The property market in the UK has been notably active in the last year, as market values skyrocketed through increased demand over 2021. Today, houses are valued 10% higher than they were just a year previous – but this relative volatility has also seen an increase in difficulty with closing sales, particularly in relation to valuation.
In 2021, around 400,000 properties were affected by low valuations, making it a not-insignificant issue for the market. Before we continue, it is important to understand exactly what a valuation is in relation to the sale of a property. Valuations are independent property value calculations carried out by accredited property surveyors for a specific purpose – typically as evidence in the securing of a mortgage or loan for purchasing a property.
Valuations are often confused with appraisals, which are less formal indicators of property value offered by estate agents. Appraisals are less robust than professional valuations, but nonetheless based on important factors such as the state of the property and its location. Here, though, we are concerned with the former. What can cause a low valuation, and what happens when one occurs?
What a Low Valuation Means
On occasion, it can come to pass that a property has been valued by a professional surveyor, with the result being a value less than the listed price of the property. The first thought might be that the valuation is biased, incorrect or skewed – but it is important to remember that the asking price for the property in question is set by the seller, based on appraisals given by estate agents.
As discussed above, appraisals are a less formal indicator of value, using basic metrics to determine a useful range of prices. If a surveyor returns a lower market value than the listed price, this new figure will be based on deeper scrutiny into the property and existing market.
What Happens Next
If a low valuation is returned, this can be problematic for both buyer and seller. As a buyer, you may have agreed a higher sale price with the seller before the valuation was returned to the lender; with your mortgage provider only willing to lend up to the value as opposed to the asking price, you may have no option but to drop out of the purchase. Likewise, if as a seller you are set on your asking, price, you may have to wait for another potential buyer to come along. It is possible to appeal the valuation as a seller, but the success rate is low.
Managing a Low Valuation as a Seller
As a seller, it is important to note that a low valuation is not the be-all and end-all. If you are landlord with a professional letting agency, your property will be up to code and well-maintained – something which works in your favour regarding questions over condition. In this case, you may be justified in sticking to your asking price. However, it is also important to remain flexible; remaining on the market can further lower your property’s value, and re-negotiation could be your best chance at a quick sale.
Can a Low Valuation Benefit the Buyer?
A low valuation may stymie progress for the sale as it stands, but it can be beneficial to the seller if managed correctly. The valuation can be used as a bargaining chip by which to re-negotiate the price – or even to negotiate repairs and additional work before sale, especially if it relates to the condition of the property.
