Down valuations – lost in translation?

In recent weeks and months I’ve spoken lots about a term which continues to raise the ire of some brokers and I make no excuses for attempting to further establish why ‘down valuations’ are so misunderstood.

Related topics:  Blogs,  Mortgages
Matthew Cumber | Countrywide Surveying Services
8th June 2022
Matthew Cumber Countrywide
"The overriding, and reassuring, point that emerged throughout this discussion was a clear need for all links in the mortgage chain to be more closely aligned and offer greater transparency"

The most fundamental aspect of this is a lack of knowledge/awareness of how valuations are undertaken and the reporting mechanism behind this. To be fair, it also doesn’t help when you see headlines such as ‘The bank knocked £35,000 off the price we agreed: Mortgage lenders put the brakes on runaway house prices with a surge of down valuations’ in the national press but that is something we have sadly become accustomed to.

So let’s clarify a few things around the valuation process.

My first point is that a mortgage valuation is a limited check carried out to ensure the market value of the property is at or above the price being paid for it and to calculate the loan the lender is able to offer.

It’s also vital to point out that lenders do not tell valuers what to do and they certainly don’t tell valuers to undervalue certain properties or influence this process. The valuation report is normally carried out by an RICS Registered Valuer who has a duty to report the market value independently and accurately to the lender. All RICS valuers in the UK are regulated by RICS against international valuation and ethics standards.

In short, valuers can’t and don’t speculate on the value of individual properties according to what someone might be willing to pay. The market value is based on comparable market evidence, which will typically refer to recent transactions of similar types of properties in the local area, other economic indicators and also the professional’s knowledge of the local market and economy. Although, for some reason, this is a message which seems to be getting lost in translation.

As such, it was great to see our recent webinar on this particular subject attract a record audience and this shows what an emotive and highly divisive issue down valuations is. To help establish how a wide ranging audience of lenders, brokers, surveyors and other property professionals within the industry view this topic we also conducted a poll which generated some wide ranging opinions. It found that (52%) of the audience thought that down valuations are either ‘very or quite prevalent’ in 2022. Almost a third (31%) highlighted that there was ‘no change’ from before, 14% suggested that they were ‘not very prevalent’ with 3% believing that down valuations hardly ever happen.

When asked the question – down valuation, myth or fact? – the audience’s response was largely mixed with 36% saying that they thought this was a fact and 31% responding that it was a myth. In addition 21% thought it was both myth and fact with 12% believing it to be neither.

The overriding, and reassuring, point that emerged throughout this discussion was a clear need for all links in the mortgage chain to be more closely aligned and offer greater transparency in the way we look and advise on property. This is something that we, as an industry, must identify, understand and overcome in order to move forward in a positive manner.

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