Down Valuations Cause an 8K Gap Between Buyers and Sellers

29 October 2022 | Finance, General

Recent data in the property market has shown that down valuations are leading to a ‘reality gap’ between buyers and sellers. Many mortgage brokers as well as estate agents have stated that there has been a significant increase in the number of down valuations in the past few months in the UK property market. Due to this, many deals have either fallen through or need to be renegotiated. So, what are down valuations, what is causing this reality gap of £8000 between buyers and sellers and what can you do about these down valuations? This is what the experts have to say.

First, let’s talk about what down valuation really is. For instance, a buyer and seller have negotiated the price of the property and they have both agreed on the sale price of £500,000. Now, the buyer will require a mortgage from his or her mortgage broker or lender in order to complete the purchase. However, if the buyer’s broker or lender feels that the property is not worth as much money as the buyer wants to borrow, the lender can opt for a property survey to get an idea of how much your house is worth. Let’s assume the value of the property drops by 4 per cent, in which case the property has been down-valued by £20,000, thus valuing the property at £480,000. This then causes a problem for the buyer as well as the seller who will have to renegotiate the selling price or both parties will have no choice but to explore other options.

Essentially, a down valuation happens when a mortgage broker or a lender decides to conduct a survey to find out the value of the property. Usually, this survey is conducted if the broker or lender feels that the value of the property is much lower than the original offer price. On average, in the UK, the average offer price for a property has gone down by 2.8 per cent which means that down valuations are causing almost an £8000 reduction in the valuation. In simple words, the difference between how much a lender is willing to give the homeowner compared to how much the seller feels the property is worth is around £8000. In the East Midlands, the down valuations have been the highest amounting to a whopping 3.3 per cent reduction. In Scotland, the down valuations have reached an adjustment percentage of 4.3 per cent whereas in East England the down valuation is causing a 2.3 per cent difference.

So, why are we seeing these down valuations in the UK market? For one, it is due to the instability in the property market as well as the impact of inflation. For buyers and sellers, especially ones who have already negotiated prices and are just waiting to sign on the dotted lines, these down valuations have been detrimental as they need to start the process of negotiation all over again. Some experts believe that this trend of down valuations is here to stay, at least for the near future due to the instability and uncertainty of the UK property market.

Essentially, what is happening is that sellers are setting high selling prices in order to make the most money on the sale of their homes. This is only possible because of the lack of supply and consistent demand. So, buyers have no choice but to match or go above the expected selling price if they want to buy a home before the mortgage rates start increasing. Again, this has a lot to do with the rising rate of inflation in the UK; as the rate of inflation continues to rise, the rate of interest will go up in order to curb inflation which in turn will lead to higher mortgage rates.

Now, what can you do if your property has been down-valued? As a seller, the best case scenario is to accept the new offer price as this reduces the hassle of finding a new buyer and going through the whole ordeal all over again. Alternatively, you could keep your property on the market and wait to see if the value rises in the future. As a buyer, you can get the property valued by another surveyor if you are not happy with the valuation or you could renegotiate the selling price with the seller and make a new offer.


  • Danielle Stone

    She has been writing professionally for 8 years, with articles published in various print and online publications. She is an avid researcher and strives to bring her readers the most up-to-date information and insights on the topics she covers. Danielle is also an expert on home renovation, interior design and construction, and she loves helping homeowners turn their dreams into realities. When she’s not writing or editing, Danielle enjoys spending time with her family, gardening and exploring nature.

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