Since July 2020 and the introduction of the Stamp Duty holiday on house purchases up to £500,000, the residential property market has seen unprecedented levels of activity. Property prices have gone up significantly across the board, with average annual increases frequently being reported above the 10% level.

But with some predicting that demand in the housing market has reached its peak, it could be that property owners’ expectations and the prices they are actually able to achieve will not marry up.

Here we look at how home owners, buyers and movers can avoid the potential issues regarding property valuations.

Do your research

It isn’t uncommon for a flurry of houses on an area or even on a specific road to come in close succession. Where a good sale figure is achieved on a property, other homeowners may start to consider their options, which can lead to a domino effect. The good news in these circumstances is that previous sale prices in a localised area are used as evidence for Surveyors’ valuations. So the higher the number of transactions that have completed in an area, the more likely it is that your property will be valued at a similar price.

Ensure you have adequate funding

Due to frenzied demand for certain types of property in so called ‘property hotspots’, or just with two or more buyers getting caught up in a bidding war, there have been reports of a greater number of down valuations being issued over the past 12 months or so. A down valuation occurs when the figure reached by a surveyors’ valuation report comes in lower than the price that the buyer has agreed to pay. As lenders want to be confident that the value will maintain or gain, they will usually cap the amount they are willing to lend at the surveyor’s valuation, which can leave some buyers struggling to fund the purchase.

Bidding over asking price has been fairly commonplace over the last 12 months and there is nothing wrong with this if you are sure you have the necessary funds in place to cover any shortfall in mortgage lending.

Think Like a Surveyor

Highly localised variations in price are not uncommon. For example, houses on one side of a street can have significantly larger gardens than those on the opposite side, or some houses may have views that make them more attractive to buyers than other comparable properties in the area, therefore influencing the potential demand and sale price. A property may have been recently renovated, which can lead to it being brought to market with a higher asking price than other houses on the nearby streets.

However, evidence relating to these factors may be limited in terms of previous sales.

Consider all factors

Sellers will obviously want to achieve the best possible price for their home but there is a fine line between this and having unrealistic expectations. If you are reliant upon selling your home to release funds for a further purchase, in addition to price, you may be wise to consider the position of the prospective buyers as well as the price they are willing to pay, with cash purchases often being favoured over those buying with a mortgage.

If you are a buyer reliant on a mortgage, you may want to think twice before getting carried away when biding for a property. In a strong market, it can be all too easy to agree to pay over the odds. However, this can leave you in negative equity down the line, or as described above, looking for ways to fund a purchase in the event of a ‘down valuation’.  

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