House Doctor: 'Can we get our lender to change its mind over a low valuation?'

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Question: We had an offer of £355,000 accepted on a fantastic three-bedroom house. Unfortunately, our lender has just given its own valuation of £320,000 – leaving us without a big enough mortgage to buy. Is there anything we can do to get the lender to change its mind on this ridiculously low valuation?

George Williams, Bedfordshire

Answer: It might look like you've simply run into an aggravating difference of opinion about a house price but your problem actually goes to the heart of every British mortgage decision ever taken.

Whenever lenders weigh up the pros and cons of a home loan offer, a simple yet stark premise underlies it: in a worst-case scenario such as repossession, could the bank or building society quickly get its money back by selling the property?

With property prices more likely to fall, a house bought at a high valuation presents a greater risk of loss to a mortgage provider – especially in an era of economic sluggishness and considerable unemployment.

"Unwilling, and unable, to bank on rising house prices to mitigate the risk, lenders increasingly err on the side of caution and value homes accordingly – hence your disappointment," says Gavin Brazg of advice website www.theadvisory.co.uk.

This so-called "down-valuation" dilemma – the difference between what you are happy to pay for a property and that preferred by your lender – presents many borrowers with a financial conundrum.

Given that you don't have a savings fund to hand to plug the gap, the way forward is to either challenge your lender's valuation or plunge headlong into negotiations to try and convince the seller to drop his price.

Asking your lender to review its valuation is relatively simple – probably costing a £100 fee – and will usually be undertaken by a senior regional surveyor. Yet unless they can find robust evidence of similar properties selling in the area at the same price it is unlikely to succeed.

Your best bet instead is to be open with the vendor, explain your situation and ask to renegotiate.

Don't hold your breath, though; many sellers still believe high prices from the pre-2008 boom era are attainable and won't budge on price.

Whatever you decide, it won't be worth taking on punitive extra debt to buy the property – better to walk away than suffer financial misery.

housedoctor@independent.co.uk

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