What To Do When The Mortgage Valuation Is Lower Than The Purchase Price

When The Mortgage Valuation Is Lower Than The Purchase Price
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If you want to know what you can do when you get a mortgage valuation that is lower than the agreed property purchase price, then this article will help.

Buying a home can bring up many challenges, one of them can occur when the mortgage valuation is lower than the purchase price.

Essentially, when a mortgage lender finds that the property’s value is less than the borrower is expecting, then this will be referred to as ‘down valuation’.

Using our experience of buying and selling several properties over the years, we will explain what option you have when your dream home is down valued and why it can happen.

Handling a down valuation

Having your dream home down valued as part of the mortgage valuation can be distressing at first, because you might fear you will lose it. However, that doesn’t necessarily happen.

There are ways to deal with a mortgage valuation that is lower than the agreed purchase price.

1. Check your finances

when the mortgage valuation is lower than the purchase price - It is not easy for neither party when you get a down valuation. Take that into consideration.

If the property you want to buy has been down valued, the first thing you should do is to check your finances. Are you able to still buy the house despite the down valuation?

The thing to keep in mind here is that the mortgage amount you are looking to borrow will be based on a percentage of the home’s value. This means, if the property has been down valued, the lender will be looking to reduce how much they are willing to loan.

In order to still be able to buy the house you can:

  • Increase your deposit to cover the gap between the valuation and the purchase price
  • Find another source of funding (gift from family or friends or a bridging loan)

This will reduce the loan-to-value (LTV) ratio and the risk for the lender, but it will also increase your upfront costs and reduce your savings or equity.

If you aren’t borrowing up to your limit, you could apply for a higher LTV mortgage. To compensate for the difference between downgraded valuation and agreed purchase price, you could increase your loan-to-value.

However, this means that the monthly payments will increase, so it is important that you make sure you can still afford the higher mortgage payments. In our experience, this is not a decision that you should take lightly.

Stretching yourself too much could cause you problems down the line. For example, when your fixed-term deal runs out, and you have to remortgage. If mortgage rates have risen, you might end up with higher monthly payments, which you might not be able to afford.

2. Challenge the valuation

Not every lender is open to appeals. They are also unlikely to be successful, but some may be willing to let you appeal their valuation. This is where you’ll need to do your homework and seek out evidence of what similar homes sold for in the area.

You can also ask the lender about the details of the valuation and ask, for example, whether the surveyor checked inside the property because they may not be aware of major renovation repair work to boost its value.

This might be a long shot, but if you just can’t adjust your finances, it might be worth a try. But be prepared for it to fail.

3. Renegotiate with the seller

If your finances don’t allow you to absorb the difference and the appeal against the lower valuation has not been successful, you can try to renegotiate the price with the seller.

This will be a difficult conversation, but having a lower value valuation isn’t just a problem for you as the buyer, but also for the seller. It is likely that a new buyer who needs a mortgage will have the same problem.

This will limit the buyer pool to cash buyers or people who don’t need a mortgage. It’s worth pointing this out to the seller during the negotiations.

Also, if the seller has already found somewhere else to buy and doesn’t want to delay moving, then they may be willing to renegotiate.

4. Reapply for a new mortgage

If all the above fail, but this property is your dream home, then you can try to reapply for a new mortgage with a different lender.

Again, they will require an independent valuation that you’ll need to pay for. There is a chance that a different surveyor won’t down value the property. However, there is also a chance that you encounter the same problem.

It’s important that you never lose sight that the final say on a property’s valuation will always lie with the mortgage lender’s surveyor because they have more information to hand, and they have a professional obligation to deliver an informed and accurate valuation.

Before moving on, it’s also worth highlighting that should an independent surveyor down value the property you want to buy, then this is also in your interest because you will not be paying more than is necessary for a home that is not worth what you think it is.

You should also consider that this could have an impact on your credit rating. While a second application shouldn’t stop you from getting another mortgage, you can’t just continue to apply for a new mortgage until you find a lender that values the property in the way you want.

So before you apply with a different lender, we would advise you to speak to an independent mortgage adviser.

5. Discuss with the lender if there is a solution

Our Mortgage Survey Failure Reason
A snippet of our mortgage valuation that found issues with our desired property

Depending on why the property was down valued, there might be a way to still get the money you want to borrow. For example, if there is a structural issue, the lender might agree to something called a retention.

A retention is where they withhold part of the mortgage amount until specific work has been carried out.

When we bought our last home we had a bad mortgage valuation that caused us to have to pull out of the sale altogether. Unfortunately for us, the mortgage provider didn’t just down-value the property we wanted – they refused to give a mortgage on it at all!

You see, they found structural issues with the property where an upper floor extension had been built on top of a garage that wasn’t built to take the weight. We were prepared to do the work required to make the property structurally safe and asked the mortgage provider if they would give us the mortgage but with a ‘retention’.

However, they wouldn’t entertain this and just flat out refused to give us a mortgage, meaning our only options were to either pull out, or try and find a new mortgage provider who would overlook the issue. We chose to pull out.

It is worth contacting your lender after your property has been down valued to find out why exactly and if there is anything that could be done.

6. Pull out of the sale

The last resort will be that you have to pull out of the sale. If none of the above work, then this is the final option. We know it can be heartbreaking to lose the house you have fallen in love with, but sometimes it can’t be avoided.

And who knows, you might find a property that fits your needs even better. This happened to us after we had to withdraw from the house that the lender didn’t want to give us a mortgage for.

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Why a property gets down valued

When the mortgage valuation is lower than the purchase price, it can cause a lot of hassle for a buyer. To deal with this situation, it is always useful to understand why properties get down valued.

Market conditions

a pile of coins with a small model of a house on top and two further houses next to it.

The market dictates the price. In a slow one, prices tend to be lower, while in a fast and furious market, like we had in 2021/22, prices will be higher.

If the property market is moving fast and prices are rising quickly, it can happen that the valuation doesn’t reflect the higher value the property has gained. In such a case, the surveyor might be basing their valuation on past sales data that may not reflect the current demand and supply.

If you believe this is the case, then trying to appeal the valuation might be a good first step. Of course, that will only be an option if the lender allows you to appeal it.

Cautious surveyor

The surveyor is being cautious and conservative in their valuation, as they have to protect the lender’s interest. They must ensure the property can be sold for enough money to repay the loan in case of default or repossession.

Because the final say of the valuation lies with the surveyor engaged by the lender, you might struggle to argue against it. After all, the mortgage company doesn’t want to risk losing out.

If you think this is the reason for the down value, it might be better to look at your finances or renegotiate with the seller. Applying for a mortgage with a different lender, who uses a different surveyor, might also be a valuable option in this case.

Issues with the property

An independent surveyor will tell you realistically what is the value of the property.

In some cases, the property has some structural or maintenance issues that affect its value, such as damp, subsidence or poor insulation. This can result in a mortgage valuation being lower than the purchase price.

If this is the case, you have several options. You can negotiate with the seller, or ask the lender to have a retention on the mortgage. Of course, this means you have to find the money for the repairs.

You might also want to consider if you still want to go ahead with the purchase. Some of the issues that can cause a down valuation can be quite costly to fix.

Unique property

There is always some room for negotiation.

While most properties can be compared to other properties in the area, some are quite unique or unusual. Because valuations are based on comparable properties, this can cause an issue.

It’s also rather difficult to argue against it, because it will be based on the opinion of the independent surveyor.

And as we have already said, the lender will rely on their surveyor’s opinion because they trust them and know that they have their interests at heart.

In a case like this, you can look at your finances, renegotiate with your seller or try to apply to another lender, in the hope their surveyor has a different opinion.

Porperty is overpriced

When the mortgage valuation is lower than the purchase price, sometimes it’s because the property just isn’t worth that much. While a property is worth as much as someone is willing to pay, a lender has to look at their risk.

While you might think your chosen property is worth any penny of the price you have agreed, there is no guarantee that another buyer thinks the same. And this is the concern of the mortgage company. They want to be sure that in case they have to recover their investment, they won’t lose out.

Buying a property isn’t a simple transaction, after all you aren’t just buying bricks and mortar, you are buying a home. So when you find your dream home, it’s difficult to think about market value and other such things.

Emotional attachment, lack of research or pressure from the seller, agent or competitors can all be reasons why a buyer agrees to a price above market value.

In a case like this, it’s important that you put all your emotions aside. You don’t want to overpay for a property, do you? Renegotiating with the seller will be the only option here, unless your finances will allow you to buy the house anyway, and you are willing to pay more than the house is worth.

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How do surveyors value a property?

Make sure you understand all the mathematical details and do your due diligence.

When the mortgage valuation is lower than the purchase price, it’s easy to get frustrated. However, this won’t help. Instead, it will help to understand how surveyors come up with their valuation and why they are done in the first place.

It’s also important to appreciate that the independent surveyor is not being difficult when they value a property at less than what you believe it is worth. Their job is to make sure that they establish a realistic market value of the property so that the lender’s risk is appropriate.

The lender’s aim is, according to the Royal Institution of Chartered Surveyors (RICS), who are often instructed by them to help them establish the market value of the property:

  • To establish that the purchase price that has been agreed on a property is reasonable
  • And for remortgaging, the lender needs to establish that the market value currently of the home is what the borrower says it is.

Based on these two criteria, the surveyor will base their valuation on:

  • Checking other properties locally for their selling prices, where possible
  • Use their knowledge of supply and demand in the area and market conditions
  • Check the property’s condition to see whether it affects its value

So, ‘is a mortgage based on the purchase price or value?’ I hear you ask. It would be a great situation for all of us if mortgages were handed out for the home seller’s price.

Unfortunately, mortgage lenders have to be realistic and in a worst-case scenario, they will have to sell your home to recoup the balance of their mortgage debt. So they are not particularly interested in how much a homeowner says their home is worth.

Instead, they are interested in how much they can sell it for, if needs be, which means they need an accurate and independent valuation of that property.

You may even find that it’s worthwhile investing in a full property report from a RICS surveyor, so you are not only made aware of any issues with the property you want to buy, but the surveyor will also offer an idea of its market valuation.

This information can also be used to negotiate a lower price. The valuation figure being quoted may also prepare you for disappointment when it comes to sourcing a mortgage to buy the property.

How common are down valuations?

Unfortunately, down valuations are an increasing problem.

It can be heartbreaking when the mortgage valuation is lower than the purchase price. But how often does it really happen?

It is actually fairly common for a valuation to be lower than the agreed purchase price. And the higher the value the more often it will happen. Especially, in more challenging economic situations or under certain market conditions.

During the pandemic in 2020/21, the housing market got a boost, partly due to the stamp duty holiday and partly because people wanted more space following their experience with lockdowns. As a result, prices rose sharply, which worried lenders.

Because the prices were artificially inflated due to the circumstances, lenders anticipated that they would come down again soon. To keep risks low, mortgage companies became more cautious and down valuations increased.

Once the market rebalances, down valuations tend to reduce again. However, in 2023, this didn’t happen, because the price fall was very gradual. This made it difficult for lenders to guess where the price will end up. And that made them more cautious.

So while down valuations are part and parcel of the house buying process, their number will increase and decrease according to market and economic conditions. It’s always good to keep this in mind.

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When The Mortgage Valuation Is Lower Than The Purchase Price

A mortgage valuation lower than the purchase price is a situation that can occur in the UK property market and affect both buyers and sellers.

It can be caused by various factors, such as market fluctuations, the surveyor’s judgement, the property’s condition, or the buyer overpaying.

It can also have other implications, such as affecting the loan amount, the price negotiation or the completion of the sale.

However, it doesn’t have to be a problem that cannot be resolved.

There are several options and strategies that both parties can consider and apply to overcome the down valuation and reach a satisfactory agreement.


  • Steve Lumley

    Steve Lumley has years of experience writing about property. His output has covered everything from property investment, news for landlords and student tenants to articles on how to run a successful portfolio and starting out as a property investor. He has also written several books on the subject.

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  • Paul James

    Paul James, is a marketing expert with a passion for property. As well as being a property investor, Paul has also worked within the marketing departments of some of the UK’s leading estate agents. Paul is the founder of Property Road.

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