How has a volatile mortgage market impacted valuations?

With the market enduring a difficult period, the topic of down valuations on housing prices has been on the lips of many. However, one expert said the real question is whether valuations are reaching expectations.

The pandemic saw house prices sky rocket; and despite prices slowly creeping back down in recent months, one expert said many sellers are hanging on to the perception of their properties’ worth based on the previously seen record highs.  

Down valuations – expectations

Malcolm Webb (pictured left), technical director at Legal & General Surveying Services, said it is important to note that lenders do not down value property.

“We have been through a volatile market, which can mean that valuations do not always reach expectations; valuers have to reflect the market and if the market is not performing as well, this can have an impact on values,” he said.

Webb said that it is important for sellers to have discussions with their estate agents on the best marketing strategy for their property. Estate agents will be close to the market and therefore will understand the complexities of it.

“We often see property as an investment, but it is an emotive subject as it is also our home – however, sellers must be realistic when it comes to their expectations around valuations,” Webb said.

Down valuations – market conditions

Webb said that when the market was performing ahead of expectations, people were over paying on properties to secure them.

Now with pressure on household incomes and the rising cost-of-living, he added that purchasers are likely to be more cautious.

“This has the impact of slowing the market down and properties taking longer to sell; we are now seeing lower offers being accepted on properties rather than them reaching full asking price, or more,” Webb said.

Down valuations – brokers react

Lewis Shaw (pictured centre), owner and mortgage broker at Riverside Mortgages, said when it comes to mortgages, there is no such thing as a down valuation, only overpriced homes.

“There has been an uptick in expectations falling short that will probably continue as prices cool following two years of breakneck growth,” he said.

Shaw believes that as long as estate agents price properties sensibly and vendors understand that the market has changed, everything should carry on without too many problems.

“However, it does cause issues when a vendor has had their expectations mismanaged because we know, psychologically, it can be difficult to move on from the initial price suggested,” he added.

In those circumstances, Shaw said there are three options; accept the chartered surveyor’s professional valuation and reduce the purchase price, pay over the odds and alter the loan-to-value (LTV) of the mortgage, or pull out of the transaction.

Elliott Benson (pictured right), owner and mortgage broker at Sett Mortgages, said he did not notice a marked increase in down valuations in the final quarter of 2022, or when moving into the new year.

“The options really are either the vendor reduces in line with the new valuation, the buyer and vendor meet in the middle pricewise or the buyer puts in enough deposit to cover the whole shortfall,” he noted.

In the worst case, Benson said the vendor might decide to remarket the property if a resolution cannot be brokered, but added that there is generally little point as there will need to be another mortgage valuation done that might come back with the same result.

Have you seen an increase in down valuations this year or during the back end of 2022? Let us know in the comments below.