Mortgage lenders accused of devaluing properties by estate agents
Tuesday, 11 August 2009 3:14 PM
Estate agents are accusing mortgage lenders of undervaluing homes causing sales and remortgages to fall through.
The National Association of Estate Agents (NAEA) says its latest research shows large discrepancies between agreed sale prices and valuations carried out by surveyors which are in turn having an adverse effect on the number of properties being sold.
The body that represents estate agents across the UK says mortgage lenders are undervaluing properties by as much as 10 per cent with a large majority (69 per cent) of agents experiencing problems with lenders' valuations after a sale is already agreed.
The NAEA, which questioned its members on the state of property transactions, said 65 per cent of respondents said that property sales had fallen through as a result of down valuations.
It adds 86 per cent of estate agents had said they had had to renegotiate property sales as a direct result of a valuation.
Peter Bolton King, chief executive of the NAEA, said: "Our members have heard in several cases that lenders gave specific instructions to their valuers as to how they should approach these valuations.
"We all know that valuation is not an exact science and you can understand under current market conditions people erring on the side of caution. But is it fair that they value a property based on what might happen in the future rather than what is happening today?"
"Undervaluing properties creates the knock-on effect of sellers having to drop prices and those homeowners who are looking to re-mortgage their property being left with little room for manoeuvre.
"While I understand that lenders are operating under severe constraints, it is neither fair nor ethical for valuations to be lowered on the basis that it might reduce exposure to competitive loan rates."
But Sarah Robson, a spokesperson for the Council of Mortgage Lenders, said: "Lenders have a responsibility to ensure that the value of property taken as security on mortgage loans is current and realistic. Although the valuation is carried out for the lender, borrowers also benefit from a realistic independent valuation as it could help them avoid paying over the odds for the property they are buying.
"Lenders only use valuers who are trained professionals, who work to industry standards and base their valuation on comparable recent property sales. Valuers are under a duty to ensure that their valuations are as accurate as possible.
"In an environment of falling house prices, low transactions and economic uncertainty, undertaking valuations is particularly difficult, as there may be few similar properties transacting against which to obtain a valuation benchmark, and greater uncertainty about the marketability and value of a particular property."
