The delicate art of estimating property values in a wobbly market

'There is no such thing as a down valuation'

The delicate art of estimating property values in a wobbly market

Following the annual winter slowdown in the housing market at the back end of 2022, prospective sellers are now looking to push on with their transactions. However, with the likelihood of declining house prices over 2023, they may not achieve the sale price they had imagined.

“There is no such thing as a down valuation, but a difference in opinion between a seller or buyer and the valuer,” said John Baguley (pictured), director of technical, risk and compliance at Countrywide Surveying Services.

In reality, Baguley said, the difference in opinion always exists. But when markets swing quickly, in either direction, the difference in opinion becomes more acute.

He added that buyers want to sell for a price more akin to when the markets were busier and when markets are busy, over-enthusiastic asking prices can emerge and sometimes get agreed. 

“This leads to a difference between what the evidence says a property is worth and the price the seller or buyer thinks a property is worth,” Baguley said

Accurate market value of a home offers certainty 

Baguley said the valuer has to have supporting, reliable evidence to prove the figure is sustainable beyond isolated transactions. 

He added that the impact of where reality and expectation do not match is disappointment, and probably dissolution of the process. 

“No lender ever directs valuers where to pitch the value, but they expect the valuer to work to the rules and provide the right supported figure for the property at the date of valuation,” Baguley said.

Baguley believes customers must move away from the perennial narrative that somehow a secret force is at play to deliberately force valuers to alter values.

Achieving this, he said, can be attained by a better understanding of valuations and the definition of market value, as well as having an appreciation for all those in the property food chain working together to the same principles.

“Where a difference in opinion does exist, to have open lines of communication to allow an appeal to happen is needed, and, most importantly, those making the appeal must provide proper, correct evidence of completed transactions of similar property,” Baguley said.

He added that merely having an agreed price or asking prices in isolation are not suitable enough evidence.

“Let us move forward and away from the narrative, and by doing so give the client the certainty that the transaction has the best possible chance of the outcome everybody wants,” Baguley added.

‘Down valuing’ of properties is a hot topic

“We can talk about the methodology of valuations and trends in the market, but in reality the fundamentals remain that a property is only worth what a seller will sell it for and a buyer will pay for it,” said Helen Scorer, operations director at Pure Panel Management.

She added that a seller can stay firm and hold out for a higher price or accept a lower offer.

For buyers who are purchasing with a mortgage at a set loan-to-value (LTV) level, then Scorer said they would need to find the extra funds or deposit required to bridge the gap any lower valuation has left.

Scorer said the phrase ‘down valuing’ has certainly always been a hot topic in the industry and one that surveyors continue to show resistance against.

She added that the fact remains a property can only be valued on its merits and suitable sales comparisons to support the valuation figure.

“To date, we have seen no trends whereby properties are being valued lowered than the estimated values provided,” Scorer added.

Scorer said this is largely due to the previously buoyant market and plenty of comparable sales that are still within the six-months tolerance period which is acceptable to lenders.

Have you witnessed a rise in down valuations within the housing market? Let us know in the comments below.