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‘We sold our house – then the bank knocked £100,000 off its value’

down valuations
down valuations

Have you lost your dream home because of a down valuation? Get in touch: money@telegraph.co.uk

Right at the peak of the pandemic-inspired race for space, Sarah and Jonathan Bright decided the time had come to get out of London.

With a growing family the couple wanted a bigger home, more outside space, better schools and to be closer to family.

They put their three-bedroom, end-of-terrace in Leyton, east London on the market in 2021 and were thrilled when prospective buyers flocked to see it. “We had queues of people lining up,” said Sarah.

The property was listed for £625,000. With multiple bidders their estate agent organised a sealed bids auction for four serious bidders – understandably, when the bids were revealed they went with the highest offer of £700,000.

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Simultaneously the couple, who were house hunting in Brighton, found a house they loved and could (just) afford, and had their offer accepted.

What could possibly go wrong?

Today, almost three years on, Sarah and Jonathan, both 42, and their two children, aged five and one, remain in London.

Their dreams of life by the coast were dashed when their buyers’ mortgage lender sent a surveyor to value the property. He stated that it was worth just £600,000, their buyers pulled out and they were left back at square one.

Three years on, down valuations – where a mortgage lender comes up with a price lower than the agreed sale price – are once again on the rise.

In a nervous, shaky market, where prices in some areas are falling and others are flatlining, surveyors tend to take a very conservative approach. Their agenda is to ensure that should the new owner get repossessed the bank – that is to say, the surveyor’s employer – would be able to get its money back. Down valuing is one way to achieve this.

Sarah and Jonathan Bright's dreams of life by the coast were dashed after a surveyor down valued their property
Sarah and Jonathan Bright's dreams of a new life in Brighton were dashed after a surveyor down valued their property in London - mauritius images GmbH/Alamy Stock Photo

It means homebuyers face the headache of their lender refusing to grant a mortgage for the agreed purchase price.

Meanwhile, those who need to remortgage could be squeezed into lower banded loan-to-value ratio products – causing their interest rates to surge.

When a down valuation happens, buyers can either raise the funds to cover the difference between the mortgage and sale price, ask the seller to lower their asking price or pull out of the sale entirely.

Jason Harris-Cohen, chief executive of house buyer Open Property Group, said: “Down valuations are an unfortunate part of the home-selling process and they seem to be rearing their head once again, with lenders keen to safeguard themselves in what continues to be a tricky environment with respect to the cost of borrowing.”

Laura Bairstow, of broker Gen H, added: “We have noticed a definite increase in down valuations, especially in instances where the borrower only has a 5pc or 10pc deposit.”

“We got quite far down the line of buying, and then the valuation came in,” said Sarah, who worked in talent management before having children.

“It really didn’t take into account what properties were selling for at the time or things like the condition of the house, which was good.

“We lost our buyers, and lost the house [in Brighton], and all our estate agent said was ‘wait three months and try again’.

“The whole thing is so arbitrary, it feels like it is all about the luck of the draw,” she said.

“Our neighbour, whose house is smaller than ours, sold for around £650,000 shortly afterwards; they didn’t get down valued to £600,000. It has definitely left us with a bitter taste in our mouths.”

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‘Advisers warned me I’d end up in negative equity’

As a first-time buyer Lea Turner found herself having to get her head around plenty of new financial concepts, from mortgage offers in principle to fixed versus variable mortgages.

Homes being down valued was also something she had never heard of – until it happened to her.

Lea, 38, wanted to relocate from Northampton, where she was renting, to west Manchester, where she could afford a house for her and her eight-year-old son and be closer to family too.

In the summer of 2021 she found a property she loved – a modern, four-bedroom, detached property with a big garden – and agreed to pay the asking price of £350,000. “I just fell in love with it,” she said.

lea turner
Lea Turner, 38, was shocked when her lender knocked £30,000 off the valuation of the house she was planning to buy - Instagram

Discovering that her lender thought it was worth only £320,000 was a huge shock. “It was crazy,” added Lea, who runs business membership community The HoLT and works as a LinkedIn trainer.

“The house was really nicely done and a lot bigger than the other houses of the estate so I thought the price was fair, but I couldn’t just find the extra money and I spoke to a financial adviser who warned me I could end up being in negative equity if I did.

“I wasn’t going to buy a house for £30,000 more than the bank was saying it was worth, so I had to pull out. It was incredibly stressful because I had thought it was going to happen and we’d be in by Christmas.”

At the same time, Dr Michele McDowell, a child psychologist, was planning a move from north London to Northampton.

She had no problem selling her two-bedroom flat in Kingsbury for £330,000, but buying a follow-on home was a nightmare

With her flat under offer, Michele, 53, found a house she loved – a three-bedroom terrace on the market for circa £280,000. To secure the property she offered £285,000 and started getting excited about the move.

Then the rug was pulled out from under her feet; her mortgage company valued the property at £275,000. Unable to bridge the gap herself by putting down a bigger deposit, Michele tried her luck with another lender. Its valuation came in at £270,000.

“My vendors were in a chain themselves, so they couldn’t afford to reduce the price, and I lost my faith in the house because the mortgage companies said it was not worth the money I had offered,” she said.

“It was incredibly stressful at the time because I had already got my flat in London sold so I was under a lot of pressure to buy somewhere quite quickly.”

Happily, Michele went into property search overdrive and found a larger and better located home which she paid £292,000 for. “The whole thing was traumatic, but it worked out really well in the end,” she said.