A recent rise in lenders putting down valuations on properties, has lead to experts worrying about the future of house prices.
According to Emoov, one in five of its sales resulted in a down valuation. This is up fourfold from one in 20, only 2 years ago.
This is the highest rate since the UK’s financial crash in 2008, according to agents from 10 mortgage adviser groups.
Experts warn this is a result of surveyors ‘covering their backs’, as they are worried about a potential drop in house prices in the future.
However, the trade body for surveyors, the Royal Institution of Chartered Surveyors, insists that all valuations are independent and accurate.
So what is a down valuation?
- After a buyer agrees the price of a house with a seller, the mortgage provider uses a surveyor to check what they believe it is worth, to know how much to lend the buyer
- The surveyor, employed by a mortgage provider, looks at the sale price of similar properties locally, market conditions in the area and the current condition of the property
- If the surveyor believes the house is worth less than the agreed sale price, this is known as a ‘down valuation’
- This means that if the buyer cannot negotiate a new price for the house with the seller, they will have to find the remaining money up front or risk losing the house
Down valuations have been blamed for an increase in housing chains breaking down across the UK.
UK Finance, which represents the banking industry, said: “Lenders have a responsibility to ensure that the value of property taken as security on mortgage loans is current and realistic.”
“Although the valuation is carried out for the lender, borrowers also benefit from a realistic independent valuation as it could help them avoid paying over the odds for the property they are buying.”