Down Valuations: How Can Brokers Help Keep the Deal Alive?

The appropriate response depends on the size and cause of the shortfall, the property, the client’s available resources and what they are trying to achieve. In some cases, reconsidering the purchase may be more appropriate than taking on additional borrowing simply to preserve the transaction.

When Could Specialist Finance Help?

Specialist finance may be worth exploring where a straightforward mortgage is not suitable. For example, a property may require refurbishment before it is suitable for longer-term finance, or a client may be working to a tight completion deadline.

Depending on the circumstances, bridging finance could support an acquisition, fund works or provide time to arrange longer-term finance. However, bridging does not automatically resolve a down valuation mortgage or remove the funding gap. The lender will carry out their own assessment and apply their criteria and loan-to-value limits, so additional client funds or suitable additional security may still be required.

Specialist buy to let or commercial finance may also be relevant where the property or its intended use falls outside standard lending criteria.

The Importance of Having a Realistic Exit Strategy

Where short-term finance is being considered, the exit strategy is fundamental. Bridging finance should not simply move the funding problem further down the road. There needs to be a credible repayment plan.

That could involve refinancing once works are completed, selling the property or using another identified source of funds. If refinancing is the intended exit, brokers should consider what needs to change before that becomes achievable. If the original problem was the property’s value, there needs to be a reasonable basis for expecting a different outcome later.

Don’t Let a Down Valuation Automatically Kill the Deal

A down valuation can be frustrating, but it does not automatically mean the transaction is over. Options may include challenging the valuation with appropriate evidence, renegotiating the purchase price, adjusting the deposit or exploring a different finance structure.

Where the case becomes more complex, speaking to Crystal Specialist Finance early can help brokers understand what options may still be available before submitting further applications that are likely to get a decline.

Our experienced team reviews every case on its own individual merits and can help identify suitable lending options tailored to your client’s needs.

With access to 50+ specialist lenders across bridging, buy to let, commercial and other property finance solutions, we provide the ultimate speed, service and flexibility when it comes to completing complex cases.

You can choose to package a case yourself where you remain the client’s point of contact, or refer it to us while we handle the client relationship directly. Either way, you will earn 50% of the procuration fee upon completion.

If a mortgage valuation lower than the purchase price has put your client’s transaction at risk, call our New Business Advisers on 01827 337710, email enquiries@crystalsf.com, or submit your enquiry through CrystalHUB.

FAQs

What is a down valuation?

A down valuation is the commonly used term for a situation where a mortgage valuation comes back lower than the price agreed for a property. This may affect the amount the lender is prepared to advance.

What happens if the mortgage valuation is lower than the purchase price?

A funding gap may arise. Depending on the circumstances, the buyer may need to renegotiate the purchase price, contribute additional funds or consider another suitable finance option.

Can a mortgage down valuation be challenged?

Some lenders allow valuation challenges or appeals. These generally need to be supported by appropriate evidence, such as recent completed transactions involving genuinely comparable properties.

What are the options after a property down valuation?

Down valuation solutions may include challenging the valuation, renegotiating the purchase price, increasing the client’s contribution or considering a different funding structure. The appropriate route depends on the individual case.

Can bridging finance help after a down valuation?

Potentially, where there is a suitable short-term funding need and a realistic exit strategy. However, the lender’s own valuation, loan-to-value limits and wider criteria will still apply.