Undervalued Properties and Mortgages Explained

The mortgage valuation is vital in home buying, 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 your whole mortgage may need to change if the house is undervalued.

But all is not lost—with the right help, you’ll be able to move forward and hopefully reach 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, you likely won’t be eligible for the original mortgage amount if your mortgage is undervalued. 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.

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, so 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 have strong 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). 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 you should be prepared to spend a lot of time negotiating with the bank that 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. If the mortgage has been undervalued, you’re perfectly within your rights to ask the vendor to accept a lower offer. 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, they 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 have to repossess it. Putting down an 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 undervalues your property, speaking to a broker can be invaluable.

They’ll be able to help you decide what to do next, put that plan into action, and may even suggest approaching a different lender (crucially, one who uses a different surveyor) who may be able to value your property differently. Remember that this can delay the sale and 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 relieve some of the pressure and mean you won’t need to go through it alone. Make an enquiry, and we can connect you with a broker who can offer that kind of support.

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 (such as damp and subsidence) were noted in the mortgage valuation survey.

Yet you may never find out the full reason. 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 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 a lender has devalued your house and will be able to help you find the ideal resolution. With our unique broker matching service, finding the expert to suit couldn’t be easier.

Just tell us a few details, and we’ll connect you with someone who can help. It’s free, there’s no obligation, and it’s easy to get started—just call us on 0330 818 7026 or make an enquiry, and we’ll do the rest.