If your mortgage lender values your property at a lower price than you have agreed to pay, this could put you in a tricky predicament. Michael Young of Lime Solicitors runs through your options if you receive a down valuation
So you’ve agreed to buy your dream home. The mortgage appears to be lining up, but then a valuation is done by the bank in order to be able to conclude the mortgage.
The valuation then comes back at less than what you’ve agreed to pay – a “down valuation”.
The shortfall means you can’t borrow the amount wanted. You need to renegotiate, find the difference, or risk losing that dream house altogether.
You may also think twice against the deal as a whole given the lender’s view. There may be a chain in place dependent upon your purchase so there can be lots at stake.
In the present Covid climate down valuations appear more common – the recent stamp duty cut saw greater demand from buyers but at the same time the economic uncertainty means lenders are more likely to be cautious.
Challenging the valuation
In the first instance you might consider challenging a down valuation or looking elsewhere and to another valuation if time and circumstances allow.
This might prove difficult however. In the alternative it might give scope to renegotiate with the seller too.
Claiming negligence
That said, what if the valuation is simply negligent? Negligence would follow where no other surveyor acting in the same circumstances would provide such a valuation report in all the circumstances.
So the position must be that the valuation was not just unusual, but that it was so wrong as to be a clear misjudgement that no other surveyor would have reached. That in itself can be difficult for a lay person to easily judge.
Do your research
We suggest that one way to keep informed is by looking at similar property sales in the area as that may help give an indication of parameters.
Whilst it is also possible to pursue losses from a surveyor for negligence on a valuation, it is also likely a position fraught with difficulty and risk for the average consumer.
The direct relationship is with your bank and even then the contractual position on any mortgage offer may not have concluded.
There is then case law to confirm that surveyors cannot be targeted where the case concerns buy-to-let or commercial elements too for instance.
Even where it is purely a primary home residential setting, most surveyors agree disclaimers and limitations on liability now within their engagement.
So in short any theoretical claim for a down valuation may be hard to spot and it may be harder to then successfully pursue the surveyor over.
Renegotiate
If the down valuation is so far out as to be obvious to challenge it may be best to look to other valuations. If not but faced with a marginal down valuation a buyer’s best bet may be to look at that as a reason to try and renegotiate.
If losses are such where a claim in professional negligence is simply unavoidable though seek independent legal advice.
There is a protocol expected by the Courts to follow in relation to any negligence claim and a claim on a down valuation against a surveyor is likely to be complex and best advanced with professional input.
Michael Young is a legal director in the Professional Negligence team at Lime Solicitors
