Resist estate agents’ demands to match valuations to sale prices as house price crash looms, warns chartered surveyor

10th April 2014

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Chartered surveyors must protect homebuyers and lenders against the mounting risk of a repeat housing market crash, a chartered surveyor has warned.

Hotspot housing markets in London and Aberdeen show mounting evidence of a housing bubble emerging, running the risk of a significant and unexpected drop in prices when the bubble bursts. Ian Fergusson, chief surveyor at Sesame Bankhall Valuation Services, said that such a fall in prices is already thought to be likely in London, with evidence mounting of a sealed bidding frenzy taking grip throughout the capital.

“It was this very scenario when, in the months leading up to the housing crash of five years ago, surveyors came under increasing pressure from buyers, sellers and estate agents to match valuations with agreed sales prices,” Fergusson said.

“Yet there can be a significant difference between the price a property sells for and the value that a surveyor places on it. And that gap is, in certain hotspots, once again being stretched to the limit in some areas, just five years or so after a major correction in the housing market saw prices plummet throughout the country, raising the question of whether any of the lessons have been learned from the housing crash.”

Fergusson’s warning is backed by a report from property researchers Hometrack which shows that, in London, buyers are sometimes paying more than 99 per cent of asking prices against a backdrop of soaring demand. As demand outstrips supply, buyers are paying the highest proportion of asking prices seen for a decade.

Spiralling house prices surging ahead of market valuations raises the risk of the market over-heating, whereby some home buyers face a mortgage shortfall and a rise in the incidence of ‘down-valuations’, where a lender’s surveyor values a property below the agreed price.

“Buyers and sellers should rest assured that chartered surveyors undertake considerable risk management and comparable analysis processes. This is to protect both buyers and lenders against the risk of a funding gap between house prices and valuations widening to the point where it becomes increasingly difficult to fill,” said Fergusson.

1 thought on “Resist estate agents’ demands to match valuations to sale prices as house price crash looms, warns chartered surveyor”

  1. Noo 2 Economics says:

    When I bought my house (back in ’87) the surveyor insisted on seeing the sale price (it was a private sale with no estate agent involved). I asked why he needed it when he was performing an “independent” valuation, back came his reply – “if you don’t let me know how much you are paying I won’t do the valuation and you won’t get a mortgage without my valuation as I do all valuations for your mortgagor”.

    I complied and the valuation came in at 80% of the purchase price (which had already been assessed by 2 estate agents before I bought the house “off market”). When I queried the discrepancy the lame excuse was trotted out that he only valued the bricks and mortar not the land. So why did he originally need to know the purchase price I asked again, he had no answer.

    So much for chartered surveyors integrity and now this one comes out with all this tripe.

    The fact is Chartered Surveyors insist on knowing the asking/purchase price so they can manipulate the valuation down to take account of the value of the land being purchased, as they really have no idea what the “value” is and are working off current market price with a rule of thumb to devalue the price by about 20% as a guess at the value of the land the structure sits on. They usually hold lucrative contracts with mortgage companies to perform all valuations for mortgages given by the particular mortgage company – nothing independent here nor any high principles to be found despite Ian Fergusson’s protestations to the opposite.

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