Homebuyers and sellers are being warned of down valuations, which are becoming rife and could hinder mortgage applications.
Mortgage broker, Enness, has issued advice to people embarking on property transactions in a bid to prevent them falling foul of this predicament, which can impact the loan-to-value (LTV) of a mortgage.
The problem arises when there is a discrepancy between the price agreed for a property by a buyer and seller and the valuation given by the lender’s valuer.
Usually, by the stage the lender’s valuation has been submitted, the mortgage process is already underway. So, if the lender decides it’s not worth what has been agreed, they will pull their mortgage offer.
It’s an issue more common, said Enness, in places like London where property isn’t holding its value and too few homes have sold to use as a comparable when pricing.
Islay Robinson, chief executive officer at Enness, said down valuations were also having an impact on lending trends.
He said: “We’re seeing an increased demand for high LTV mortgages, even at the higher end of the market, with some clients seeking as high as 90% LTV.
“Being aware of LTV thresholds is key because the higher the LTV, the more expensive a loan will become.”
Enness has advised, in order to avoid the problem from occurring, sellers should ensure they value the property correctly from the outset.
The broker suggests using house price checker tools to find out what the home in question last sold for, how any renovations might affect this and the state of the current market.
Seeking opinions from several estate agents and asking them for examples of pricing on homes recently sold will help. Enness suggests asking them to write a letter with a projected market value.
Sellers should ensure their property is in the correct price search category online and asking prices should start at the lower end of what you would accept, Enness added.
