What To Do If Your Property Was Undervalued?
by Sumona Real Estate 24 November 2021
A mortgage valuation is one of the important stages in the mortgage application process. In the instance where the mortgage company undervalues the house you’re planning to buy, it could potentially jeopardize the entire transaction. It is essential to keep in mind that the mortgage company’s mortgage valuation not only protects the lender’s interest but is also in the favor of the buyer as they give a realistic estimate of the house they are looking to buy when compared to the quote given by the estate agent.
By getting a property valuation done not only aids in selling but also when you get your free rental valuation, it gives you an assurance that you are paying the right price for the house you want to buy.
Reasons why a mortgage company could undervalue a property you are interested in
It is not only enough that you as a buyer are ready to pay for the value of the house as quoted by the seller. It is the duty of the mortgage lender to value the house for its deserving price so that it makes it easier for them for debt retrieval.
There are two factors that affect the mortgage valuation
– Recently sold properties of the same stature in the neighborhood areas
– The condition of the house while buying includes dampness and subsidence in the building which can negatively affect the house value. One of the common terms, ‘Recently completed’ is defined as the condition of the house that is within the last six months for a property of similar size and condition in the same neighborhood.
A surveyor’s job entails revising the value of the house in comparison with prices of the recently sold properties that are similar in the neighborhood and seeing if the price quoted for the property is higher than that of the average price or lesser.
Financial options you can consider if the property is undervalued
If a lender’s mortgage valuation of a home you want to buy is undervalued, you still have the following options left
Buyers can go to their sellers and renegotiate the asking price showing the valuation by the bank or the building society. If the seller is in a chain and wants to move to a new house after selling the current one, they might be willing to negotiate on the asking price to close the deal quickly. In the other case, if the original amount is not paid, a seller is not obligated to drop their asking price and may walk away from the sale.
Make an appeal
Though the appeals are rarely successful, in a situation where a buyer shows strong evidence, sale prices of similar properties in the neighborhood in the recent past few of the lenders may oblige for revaluation. And also, if a buyer is willing to pay for it and feels that buying the property at the set price will make a difference, a detailed valuation could be asked.
Approaching a different lender
A buyer could approach another lender and ask for revaluation of the property with different surveyors as they will see the property differently. On the other hand, if a buyer gets several mortgage credit checks done in a short period of time, it may have an impact on future phases of the application.
Will the lender offers the same amount if the property is undervalued
If a mortgage valuation is lesser than the originally quoted price of the property, the mortgage lender may not be ready to offer the originally requested amount. The borrowing amount depends on the value of the property and hence a low valuation might lead to different terms and agreements, including the deposit amount and amount of loan that can be dispersed.
Remortgaging after undervaluation
The remortgage alternatives are also similar and the only difference is there won’t be any seller to bargain with. You will have to negotiate with the lender yourself and challenge the remortgage appraisal that is undervalued by providing strong evidence of sales that took place recently in the same neighborhood. You can also look for remortgaging with a different lender who might value your home with a different set of surveyors.
If a property is undervalued it could become a stressful process to get it reversed. It is always a good idea to hire a mortgage broker with the expert market knowledge and an understanding of all the mortgage processes.