There are many reasons why property transactions collapse, but an increasingly common one is that a buyer finds that their lender down-values the property they intend to purchase.
There has been a “significant” rise in homes being valued at less than what buyers have agreed to pay, the UK's largest mortgage advisers have said.
These "down valuations", by lenders, can mean buyers having to pay thousands of pounds extra, up front, to avoid the sale collapsing.
UK Finance said lenders, which it represents, were right to ensure property values were realistic.
Other bodies are suggesting that lenders are being super-cautious as they are expecting a housing down-turn.
Whatever the reason, it doesn’t help you if you are selling your property and it gets down-valued by the buyer’s lenders.
When a down-valuation occurs, there are various scenarios that could unfold:
1. Your buyer tries to bargain the price of your property
Your buyer tries to bargain down the purchase price of the property by the same amount as the down-valuation. So, if your property purchase price was agreed at £150K, but then down-valued to £130K, your buyer may try and re-negotiate the purchase price to £130K.
2. Top-Up funds from the buyer
The buyer will have to top up the funds by the same amount as the down-valuation in order to get the lending. So, using the above example, they would have to put in £20K to keep the transaction alive.
3. The buyer approaches another lender
The buyer decides to approach another lender and get another valuation. This can set the transaction back considerably and there is no guarantee that the buyer will get another mortgage offer or that a new valuer will give the required valuation at the agreed purchase price.
4. Buyer loses confidence
The buyer loses confidence with the purchase and does not have the top up funds, so the sale falls through.
5. Marketing for a new buyer
You start the marketing process again for a new buyer and hope that their lender/surveyor comes through at the agreed sale price.
Down-valuations only occur when you are trying to sell to a buyer who is using mortgage finance.
These issues do not occur if you are selling to a cash buyer like ourselves.
We are increasingly hearing from property owners who are finding that their property sales are collapsing due to down-valuations.
If the sale has been going on for many months, there is not only tremendous disappointment, but a onward purchase may be in jeopardy.
If a chain has broken down, then the pressure on the seller to get a sale over the line is even greater.
This is where we can step in. As genuine cash buyers with cash in the bank, we can make an offer on your property and guarantee a completion date.
In a stagnating market, it can be a false economy to try and hang on to achieve what you believe to be market value for your property.
Sometimes, depending on your circumstances, sellers should just take a view of all the hassle and costs mounting up, and weigh those up against the clean and quick nature of selling to a cash buyer.
As professional property buyers, we understand that each person’s case and circumstances will be unique, and we pride ourselves on coming up with solutions that ensures property sellers can move on.
Cash really is king in the current market conditions, and, if certainty is your main requirement, then services like ours should be your first port of call, not when a sale breaks down - even more so if your property has any problems that may be identified in a survey and cause a down-valuation.
UK Finance, which represents the banking industry, said: “Lenders have a responsibility to ensure that the value of property taken as security on mortgage loans is current and realistic”.
The problem with this in the current stagnating market conditions is that surveyors do not have much evidence to go on due to lack of sales. This may mean they are even more cautious in their approach.
If you contact us, we make a no obligation cash offer for your property within 48 hours. You can put this on the table alongside other offers, and crunch the numbers to see which option is right for you.
Our offer remains valid for 7 days.
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