Is there really such a thing as a 'down valuation'? – Ison

It is an easy piece of shorthand whenever a valuation comes back below an agreed purchase price or below what a homeowner believes their property is worth. The trouble is that, from a valuer’s perspective, there is no such thing as a “down valuation”. 

It’s a term that can create a misleading impression of both the valuation process and the role of the valuer. 

An objective view 

Valuers don’t begin with a purchase price or an owner’s estimate and decide whether to value a property up or down. Our role is much simpler than that, although not always easier. We assess the available information and provide an independent opinion of the property’s market value at that point in time. 

That’s an important point because a valuation is not there to simply make a transaction “work”, nor is it intended to confirm what either party hopes the property is worth. Its role is to help a lender understand the true value of the security against which it is lending and make an informed decision about risk. 

Recently, we’ve seen commentary suggesting “down valuations” are taking place on a scale not seen before. While those headlines inevitably attract attention, they risk creating the impression that valuers are somehow driving transactions off course, rather than carrying out the role they are professionally required to perform. 

In a purchase transaction, the agreed sale price is clearly relevant. It reflects the point at which a willing buyer and willing seller have reached agreement, but it isn’t the only consideration. 

The valuer will compare that figure against recent sales evidence, local market activity, the property’s individual characteristics and wider market conditions. If comparable evidence supports the agreed price, the valuation is likely to reflect it. If it does not, the valuation should reflect the evidence instead.  

That isn’t a “down valuation”; it’s simply a valuation. 

Several determinants make up a property valuation 

The difference becomes even clearer when looking at remortgage cases. 

Unlike a purchase, there is no agreed sale price. Instead, the valuation is often compared with the homeowner’s own estimate or an automated figure produced earlier in the process, both of which may be influenced by previous market conditions, improvements made to the property, asking prices or, quite naturally, a degree of optimism about what the home might now be worth. 

That means a valuation coming in below a homeowner’s expectation is not directly comparable with a purchase valuation coming in below an agreed price. They are different situations and should not be grouped under the same headline. 

None of this is to say that differences in value should simply be dismissed. Expectations do not always align with what the market is telling us, particularly in today’s environment.

Affordability remains stretched in many areas, mortgage rates continue to influence buyer behaviour, and some sellers are still pricing homes based on stronger market conditions than those we are seeing today. Some variation is therefore inevitable. 

What we are not seeing is evidence of a sudden or widespread increase in valuations falling below either agreed purchase prices or homeowner estimates. Our valuation data shows those proportions have remained broadly consistent, with no indication of a systemic shift. 

Perhaps the more accurate conclusion is also the less dramatic one. Valuers continue to do what they have always done: assess each property on its own merits, weigh up the available market information and apply professional judgement to arrive at a market value. 

So, I would encourage the industry to be careful with the phrase “down valuation”. It may be convenient, but it doesn’t accurately describe the process. 

There are simply valuations. They may align with expectations, come in above them or fall below them, but that independence isn’t a flaw in the system; it is precisely what gives lenders confidence in the decisions they make.