’ve received a down valuation on your property, you don’t want to lose your buyer, but you don’t know what the best way is to move forward and need some help. You’ve come to the right place! Allow us to go through what to do if house valuation is less than offer…

Allow your buyer to find a new lender – One of your options when you receive a down valuation is to allow your buyer some time to find a new house repayments lender. As we mentioned earlier, the valuation is down to each individual’s guess so a different lender may value the property at the agreed sale price, meaning they’re happy to lend and the sale can go ahead. It’s worth bearing in mind though that it will take time for your buyer to find a new lender and there’s an extra 4-6 weeks after they’ve found the lender, to get a valuation, which just adds delays to the process

Find a new buyer – Another option you have after receiving a down valuation is to find a new buyer. This way you don’t have to renegotiate to a lower price with your current buyer and may be able to find a buyer who’s happy to put down a higher deposit if the valuation doesn’t match the agreed sale price, so the house repayments lender will be open to lending on the property. However, a downside of this is the time it will take to find a new buyer. There’s no guarantee you will be able to find a new buyer and when you do find one, it may take MONTHS to find another, leaving you stuck with no buyer and a house to sell

Renegotiate on price – Your buyer may want to renegotiate on price after receiving a down valuation, to bring the sale price in line with the valuation received. This will allow your sale to continue to go through. A downside of this, however, is that you will have to take a price reduction from what you thought you were getting to what you’re now able to get, which may leave you feeling disappointed

Sell to a quick house sale company – Your final option when it comes to receiving a down valuation is to sell to a quick house sale company. This will allow you to continue with buying your onward purchase and will mean you won’t have to rely on your buyer getting a house repayments scheme and don’t have to renegotiate on a lower price. A quick house sale company will buy your property from you using their own cash, making them a cash buyer and means there’s no chain below you.

Here at The Property Buying Company, we can be the answer to ‘what to do if house valuation is less than offer’ and buy the property off you for cash. We don’t charge anything and will cover all the costs for you, including the legal fees!

We can complete in a fast timescale of your choice and with us being a cash buyer we don’t need a house repayment scheme – meaning no need to worry about a low survey valuation on your property!

We have over 50 years combined experience and we’re rated excellent on Trustpilot, so we really are the safe buyer you need.

Don’t just take our word for it – give us a call or fill in our online form for a no-obligation CASH offer to get your property SOLD with no worry of a down valuation…