Undervalued Properties and Mortgages

What happens if a surveyor undervalues a property you’re buying? This guide will tell you everything you need to know.

Are you purchasing a property that has since been undervalued by a surveyor?

Home Property Types Undervalued Properties And Mortgages
Pete Mugleston

Author: Pete Mugleston

Mortgage Advisor, MD

Nathan Porter

Reviewer: Nathan Porter

Independent Mortgage Advisor

Updated: March 18, 2024

How we reviewed this article:

Our experts continuously monitor changes in the financial space and work closely with qualified mortgage advisors for factual verification.

September 20, 2022

The mortgage valuation is a vital step in the home-buying process, but what happens if the bank valuation is lower than the purchase price? This can quickly put the brakes on things and leave you with limited options, because if the house is undervalued, your whole mortgage may need to change.

But all is not lost – with the right help, you’ll be able to move forward and hopefully come to an agreement with both the lender and seller. This article outlines what to do should this situation arise.

What happens if a surveyor undervalues a home you’re buying?

Unfortunately, if your mortgage is undervalued, you likely won’t be eligible for the original mortgage amount. This can be even more frustrating as it can typically be quite far into the home-buying process – you’ll have already agreed on a price with the seller and the property will likely be off the market. Only when you applied for your mortgage and requested the survey would the down-valuation come to light.

In this case, your lender will amend the original mortgage offer to account for the new valuation. Given that the offer will be based on a percentage of the property’s value, this will impact both how much you can borrow and the amount of deposit you’ll need to put down. In reality this also means you may have some difficult conversations ahead with the lender, seller or both.

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What you can do about this

If a surveyor has undervalued your property, you generally have a few options – try to appeal the decision, renegotiate the price with the seller or find extra cash to make up the shortfall. None of these are guaranteed, which is why it’s often best to speak to a broker for additional support.

Can you challenge a surveyor’s valuation?

If the mortgage company undervalued the property you can certainly try to appeal the decision, but you’ll need to be armed with cast-iron reasons for wanting them to change the value.

Often this will need to be evidence of comparable properties selling in your area at a similar price (bear in mind these normally need to be within the last six months), or if the condition of the property has been called into question, you may request a more thorough survey with accurate maintenance/repair costs to try and argue that it shouldn’t have been down-valued to such an extent.

However, appeals are rarely successful, and be prepared to spend a lot of time negotiating with the bank who undervalued the house in the first place.

Can you renegotiate the house price after a survey?

Yes, this is possible and could be the most realistic route to take. If the mortgage has been undervalued you’re perfectly within your rights to ask the vendor to accept a lower offer, and if they’re in a chain or have been trying to sell the property for a long time, you may find that they’re more willing to accept.

But again, there’s no guarantee. They may not agree with the down-valuation and want to hold out for the original asking price, and in some cases may walk away from the sale altogether.

Put down additional deposit

The problem with down valuations is that lenders won’t be confident that the property will recoup the necessary amount if they ever had to repossess it. Putting down extra deposit and therefore borrowing less can allay these fears, though not everyone is in a position to do this.

How a broker can help when a property is undervalued

If you’re wondering what to do if the bank undervalued your property, speaking to a broker can be invaluable.

They’ll be able to help you decide what to do next and can put that plan into action, and may even be able to suggest approaching a different lender (crucially, one who uses a different surveyor) who may be able to value your property differently. Just bear in mind that this can delay the sale and will lead to additional credit checks and potentially more fees, but it could be an option if you’re committed to buying this property.

At the very least, having an expert on your side can take some of the pressure off, and means you won’t need to go through it alone. Make an enquiry and we can put you in touch with a broker who can offer that kind of support.

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Common reasons why properties are undervalued

The mortgage lender may have undervalued the property for a variety of reasons. It could be because the asking price was far higher than equivalent properties in the area, the condition of the property isn’t up to standard, or perhaps maintenance issues were noted in the mortgage valuation survey (such as damp and subsidence).

Yet you may never find out the full reason, and it’s important to be aware that the surveyor has been instructed to carry out the valuation on behalf of the lender, rather than for your benefit, as it’s all about ensuring the property will provide suitable security for the mortgage offer.

Remortgaging an undervalued property

Having a remortgage valuation that’s too low can be particularly difficult, because you’re essentially tied into the property but may have relied on that higher valuation to reduce your loan-to-value (LTV) and/or your mortgage rate, or may have wanted to release some equity by adding to your mortgage balance.

If your remortgage valuation is lower than expected, your options are more limited as you don’t have a seller to negotiate with. Your main option is then appealing the decision with your lender – either that, or looking to remortgage with a different provider. Again, a broker can help you decide the best course of action.

Get matched with a broker experienced in these cases

The brokers we work with know what to do if your house has been devalued by a lender and will be able to help you find the ideal resolution, and with our unique broker matching service, it couldn’t be easier to find the expert to suit.

Just tell us a few details and we’ll put you in touch with someone who can help. It’s free, there’s no obligation and it’s easy to get started – just call us on 0808 189 2301 or make an enquiry and we’ll do the rest.

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FAQs

The valuation is designed to ensure that the property is worth the price you’re considering paying. To do this, the surveyor will use recent sales data of properties in your area to compare against your own, and may visit the property as well, though in some cases it may only be a quick glance from the road.

If it’s a physical inspection, the surveyor will look around the property for any obvious defects or other features that could impact its value, though it won’t be overly detailed. However, in many cases the surveyor won’t visit the property at all and will be able to get all the information required online.

Not always. The valuation report is for the benefit of the lender and they’re under no obligation to provide anyone with a copy, though they may let you see it if you ask, and if any serious issues are flagged they’ll normally let you know.

No. A mortgage valuation is to confirm the property’s value, and while it may reveal certain issues if they’re serious enough, it isn’t designed to highlight any repair or maintenance work that would be required. This is the job of a more in-depth survey, and is something you’ll be able to arrange separately to the valuation.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for Online Mortgage Advisor of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

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