RICS valuations are carried out by surveyors registered with the Royal Institute of Chartered Surveyors. As a professional body, RICS provides valuation services to the highest global standards. You can rely on RICS surveyors to deliver a valuation that’s accurate bearing in mind the location of the property and its condition. But what if your valuation isn’t what you expected, either a lot more or less than you’d imagined?
Why is my RICS valuation so low?
If you were lending money against a property, you’d need to know for sure that the amount you lend is easily covered by the property’s value. That’s the mortgage lender’s perspective. As a buyer, you don’t want to pay more than the estimated market value for a property. But what if the valuation is less than the estimate the estate agent or seller originally gave you? It’s called a ‘down valuation’, and can come about when a surveyor decides the value of a property is at least £10,000 less than the agreed price. If it happens to you, you’ll need to persuade the seller to lower their price.
A mortgage lender’s valuation isn’t a survey of the home’s condition, and it doesn’t examine any problems with the building. It’s a simple check to make sure the place is worth roughly the amount of money you’re about to pay for it, and it helps the mortgage lender calculate how much they can lend you.
A RICS valuation is the only real way to inspect the condition of a building and identify any problems. The market value of a property is based on comparable places in the area. It usually refers to at least three similar buildings in the same area and your RICS surveyor will also add their own take on the value of the place, based on experience.
How do ‘down valuations’ happen? It can come about when house prices are changing faster in one area than they are elsewhere, or when transaction levels, in general, aren’t that high, or when your surveyor has found something badly wrong with the property that’ll cost real money to fix. At times like this surveyors have to be very sure indeed that they can give genuine evidence of the lower value in writing.
It might seem like a wholly good thing paying less for a property than you expected. But down-valuing can damage the chain. You want to buy a house valued at £250,000. You have saved up a 10% deposit and need a 90% mortgage. Your RICS valuer says the place you want to buy is only worth £200,000, and the lender says they’ll only lend you 90% of the new valuation, £180,000. You’re left with a disastrous £45,000 funding shortfall.
Why is my RICS valuation so high?
Things can go the other way. Maybe the lender’s mortgage valuation missed something important. Perhaps sales have boomed in a certain area in the past year, pushing prices up. Maybe the property turns out to be particularly desirable for some reason or another. Or it might simply be a matter of general market forces. The 2008 financial crisis saw a sharp increase in surveyors being sued by unhappy individuals, investors and banks for apparently over-valuing properties.
Overvalued property can also take ages to sell. Potential buyers are put off by the price, and if people use price filters to search online for places to buy, they can easily miss out on seeing the property altogether. In April this year Which? revealed how the estate agencies that most often over-value properties also just happen to be those that charge the highest commission, a phenomenon discovered thanks to an investigation by the Times newspaper. It showed how homeowners using estate agents who’ve overvalued properties eventually have to reduce their asking prices – but they still pay higher fees than if they’d used a cheaper estate agent. And that’s just one great reason why a RICS survey is well worth having.
Selling or buying a property? Always get a RICS survey
A RICS survey is just as important for sellers as it is buyers. It’ll help your estate agent set the right price for a property you’re selling, and help you land upon the right price for the place you want to buy. We’re trusted, respected RICS surveyors, and we’ll be delighted to help.