What can I do if my Mortgage Lender down values my property. How does this property Down Valuation effect my chances of getting a mortgage.
Property Down Valuation is infuriating to all concerned if it reduces the amount you can borrow from a Mortgage Lender. One of the first stages of grief is anger: turning on medical staff and question their professional opinions from an inner belief that you intimately knew the decreased and they were wrong in their assessments. A similar train of thought is commonly levelled at surveyors with your first-hand knowledge about your own property and how well the area has been doing.
It could well be the case that you are right but there are two agendas afoot here. Firstly Mortgage Lenders rarely carry out the valuation appraisals for a mortgage themselves, they hire in professional qualified surveyors. The surveyors are cautious by nature as over promising leaves them exposed to the Mortgage Lender’s legal team in the event of a mortgage default. The other is most experienced owners either have rose tainted glasses or over egg the pudding when stating their valuation figure down on the form to facilitate either the release of maximum mortgage or build in a buffer in case the surveyor knocks them down. This common wide-spread inflation is always there in the back of the Mortgage Lender’s minds. Remember a mortgage is secured lending against property so its value is key to Mortgage Lenders protecting their money.
What can I do to challenge the outcome of a Mortgage Valuation? Appeals process?
In my experience challenging a Mortgage Lender on the down valuations is fruitless. The Mortgage Lender hides behind the Surveyor who normally ask for unobtainable evidence. So unless properties sell like hot cakes who have no hope of adhering to their requirements for a challenge. The request is normally takes the following shape: provide written evidence of 3 sales in the last 6 months of the same property configuration in the very near vicinity (if not on the same street). An average value will then be taken.
Even if three properties have been sold in close proximity the assessment on this basis can be flawed. How so, well if your property is a Penthouse when referenced to three mid-block apartment values you will be disadvantaged. Similarly, if your house has had an extension.
Arrogance plans a big part too. Surveyors are like Head Masters they do not take kindly to be told they have made a ‘professional’ error of judgement. I listened to a lecture once from a Surveyor, who was contacted to a leading UK Mortgage Lender at the time, and they said something along the lines of …there is no such thing as a down valuation, we appraise the property at what it is worth, it’s the mortgage customer that has false pretences.
My Mortgage Lender used a desk top valuation (automated valuation model, AVM) to assess my property and it has come back inaccurate.
Desk top valuations are commonly used by Mortgage Lenders on remortgages. The way they work is a computer makes various house price inflation judgements (from when the property was bought, and at what price) cross-referenced with actual like-for-like recent property sales in the area. Their effectiveness is called into question particularly where the house density is sparse or when assessing streets with individually styled detached houses. If you can put together an explanation on some grounds other than ‘I think my property is worth more’ then you may be able to convince the Mortgage Lender to send out a valuer to assess the property in person. For example, your property has had major structure changes since you bought it. Redecoration, not matter how good, is unlikely to count as Mortgage Lenders will see this ‘improvement’ as purely cosmetic and subject to personal preferences.
What can I do to limit down-valuations?
Although I would condone it some Mortgage Applicants inflate a realistic price in the hope this will go unnoticed by the Surveyor. This can work provided it’s not over zealous as that may insult the valuer’s intelligence and have the opposite effect. So it’s a fine balance.
If you know a house in the same street has sold for an excellent price you could delay your remortgage application until the Land Registry reflects the sale.
Use a Mortgage Expert such as Niche Advice who through their experience can guide towards Mortgage Lenders with Valuers that often provide more favourable valuation outcomes.
In the case of buy to lets when the main fear is the expected rent that the valuer might downgrade Niche Advice could select Mortgage Lenders that work off the existing AST or visa versa.
And, do your homework reference Rightmove and Zoopla for a feel for your properties worth.
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Author: Richard Stokes
Richard Stokes is a partner at Niche Advice who are whole of the market Independent Finance Brokers In London. His role is very much focused on on Mortgage and Insurance products.