House buyers caught in shortfall trap as ‘down valuations’ soar
THE rise in the number of homes being valued at less than the amount that buyers have agreed to pay has been blamed on estate agents overpricing property to get business.
Such “down valuations” can result in buyers having to stump up thousands more than a property is worth in order to secure the deal or being forced to allow the sale to collapse.
Buyers with a mortgage must have a surveyor carry out a valuation of the property on behalf of the bank loaning them the money in case the home has to be sold to repay the loan. The bank or building society will not loan the buyer more than the valuation price.
Both London and Country, the mortgage advisers, and Emoov, one of the UK’s largest digital estate agents, told the BBC last week that down valuations were on the rise, suggesting that one in five was now being valued at least £10,000 below the agreed price.
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Russell Quirk, the chief executive of Emoov, blamed surveyors for “simply covering their backs” and “prophesying a [financial] crash”.
But Ben Elder, global director of valuation at the Royal Institution of Chartered Surveyors, told The Sunday Telegraph that agents had persisted in pushing ahead with high valuations despite the market cooling.
“Agents have no obligation to act objectively,” he said. “They are often bidding against each other to get work, so the price can get pushed up because of that and then does not reflect the hardening of the market. Their priority is to get the sale in the first place.” Mr Elder rejected the suggestion that surveyors were in some way trying to cover their backs, insisting that they acted entirely independently and could face legal ramifications if they inaccurately valued a property.
“It’s a market place and all the players have different roles,” he added.
“But the valuer is responsible for interpreting the market and faces having to defend the figure it places on a property in a court of law if necessary. If you don’t reflect the changes in the market in the valuation process, you get an over-valuation, people go into deficit and the house has to be sold.”
He added: “The market is not going to be effective until the supply and demand ratio is more even than it has been over the last few years.”
Mark Hayward, CEO of NAEA Propertymark, said: “We are seeing a bit of this at the moment. We are not predicting a crash, but valuers are being cautious. The market is in a nervous state.”