What to do if your sale is at risk of falling through

Covid is wreaking havoc with some property purchases, mortgage brokers have warned, as agreed sale prices are downgraded by banks and building societies.

In the most severe cases, it is resulting in house sales and chains falling through and homeowners unable to move, as mortgage lenders say properties are worth less than the price agreed between buyer and seller.

The problem is that while some sellers and buyers have been ambitious with their asking prices and offers, the pandemic is creating uncertainty about future house prices and with that comes what are known as ‘down valuations’.

While many purchases will be unaffected, these risk potentially becoming part of any house-buying chain and so could affect anyone trying to buy or sell a property.

A down valuation occurs when a bank or building society checks the value of a property for sale – and that valuation ends up being lower than the agreed purchase price.

As a result of this down valuation, the mortgage lender then refuses to provide the required loan to fund the purchase.

It leaves the person buying the property either having to negotiate a new lower price with the seller, or being forced to bridge the gap between the originally agreed purchase price and the smaller mortgage offered due to the lower valuation.

The seller in turn can agree to reduce the agreed sale price – or meet somewhere in the middle – but this can have a knock-on effect and leave them unable to afford to buy their next home.

If an agreement can’t be reached, the house sale falls through, affecting the rest of the property chain – something that is beginning to occur more widely across the country.

How to deal with a down valuation

As a buyer

1. Negotiate a new price with the seller that both parties can work with 

2.  Find a new lender that will offer the deal you need 

3. Increase the size of your deposit from your savings 

4. Bridge the gap with money from friends and family. Perhaps try the Bank of Mum and Dad 

5. Pull out and look for a new property 

As a seller

1. Consider lowering the sale price or meeting somewhere in the middle

2. Encourage the buyer to try another lender with different lending criteria

3. If the numbers don’t work for you, get estate agents or solicitors to negotiate reductions or new deals up the chain

4. Put your property back on the market and try to find a new buyer who can offer the required amount

5. Look for a cash buyer