Home buyers desperate to climb the property ladder and sellers trying to move up the chain are falling victim to lower valuations.
Shortage in housing supply and rising demand have pushed home prices to new record highs.
In a clamor to be safe PropertyBuyers are now regularly bidding on the asking price for homes – but this means that under-appraisals are becoming increasingly common.
Down valuation is where you agree to buy a home at a certain price, but your mortgage The lender doesn’t think it’s worth that much.
Before agreeing on a mortgage, a property appraiser assesses whether the payments you have agreed to make are reasonable. If not – they give it less importance.
For example, if you agreed to pay £250,00 for a house, the appraiser may decide that it is only worth £240,000 and therefore mortgage The provider will only lend that amount.
The difference between the agreed and the appraiser’s price is called the “down valuation”.
That means buyers can’t secure it mortgage They want to, and sellers are being told that their homes are not worth as much as they expected, which also affects their next move.
If you find a down valuation, your lender may decide the risk is too high and withdraw it. mortgage offer, so you can’t buy the property.
Alternatively, it may still offer mortgageBut on a higher loan to value (reflecting a lower valuation), which means you’ll have to pay a larger deposit.
Paula Higgins, Chief Executive Officer homeowners allianceSaid: “This is difficult because homes are worth the price one is willing to pay and in a market where supply is low and demand is high, buyers are at odds what buyers are willing to pay.
“But this runs the risk of undervalued buyer mortgage lenders, adding to the delay and possibly moving the entire transaction down the line.”
She reveals three top tips for avoiding down valuations and making sure you’re not wasting time buying or selling. Property,
Determine actual selling price
a hot Property The market may see buyers paying over the asking price for properties, but it is important not to get bogged down in the ruckus.
Paula said many ordinary buyers are concerned that they need to buy now or theirs due to rising inflation and rising home prices. Pennies It won’t go that far in a few months’ time.
But buyers should be wary of paying too high – and sellers asking for too high a price.
Paula said: “If the seller needs to sell quickly without unnecessary delay, they need to talk to their estate agent about setting a realistic – not optimistic – sale price.”
One way for sellers to estimate a realistic asking price is to check what similar properties have recently sold in their area.
Don’t fall prey to sealed bids
According to Paula, the growing trend of “sealed bids” is causing further decline in valuations.
This is when potential buyers submit their offer in a “sealed envelope” by a specific date and time, so other buyers do not know which offers have been placed.
Paula said this process means a higher risk of buyers paying too much as they try to figure out what other people are offering and try to “win” a bid.
This can lead to inflated prices that do not reflect what has been done to other similar properties, and can cause problems in obtaining a mortgage if the lender questions the price.
Make friends with your estate agent
Despite living in the age of technology, Paula recommends making “friends” with her estate agent.
Developing a good relationship with an agent can keep you informed about new properties coming on the market before their listing goes live online.
Paula said: “Find out who are the best estate agents in your local area and be their best friend.
“This is especially important for first-time buyers because the market is so competitive.”
Many property agents will email homes that are coming on the market before visiting property websites like Rightmove and Zoopla.
So if you’re on their mailing list or speed dial, you can get a sneak peak before other buyers.
A first look can mean securing the home before it even goes on the market.
What to do if the value of a property is low?
The market is so hot at the moment, even if you are savvy, you could fall victim to a down valuation.
But that doesn’t mean the end of the road.
If you are a buyer, you can appeal the down valuation decision with the lender.
To do this you need to provide some examples of recent sale prices of similar properties nearby.
Another solution would be to increase your deposit amount, which lowers your mortgage’s loan-to-value ratio and can make it less risky for the lender.
You can also talk to the seller and explain the situation to see if they would be willing to lower the price – after all, if you can’t get a mortgage on it at that price, it’s likely. that other people will not be able to or.
If you’re a seller and your home has dropped in value, it can be incredibly frustrating – selling for less than you expected could affect what you buy next.
But then, there are options. First, you can put the property back on the market – you may be able to find a new buyer with a different mortgage lender who has a different opinion on the price.
You can reduce the price to the amount for which your buyer is able to obtain the mortgage.
Alternatively, you can wait to see if prices move up and you can sell for more later down the line – of course, the risk here is that prices could easily go down.
It Comes as the Bank of England increased interest rates From 1% to 1.25%, which means mortgage bills are set to rise by hundreds of pounds for millions of homeowners.
also warned inflation Could rise to 11% in October – higher than previously forecast.
But there are a few tricks that can help you save and climb the property ladder.
Sun spoke to buyer for the first time who excels in his day job As well as pulling pins to help her finance her first house of £185,000 at night.
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