House Down Valued? Here’s What Happens Next
You’ve found the house, your offer has been accepted, and after weeks of searching and arranging viewings, things are finally starting to feel real. Then your mortgage lender comes back with a valuation that’s lower than the price you’ve agreed to pay.
It’s not exactly the update you were hoping for, but it doesn’t necessarily mean your purchase is over.
This is known as a down valuation, and it can affect how much your lender is prepared to lend you. If it happens, the important thing is understanding what the valuation means for your mortgage and what options you have from here.
What is a down valuation?
When you apply for a mortgage, your lender will arrange a property valuation. This helps them decide whether the property represents suitable security for the amount they’re being asked to lend.
In some cases, the lender’s valuation won’t match the price you’ve agreed with the seller. For example, if your offer of £200,000 has been accepted but the lender values the property at £190,000, you’re dealing with a £10,000 difference.
That difference can affect the mortgage you were planning to use to buy the property.
What could it mean for your mortgage?
Let’s say you’ve agreed to pay £200,000 and have planned your deposit and mortgage around that purchase price. If the lender believes the property is only worth £190,000, it may base its lending decision on the lower figure.
This could change the amount it is prepared to lend, leaving you with a potential shortfall to deal with.
What happens next will depend on your circumstances:
You may be able to renegotiate the price with the seller
Contribute more of your own money
Explore whether another mortgage option is appropriate
Before deciding anything, however, it’s worth understanding why the lower valuation happened in the first place.
Why do down valuations happen?
There isn’t always one obvious reason; a valuer will consider factors such as the property itself and evidence from comparable homes, including recent sales in the area.
If similar properties have been selling for less, the valuer may decide that the price you’ve agreed is higher than the property’s current market value. The property's condition can also have an impact, as can changes in the local property market.
Competition between buyers can also play a role. If several people are interested in the same property, offers can rise above the asking price, but that doesn’t necessarily mean the lender’s valuation will rise with them.
Can you renegotiate with the seller?
A down valuation may give you a reason to go back to the seller or estate agent to discuss the agreed price.
If you’ve offered £200,000 but your lender has valued the house at £190,000, the seller may be willing to reduce the price or meet you somewhere in the middle. They are under no obligation to do so, however, and they may decide to stick to the original amount.
It’s worth remembering that you’re not under an obligation to continue at the original price either. Before deciding what to do, consider what paying more than the lender’s valuation would mean for your deposit, mortgage and overall finances.
What if the seller won’t reduce the price?
This is where getting advice can be particularly useful, because a lower valuation doesn’t always leave you with one simple choice.
Depending on your circumstances, you may be able to increase your deposit or explore whether another mortgage option could work. In some situations, there may also be grounds to request a review of the valuation, although there’s no guarantee that this will result in a different figure.
So, rather than immediately putting more of your savings into the purchase, speak to your mortgage adviser. They can look at the valuation alongside your mortgage application and explain which options may realistically be available to you.
Does a down valuation mean you should walk away?
Not necessarily, but it is something you should take seriously.
When you’ve spent weeks searching and finally found somewhere you can picture yourself living, walking away can be difficult to contemplate. At the same time, your first home is a major financial commitment, so it’s important not to let the excitement of having an offer accepted override the numbers.
Understanding why the valuation is lower and what continuing at the agreed price would mean financially can help you make a more informed decision. For some buyers, renegotiating or finding an alternative solution may allow the purchase to proceed. For others, deciding not to proceed may ultimately make more sense.
What should you do next?
A down valuation isn’t the news any first-time buyer wants after having an offer accepted, but it doesn’t automatically mean you’re back to square one. Before making any decisions, find out exactly how the valuation affects your mortgage and what options are available based on your circumstances.
At First Time Buyer Mortgages, we specialise in helping first-time buyers understand their options and navigate the unexpected parts of buying their first home. If you’re unsure what a lender’s valuation means for your purchase, speak to our team, and we can help you work out what comes next.
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