Down Valuations: Are Valuers Too Conservative or Are Investors Overestimating? | Monday Morning Musing #12

I’ve talked about down valuations before and even ran a poll where ~80% of respondents felt that down valuations were unfair, while ~20% believed investor expectations were often unreasonable or unrealistic.

Being an active investor myself, I recently had the opportunity to put this debate to the test. More importantly, I genuinely wanted to achieve the highest possible valuation on a particular property, as I intended to release some equity to use elsewhere.

To explore this, I proceeded with two mortgage applications using different lenders and valuers. The result? One valuation came in at £395,000, while the other was £475,000 - a staggering 16.8% difference. Since my priority was to access the equity, I chose to proceed with the higher valuation, even though the finance costs were slightly higher.

Naturally, to execute this approach, I had to pay for two valuations, two lender admin fees, and additional costs associated with the second application. However, in this case, the financial benefit outweighed the extra expense.

This isn’t an approach I’d recommend for every situation, as it can become quite costly, particularly for those with a growing portfolio. However, if you strongly believe your asset is unique with limited comparables, or if achieving the highest valuation is a priority, it’s a strategy worth considering.

Ultimately, this exercise reinforced what many already suspect: valuations are subjective and often inconsistent. Until a better system, perhaps leveraging AI and data aggregation, replaces the current process, this is simply a reality investors must navigate.

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