Welcome to BuyAssociation.co.uk

Valuations - Camilla Dell, Black Brick Property Solutions

Valuations

The process of valuation in the current property market has become a very tricky business. Since the downturn, transaction levels have been incredibly low, making it particularly difficult for valuers to determine a property’s true worth. Where they usually rely heavily on sale prices for similar properties in the area to assess the value of a property, naturally this has become much harder due to the lack of deals being done.

What problems do big variations in valuation cause?
A valuation is somebody's opinion on value, and even professional valuations can vary greatly. The biggest problem is when a down valuation on a property occurs. In other words, the valuation on the property you are buying comes in lower than the price you have agreed to pay. This can be a common outcome, particularly in an uncertain or falling market as valuers tend to be more cautious. However, a down valuation doesn't necessarily mean the deal falls apart - at Black Brick we would use it as ammunition to renegotiate the price on a property. Of course, this isn't always possible.

Take heed of this example of the problems cautious valuations can cause. We recently identified a two-bedroom property in South Kensington for an investment client we were acting for. The property was on the market for £1.6 million and we negotiated the price down to £1.5 million, which seemed like fair value, given the comparable evidence available. A valuer appointed by the bank subsequently valued the property as being worth £1.2m to £1.25m. Although we advised our client that the valuation was a little overcautious as there was comparable evidence to suggest the flat was worth more, his concern caused him to withdraw from the sale. Two days later, the property sold to another buyer for £1.55m.

The lesson here is that buyers need to be brave but not reckless. In the case of this client, he is now likely to need to spend in excess of £1.6 million for a comparable flat, as the market has gone up since withdrawing from this deal. In hindsight, he wishes he had gone ahead, despite the low valuation.

So how do buyers make sure they are paying the right price?
Buying agents can help greatly. Whilst we are not professional valuers, we do have a good grasp on the market and pricing. We also use comparable evidence when formulating offers. You can have a valuation done before making an offer - but this isn't common. Most buyers negotiate first and then have one done. The valuation should reassure you that you paying the right price for a property, but do make sure you use an appropriate valuer for the property you are buying. – they must be able to demonstrate considerable experience valuing properties in the area and price range you are buying in.

How do sellers make sure they are selling at the right price?
Again, the valuation is an indicator, although you will never get an "overvaluation" - in other words, once a price has been agreed on your property and a valuation undertaken for the buyer, it will never come in over what a willing seller and buyer are willing to do a deal at. Sellers should also look at comparable sales in the area and seek the opinion of more than just one selling agent.

A note of caution
Buyers who are buying a property as a home shouldn't be too scientific about value. I've seen many buyers lose out on properties over the difference of a few thousand pounds. In the long run, if you have managed to find your ideal home, price shouldn't be the sole determining factor of whether to buy or not.

Camilla Dell

Camilla Dell is Managing Partner of Black Brick Property Solutions LLP. Black Brick is London’s leading independent buying consultancy, acting exclusively on behalf of buyers to source and secure the best property at the right price.

More pages

Page 1: Valuations

Calculate how much you can earn - rent out your UK holiday home here

Advertise Your English Rental Property simple, effective and affordable marketing online!

All you need for a beautiful bathroom - at affordable prices

Discounted hotel rooms in the UK - click here for Laterooms special offers

UK property insurance from intasure - Click here for great deals and up to 40% risk related discount on UK & overseas insurance

UK Investment property from just £34,500 High-quality student rooms in an emerging market with 10% net yield guaranteed

Holiday homes to rent - across the UK & Ireland