Down valuations leaving £8,000 shortfall on property offers - claim

Properties are being down valued by up to 5% in some areas of the UK in the sign of a housing market slowdown.

Buyers and sellers are having to negotiate average shortfalls of £8,000 as a result of down valuations by lenders, research claims.

Research from quick-buy firm HBB Solutions, based on an average UK house price of £286,397, found that sales subject to a down valuation are being hit to the tune of a 2.8% reduction. 

This means that there is a £7,978 shortfall between the sum a lender is willing to lend and the price expectation of the seller. 

In this instance, the seller has no choice but to lower their asking price or hope the buyer will increase their offer.

With the average buyer placing a 25% deposit to the tune of £71,599, a £7,978 increase pushes the required deposit pot up to 27% of the property's value. 

The biggest down valuation adjustments in percentage terms are in the North East, where a 4.8% reduction is causing a price gap of £7,638 between buyer and seller. 
The largest monetary down valuation adjustments are in the East Midlands, where a 3.3% reduction is causing a price gap of £8,109, according to the research.

Chris Hodgkinson, managing director of HBB Solutions, said: “Down valuations are a worst case scenario for buyers and sellers who have already danced the dance to agree a sale price on a property. Unfortunately, they can be a common occurrence and one that is only going to increase as the market enters a period of heightened instability. 

“What we’re currently seeing is that the market is starting to slow from a house price appreciation point of view. 

“What we’re not seeing is recognition of these changing market conditions from the nation’s home sellers, who remain intent on securing the highest price possible for their home. 

“At the same time, low stock levels mean that many buyers are still meeting them at this inflated price point in order to secure a home and before the cost of a mortgage climbs any higher.”

Following a string of interest rates, Hodgkinson said many mortgage lenders are now starting to get cold feet and reduce their rate of lending in anticipation of things to come.

He said: “The result of which is a far greater number of homes being subject to a down valuation and by quite a margin, leaving home sellers and buyers to go back to the drawing board in order to get an offer finalised.

“In order to do so, the buyer either needs to increase their mortgage deposit and quick, a task that many struggle to do having already saved for years to enter the market in the first place. Or the seller needs to accept the lower price for their home which, again, many aren’t willing to do.”

Chris Hodgkinson, managing director of HBB Solutions, said: “Down valuations are a worst case scenario for buyers and sellers who have already danced the dance to agree a sale price on a property. Unfortunately, they can be a common occurrence and one that is only going to increase as the market enters a period of heightened instability. 

“What we’re currently seeing is that the market is starting to slow from a house price appreciation point of view. 

“What we’re not seeing is recognition of these changing market conditions from the nation’s home sellers, who remain intent on securing the highest price possible for their home. 

“At the same time, low stock levels mean that many buyers are still meeting them at this inflated price point in order to secure a home and before the cost of a mortgage climbs any higher.”

Following a string of interest rates, Hodgkinson said many mortgage lenders are now starting to get cold feet and reduce their rate of lending in anticipation of things to come.

He said: “The result of which is a far greater number of homes being subject to a down valuation and by quite a margin, leaving home sellers and buyers to go back to the drawing board in order to get an offer finalised.

“In order to do so, the buyer either needs to increase their mortgage deposit and quick, a task that many struggle to do having already saved for years to enter the market in the first place. Or the seller needs to accept the lower price for their home which, again, many aren’t willing to do.”