What does this mean?
A down valuation is when a surveyor advises the buyer’s mortgage provider that the property is not worth the sale price that has been agreed. This is a relatively common occurrence, which is worth being prepared for as a seller and doing what you can from the initial stages of home selling to prevent this from becoming an issue further down the line.
What you can do prior to your listing being published
It is important to make sure that your property is listed at a fair price from the start, and not inflated through fear that potential buyers may try to negotiate the price down. Inflating the initial price may only deter potential buyers from viewing, restrict the size of the prospective market that can afford your home, and reduce the amount of buyer competition.
Moreover, if a buyer does make you an offer based upon an inflated initial valuation, and is using a mortgage, it is likely that their lender will down value the property later on, and unless the buyer is able to bridge the gap with cash, they will either have to withdraw from the purchase or you will have to reduce the agreed price in order for the sale to proceed.
Looking for the right buyer
When it comes to bank valuations, the report will be generated based upon the sale price of properties in the area, that are comparable in regards to the general layout and size. If you live in an area where the average selling price is £150,000 but you have just spent £20,000 on interior design, it is unlikely that this will be reflected in the valuation.
If this is the case and you are aware of the fact that your property may be down valued, but that this does not reflect the true value when taking into account the amount that you have invested, it is important that you are honest with buyers about this from the beginning, and that you make sure that they are able to purchase the property using a larger than standard deposit, so that they are able to bridge the gap between any disparities in the valuation and sale price.
Arranging a survey of your property prior to it going on the market
It may also be worth considering organizing a home buyers report prior to listing your property if you’re worried that some issues may crop up later on. This is a necessary requirement for homes being sold in Scotland, and can help you come to a more stable agreement with your buyer prior to the solicitors beginning the conveyancing process, which will in turn save time and money for you and the buyer by preventing further negotiations later into the sale.
What can I do after the property has been down valued?
Decrease the agreed sale price
When a home is down valued and your buyer is unable or not willing to bridge the gap between the valuation and agreed on sale price, rather than putting your property back on the market straight away, it is always worth having a direct conversation with your buyer to see if compromise can be made on both sides to come to a newly agreed price, especially if your sale is time sensitive and an onward purchase depends upon it.
Order your own survey or home buyers report
You may wish to order your own homebuyers report or structural survey so that you are able to see in more detail the changes that need to be made to your property, in order to increase the value of your home in the eyes of the lenders.
Put the property back on the market and wait for a cash buyer
If you are not under any pressure time wise, and wish to re-publish your property in order to achieve the original sale price rather than negotiate, you can do so straight away. You should, however, make sure that any future interested parties are cash buyers, or have a larger than average deposit, as any future surveys will most likely generate the same results, and you wouldn’t want to be in the same position twice.