Down valuations are “increasing as lender caution takes hold”, Self Employed Mortgage Hub founder, Graham Cox, has warned.
Cox explained how he had a client buying a £285,000 house, only for the lender’s surveyor to value the property at £250,000.
Cox was not alone in noticing this as R3 Mortgages founder and director, Riz Malik, also shared a personal account: “I just reviewed a report for a two-year-old new build that valued the property at over 40 per cent below the client’s expectation.
“From the report, it was clear that a shortage of comparable sales played a major role in this down valuation.”
Cox predicted that this would continue in the future, saying: “It’s likely we’ll see a slow and steady fall in house prices for the next year at least.”
Additionally, Malik acknowledged that, in an active market, current sales data can bolster a property’s valuation but warned that, as the market slows down, “this task becomes more challenging”.
Lawson Financial Ltd director and mortgage adviser, Michelle Lawson, commented: “Down valuations are cyclical but always seem to be coincidentally in tune with when there is something economic happening or a hidden driver."
She explained she had seen a down valuation last week of £25,000 on a flat in a university city in the South East from £175,000 to £150,000, making that property the cheapest in the city.
“I could list endless stories of inconsistency and inaccuracy but we are always told that the lenders’ hands are tied.”
She added that: “The whole process needs overhauling and, in my opinion, this has to come from the lenders to a point.”
Additionally, The Mortgage Expert mortgage expert, Darryl Dhoffer, argued that down valuations are becoming the norm.
He added that, while the surge in down valuations could be “legitimate in some cases”, where sellers just expect higher values, “I feel a sense of third party interaction with Rics and possible government intervention to stall the market”.
Similar concern was shared by Shaw Financial Services owner and mortgage expert, Lewis Shaw, who said: “There are very few genuine down valuations: it’s mainly overpriced properties.”
Shaw added that: “The problem at the moment is many sellers are still failing to understand that houses are worth less as each month passes.”
Offering some advice, EHF Mortgages managing director, Justin Moy, commented: “This is where we need to coach our clients to be realistic, not optimistic, about property prices.”
Thanks to the Newspage community for sharing their thoughts with FTAdviser
tom.dunstan@ft.com
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