Guides · Mortgage brokers
Down valuations: what sold prices can show
A down valuation happens when the lender's valuer puts the property at less than the agreed purchase price. The lender then lends against the lower figure, which leaves the buyer with a gap to fill.
Sold prices cannot overturn a valuation on their own. They can show whether the agreed price is in line with recent sales of similar homes, which helps you decide whether a challenge is worth making and how to advise your client.
What a down valuation is
A mortgage valuation is carried out for the lender, to confirm the property is adequate security for the loan. It is not a home survey and it is not advice to the buyer on whether to proceed.
The valuer is usually a RICS registered valuer instructed by the lender, often through a panel. They form a view of market value from comparable sales, the property itself and current conditions. That view is their professional judgement.
As an example, if the agreed price is £300,000 and the valuation comes back at £285,000, a lender offering 90% of the lower figure lends £256,500 rather than £270,000. The buyer must find the £13,500 difference, or the price must change. These figures are only an illustration.
Why down valuations happen
Valuers rely on completed sales. If the recent sales of similar homes nearby point below the agreed price, the valuation is likely to follow them.
Common causes include a price agreed in a competitive bidding situation, a market that has softened since the offer, a lack of recent comparables for an unusual home, and new-build premiums that resale prices nearby do not support.
Checklist
- Every sale on the street in the last twelve months
- Same-type sales in the postcode sector in the last six months
- Completion date and price for each comparable
- Size confirmed from the listing or the energy certificate
- The quarterly trend for that type of home
- The lender's own challenge process
What the sold-price record shows
Start with the street. List every sale there in the last twelve months, with the date, price and property type. Then widen to the postcode sector and look at homes of the same type sold in the last six months.
Compare the agreed price with those sales. If several similar homes sold close to the agreed price, you have evidence worth putting forward. If most sold well below it, the valuation is probably in line with the market, and your client is better served by a talk about options than by a challenge.
Look at the trend for that type of home in the postcode over recent quarters. A steady rise supports a price above older sales. A flat or falling trend explains why the valuer gave less weight to them.
The limits of the data
HM Land Registry's Price Paid Data has no bedrooms, floor area or condition. A three-bedroom and a four-bedroom terraced house look the same in the record. Check the listing history or the energy performance certificate to confirm the size of each home you put forward.
Sales take two to eight weeks to be registered after completion. The valuer may have seen more recent evidence, such as sales agreed that have not yet completed. Recent sales in your evidence may also be missing from theirs, so the dates matter.
Check the tenure as well. The record shows whether each sale was freehold or leasehold. A leasehold flat with a short lease can sell for much less than a similar flat with a long one, and the record does not show the lease length.
Challenging a down valuation
Lender processes vary. Most will consider a challenge sent through the broker with new comparable evidence. Many expect a small number of recent sales of similar homes nearby, at or near the agreed price. Some lenders accept evidence from the selling agent as well. Check the lender's own process before you submit.
Make each comparable easy to check. Give the full address, the completion date, the price, the property type and a short note on why it is similar. Explain any difference in size or condition. A challenge built on a few close sales carries more weight than a long list of loose ones.
The lender does not have to change the figure. The valuer may keep the original valuation if they judge the evidence does not support the agreed price.
Other options for the client
If the valuation stands, the client can put in a larger deposit to cover the gap, or apply to another lender, whose valuer may reach a different figure. The client may also ask the seller to reduce the price.
Sold prices help in a renegotiation too. The agent and the seller can see the same recent sales the valuer relied on. Our guide to estimating a home's value from sold prices covers how buyers and sellers read that evidence.
Using House Price Monitor
House Price Monitor's professional plan costs £15 a month and covers up to five postcode districts. It includes valuation packs: enter an address and property type to get a PDF of every sale on that street in the last twelve months, similar homes of the same type in the same postcode sector in the last six months, the postcode's quarterly trend for that type and a short written summary. Each PDF carries your firm's logo, name, phone and website. Your first report is free when you sign up.
Other guides
Using sold prices in a valuation appointment
Explaining a rising or falling local market to sellers