Are you considering selling a commercial property in 2023? If so, are you aware of the current trend involving down valuations? This is something that should concern you. Down valuations could inhibit your ability to sell to a potential buyer who needs to finance the purchase through a commercial lender.
Down valuations are the current trend in the commercial property market. Between a poor economic outlook, recessionary pressures, rising unemployment, and the aftereffects of the COVID pandemic, there is less confidence in the property market moving forward. As a result, surveyors are failing to see the same value in commercial properties that investors see.
More About Down Valuations
If you are not familiar with the down valuation issue, it is pretty simple to understand. Prior to a lender agreeing to close on a property deal, a surveyor must conduct a full and complete appraisal. Their valuation determines what happens next.
If the valuation is higher than the selling price, the lender has fewer concerns about moving forward. The deal is closed, and everyone is happy. But if the valuation is less than the selling price – i.e., a down valuation – it leads to a dispute among lender and buyer. Said dispute could ultimately lead to the buyer backing out of the deal.
We are guessing this is something you would hope to avoid. Few things are as frustrating to property owners than accepting an offer, planning a sale, and then having the whole thing fall through because the bank changes its mind.
Surveyors Are Obligated to Be Truthful
Understanding the current down valuation trend starts with understanding what is causing it. The trend is being driven by the previously mentioned economic influences: inflation, recessionary pressure, high unemployment, etc. Surveyors need to account for all such influences to determine the real value of a property, both now and in the short-term.
When surveyors lack confidence in the short-term future, they are less willing to produce a higher valuation. And never forget that they are obligated to be truthful. It is ethically unacceptable for a surveyor to artificially inflate a valuation so as to help a buyer satisfy bank requirements.
Your Property’s Valuation Could Suffer
The most important lesson for you is that the current down valuation trend could ultimately mean your property’s valuation suffers. You might have a value in your mind, a value that would substantiate a certain selling price. All would be well if potential buyers were willing to pay that price. But everything could be ruined by a down valuation.
The UK property market is in flux right now. It would appear as though the 13-year property boom has finally come to an end. We know what happens next. If history repeats itself, property prices will steadily decline for the next several years. Thus the recent trend in down valuations.
Perhaps your commercial property isn’t as valuable today as it was two years ago. But it’s probably more valuable now than it will be two years in the future. The chances are pretty good that you are going to continue to lose value for the next few years.
Bypass Banks Altogether
If you don’t want to take the chance that a down valuation will prevent a potential buyer from working things out with their bank, why not bypass banks altogether? Sell directly to us and get a fast and fair deal.
Working with the Sell My Commercial Property team is arguably the easiest and fastest way to sell at a fair price. We encourage you to do just that, before down valuations hurt your property any further.