Property investors have been hit with a “double whammy” of down valuations to sale prices and prospective rental income, quashing sales.
After more than a year of surging house prices, cautious surveyors have brought landlords’ investment plans back down to earth with a bump.
Valuers have also questioned levels of potential rental returns, putting mortgage offers on the line as lenders fear investors will not be able to afford repayments.
Angus Stewart of Property Master, a buy-to-let broker, said: “The market is still pretty frothy and it is clear that many buyers are prepared to pay that bit more to get the house they want.
“But we are seeing valuers taking a much more cautious approach than house buyers.”
A down valuation occurs when a surveyor, acting on behalf of a bank or building society, values a property below the price agreed with the seller. It can mean lenders withdraw or greatly reduce mortgage offers.
While landlords run this risk too, they have been dealt a second blow. In the buy-to-let market surveyors also assess a property’s rental potential, and a dispute over income can tip the scales on affordability.
Mr Stewart said: “Landlords can be hit with a double whammy when their lender’s valuer does not agree with them as to what they are planning to pay for the property and what level of rental income they are expecting.”
Surveyors can easily shave tens of thousands of pounds from a property’s agreed price and it has been known for some valuations to be £300,000 lower than expected.
One landlord recently offered £225,000 on a two-bedroom flat in Rugby, Warwicks, only to have it down valued by £55,000.
She said: “I offered £225,000, which I know was £10,000 less than the seller paid for the property three years ago and the offer was accepted.
“Despite this, the lender’s valuer said the flat was only worth £170,000. It’s ridiculous and the seller isn’t even making any money on the sale.”