Property: The price was right for both of us: When is a sale not a sale? When a valuer slashes the price that both sides have agreed. David Lawson looks at down-valuation, a nightmare for the Nineties

SHARON Olsen-Vetland thought she had a bargain when the owners of a small east London house accepted an offer almost pounds 5,500 below the asking price of pounds 89,995. But she could not find a lender who agreed and the more she tried, the harder it got.

The Halifax sent a valuer who insisted another pounds 7,500 had to come off the price. 'We were told it needed roof repairs and a damp course, which we knew already because my partner's father is a builder. He said he could do the work for around pounds 500,' she says.

But more shocks were in store. Sharon tried the Woolwich, whose inspector took an even gloomier view, saying the place was worth only pounds 70,000. As a last resort she turned to the National Westminster in the hope that a bank would be more eager to net a new customer. But its inspector discovered problems the others had mysteriously missed and wrote down the value to a mere pounds 66,000.

The deal fell through because the sellers would not contemplate accepting a price more than 25 per cent less than that recommended by their own agent. After paying almost pounds 450 in valuation fees, Sharon is wiser as well as poorer. 'I think lenders are offering 95 per cent loans but making sure they only give 90 per cent,' she says.

Down-valuations such as this began sparking rows between property professionals a couple of years ago, when agents and builders said colleagues working for lenders were stifling the market with unjustified gloom. They were accused of running scared for fear of being sued for over-valuing during the boom. But with few deals being done, there was not enough evidence to show valuers were mistaken.

Now, as buyers spill on to the streets, the split has developed into full-scale civil war. The National Association of Estate Agents says more than half of the members it questioned in May claimed down- valuations were holding back market recovery by dragging out or killing deals.

Buyers are the best judge of prices, says the NAEA president, David Goldsworthy. 'If a house has been on the market for a reasonable period at pounds 100,000 and then sells at pounds 95,000, that is the value,' he says. 'The lender should decide whether to lend rather than allow a valuer to cut the price to pounds 90,000.'

Those rules would have saved Neil Burgess a lot of money. He cut the price of his east London home by pounds 4,000 after it had sat unsold for 18 months at pounds 89,000. But the best bid reached only pounds 78,000 so he decided to renovate instead. 'We had nowhere else to go, so we were not desperate,' he says.

He soon found a home he did want, however, and accepted an increased offer of pounds 80,000 from the same buyer. 'But their valuer said it was worth only pounds 72,000, even though we had spent pounds 5,000 on a new kitchen since the first offer.' They finally agreed a compromise at pounds 75,000 but only because Mr Burgess could cut pounds 5,000 from the price of the home he was seeking to buy.

'The same thing had happened there. We agreed pounds 170,000 with the sellers, but the valuer said it was worth pounds 10,000 less. Yet a house two doors away had recently gone for pounds 200,000.'

He shares Sharon Olsen-Vetland's view that buyers and sellers are falling victim to attempts by lenders to make more money. When the first attempts to sell fell through he tried to remortgage and improve the previous home. His lender, the Abbey National, valued the place at only pounds 64,000. 'I went spare, so they revised it upwards. But I was asked for a pounds 670 premium to guarantee a pounds 12,000 loan.'

He agrees with Mr Goldsworthy that buyers are the best judges of value. The people who bought his home had seen 80 other properties so they knew what they were doing. John Knox has some sympathy for this view. But as chief valuer for the Winkworth chain, he also says people need protection from their own ignorance.

'I have seen a flat today agreed at pounds 49,500, but when I asked local agents, they said this kind of property was worth pounds 37,000. Agents can be their own worst enemy by pushing values they know cannot be justified. Buyers fall victim to these snow jobs and do not bargain hard enough.'

It is not in a lender's interest to encourage down-valuations because they then lose business, he says. But in a slack market with lack of hard evidence from deals it is not easy to pin down exact prices. This should improve as more sales go through.

Mr Knox is a lonely voice within his profession. John Chambers launched his presidency of the Incorporated Society of Valuers recently by slating big financial chains for using valuers based at regional centres with no local knowledge of house prices.

Others have accused building societies of choosing which agents to use as valuers on the basis of how many mortgages they put their way.

Adrian Organ, a chartered surveyor with Keats John Dowler, was so angry with one case that he went public in the professional journal Estates Gazette. The home owner involved had been encouraged by heavy advertising to remortgage, for which he had to pay pounds 500 in advance fees. He was subsequently told the house was not worth enough for remortgaging to make sense. The owner had been given a figure by the valuer, but this was pounds 5,000 more than than the one that turned up in the written report. Mr Organ checked with local agents and found that none had been asked for advice on what the property was worth and every one set a figure pounds 10,000 higher than the valuer.

Pressure from professional and consumer groups has forced the Office of Fair Trading to refer the whole business to the Monopoly and Mergers Commission. But Mr Knox says a lot of the problems could be solved if the rules were changed and valuers could meet buyers and tell them how figures are worked out.

'We can actually point out things they should be using in negotiations,' he says. This could help both sides, as buyers who have seen many properties could tell valuers why they think a property is worth what they are offering.

(Photographs omitted)