Imagine you’re stepping onto the property ladder, excited by the prospect of owning your first home—a new-build flat in a budget-friendly area of Greater Manchester. It’s close to your workplace in the city centre and perfectly priced for your budget. You’ve even paid a £2,000 reservation fee, confident in the deal since your mortgage broker assured you of an agreement in principle. However, the dream starts to crumble when the mortgage valuation returns unfavourably, labelling the location as “unsaleable” due to a lack of owner-occupiers nearby. Consequently, your mortgage application is declined.

As Ed Magnus from This is Money explains to a reader, the mortgage valuation isn’t just a formality but a critical step in the home buying process. Lenders perform independent valuations to ensure that the property is a worthwhile investment. Factors such as the property’s size, type, and location are scrutinised to ensure they meet the lender’s criteria. Properties that are difficult to resell, such as those in areas deemed non-saleable or above commercial properties, are often rejected.

What to Do When Faced With a Valuation Issue

If your dream home’s valuation comes back with concerns that could lead to a loan denial, here’s a structured plan based on advice from industry experts:

1. Reapply with a Different Lender: Not all lenders view properties through the same lens. Applying through another lender might yield a different valuer’s opinion. However, be mindful as multiple applications might affect your credit score.
2. Consult a Mortgage Broker: A broker can match you with lenders more likely to approve your application. They can also check in advance with valuers to gauge potential issues before you apply.
3. Review the Reservation Fee: Check if your reservation fee is refundable. Some contracts allow for fee recovery if financing falls through.
4. Consider the Future: Reflect on the potential resale challenges you might face based on current lender feedback. If the area is primarily investment properties, future buyers might encounter similar financing issues.

Common Challenges Across Cities

Chris Sykes, from Private Finance, highlights that such valuation challenges are not rare, particularly in cities like Manchester, Liverpool, and Birmingham. Developments in these cities often cater first to buy-to-let investors, with remaining units sold to private buyers, creating environments less attractive to traditional lenders.

Moving Forward Strategically

Ben Fuller of SPF Private Clients advises seeking lenders that use different valuation firms from the one that declined your application. This tactic minimises the risk of encountering the same issues repeatedly. Also, consider engaging directly with developers to inquire if other residents successfully secured mortgages and through which lenders.

Can You Recoup Your Reservation Fee?

Before making further decisions, check if your contract includes a clause that refunds the reservation fee if you can’t secure a mortgage. A consultation with your solicitor can provide clarity on this possibility.