Have you been the victim of a down-valuation? Tell us your story by emailing money@telegraph.co.uk*
Theo Jones is an architect and interior designer, so when the opportunity came to buy a Grade-II listed flat in Tredegar Square, a beautifully preserved Georgian square in east London, he jumped at the chance.
“As it’s on the first floor of the building, it has high ceilings, huge windows and many original historic features,” says the 38-year-old, who is the director of Islington-based firm Fynn Architects.
“You don’t get many opportunities as a designer to work on your own home and properties don’t come up here much.”
Jones agreed to a price of £320,000 for the leasehold flat, with a £25,000 budget for renovations.
“I renovate homes like this for my clients so I could see the potential immediately and I knew what the renovations would cost,” he says. “It was set up as a studio and I knew it could be turned into a one-bedroom.
“I made my offer based on careful calculations.”
As a first-time buyer, Jones took out a joint borrower sole proprietor mortgage with his parents and had a 5pc deposit of £16,000. A specialist lender had agreed to a mortgage in principle on this basis.
However, when the lender valued the property, Jones received a nasty surprise.
“They valued it at £275,000, which was £45,000 below the purchase price,” he says. “At a loan-to-value of 95pc, that meant I suddenly needed a deposit of roughly £59,000, nearly quadruple what I’d originally planned for.
“The down-valuation was a real shock.”
Down-valuations happen when a valuer or mortgage surveyor says a property is worth less than a buyer has agreed to pay. The lender may then lower the amount they are willing to give the buyer, forcing them to plug the shortfall and scramble for a larger deposit, or they might have to renegotiate – all of which could cause a purchase to fall through or a property chain to collapse.
Because of uncertainty in the current market, brokers warn that down-valuations are on the rise as prices fall and valuers are being extra cautious.
