After years of house price inflation, the property market may have turned, and prices appear to be coming back down to earth.
This may be bad news for property investments, but for anyone who wants to buy a home of their own it is very good news indeed. If you can afford mortgage payments with current interest rates, the home you want could be within reach once more.
But a falling market, has some challenges of its own, including one which has not been much seen for a decade or so.
The down valuation has returned. At Continuum we are looking at what it is, what it could mean for you – and how you just might be able to turn a problem into an advantage.
What exactly is a down valuation?
Part of the house buying process is the lenders valuation.
The bank or building society will want to be sure that the property you want to buy is worth the price you want to pay. The lender wants to avoid you falling into negative equity, which is when your property’s value plummets beneath their mortgage balance.
Lenders are cautious that if you were to default, they may not be able to sell the property for enough to recoup the loan they have made.
They will instruct a valuer, who will look at the prices of similar properties in your area and inspect your potential new home. If they believe that you are offering too much their report could limit what the lender is prepared to lend you.
Once rare, down valuations are now becoming common in today’s declining property market.
What happens next?
If the property you are looking to buy is down valued, you can just walk away from the property, with the cost of the valuation to pay to rub salt in the wound.
But if the lender is prepared to make an offer, even if it is less than you want, you may have some other options available.
- You could stump up a bigger deposit to bridge the gap between what you think it is worth, and what the lender, guided by the valuer thinks.
- You might be able to find another valuer, to make a detailed report on why the property is worth what you believe. This could be expensive, and there is no guarantee that the lender will accept their assessment.
- Or you could try to renegotiate the price down again with the seller.
In a rising market the last point is unlikely to work. There is always someone behind you willing to pay more, and the vendor can simply wait for another offer. But in the current market, where buyers are thinner on the ground and higher mortgage rates have made buyer budgets tighter, vendors may be more willing to negotiate, especially if they have a property they want to buy.
It may not be easy. Having made an offer and had it accepted, your negotiating position might seem shaky. But remember, the valuation was provided by a property professional, and so could be a fair one in the current market.
What else can you do?
If the vendor is not prepared to listen to a lower offer, and you are still desperate to buy that particular property, there may still be a way to make it yours.
If your current lender has down valued your property, call us at Continuum, and we will try to find a lender with a more flexible approach. It may be possible to buy your property for the price your vendor wants, with the loan you need.
In fact, our knowledge of the lending market may work for you whatever your buying situation. We can search mortgages from all the UK lenders. The chances are not only can we look to find a loan to make your buying plans possible, but we can also look to find one that costs you less.
Down valued or simply looking for the most suitable deal for a new home or a remortgage, call us today.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable mortgage products, you should seek independent financial advice before embarking on any course of action.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Down valuations on the rise – what to do if it happens to you – Times Money Mentor (thetimes.co.uk)
UK house prices likely to fall by 1% next year, says Rightmove (msn.com)
