Deliberate Undervaluing

Estate agents are warning that property sales and remortgage deals are collapsing due to some mortgage lenders and surveyors deliberately undervaluing homes.

Homes are currently thought to be undervalued by an average of 10% according to the National Association of Estate Agents (NAEA), due to surveyors being overcautious.

The Royal Institution of Chartered Surveyors denies this, saying that the housing market is constantly changing and had lots of ‘imperfections’.

If the valuation a lender places on a property is lower than the agreed price, the lender may choose to offer a smaller mortgage, leaving the buyer without enough money to cover the asking price and causing the deal to collapse.

Lenders can also check property value when it is being re-mortgaged in order to make sure they aren’t lending more than it’s worth.

Same Valuer, Two Different Values

Peter Bolton King of the NAEA said: “They are perhaps worrying about the market and almost deliberately knocking off 10% almost regardless of what the property sold for.

“The other reason which I found more worrying, is that we are hearing anecdotally that lenders are giving specific instructions to their valuers as to how they should approach these valuations.”

Sellers are also feeling the effect of undervaluing as they may have to drop their prices. People seeking mortgages are also left with little or no flexibility.

One homeowner says that she had problems remortgaging her home: “The bank sent their own valuer who valued it at £80,000, but I knew it was worth far more so I paid £300 to get it revalued.

“The valuer came and said it was worth £100,000 but it was the same person that made the first evaluation.”

Unpredictable And Unreliable Time

Managing Director of independent broker Mortgage Talk, Andrew Frankish, said: “With the mortgages that are not completing, we believe up to half of them are affected by the valuation.

“What we mean by that is the valuation is coming back at lower than they predicted, which pushed them into a higher loan to value, which means the products are too expensive or the banks are reluctant to lend in that money at all.

“This is even worse than remortgages where around three-quarters of remortgages are affected.”

The Council of Mortgage Lenders says it works with professionals who are duty bound to give accurate valuations, but those who value homes also deny they are deliberately undervaluing them.

Royal Institute of Chartered Surveyors, Barry Halls said: “We are dealing with a market where there are lots of imperfections and there will be a range of valuations that the valuer will look at before they arrive at their opinion of value.

“That opinion of value could well be different from another opinion of value and could fluctuate over a period of time as well.”

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