A valuation is a process whereby a mortgage lender requires a property to be valued prior to granting the loan for the buyer to purchase it. This is done for the benefit of the lender, as they want to make sure the property is worth the amount requested for a mortgage on it.

Various elements go into the valuation to produce the final value of the property. This does not only concern the property itself, but also the area and the state of the housing market. For example, assuming the property is in excellent condition, it could be valued higher one year compared to the next. This might occur if the property market takes a dip from one year to the next. It shows how the market and other similar properties nearby have an influence on the final valuation.

It is important to understand that the valuation received by an estate agent could differ from one produced by a surveyor acting on behalf of the lender. While there shouldn’t be too much difference between them, a surveyor produces an accurate valuation based on various factors. They are not trying to win your custom, unlike an estate agent.

Similarly, if you find a property you like and make an offer of £260,000 on it, for example, you may find the valuation produced by the lender is lower than the amount you offered on the property. If that is the case, you would need to work out how to meet the shortfall between the two figures. The mortgage lender would never lend more than the amount determined from their valuation.