When a Valuation Doesn’t Hold Up

Analysing Valuation Report

We had a valuation come back last week that didn’t reflect where we had the deal underwritten.

That’s not something we see often, which is exactly why it stood out fairly quickly once we started going through it properly.

As we worked through it, it became clear that the conclusion it arrived at didn’t really line up with the underlying evidence. The comparables weren’t particularly close to like-for-like, some of the assumptions didn’t connect in the way you’d expect them to, and parts of it felt more interpretive than something you’d want to rely on when you’re making a decision of that level.

Individually, none of those things would usually be enough to make an issue of it, but when they all sit together like that, you end up with a position that doesn’t really justify itself.

That’s usually the point where things can go one of two ways.

Because once something has been produced professionally, there’s an unspoken tendency to treat it as fixed and adjust your thinking around it, rather than stepping back and asking whether the reasoning actually holds in the first place.

We’ve never really approached it like that.

The important thing here was keeping a clear separation between the deal itself and the interpretation that had been put on top of it, because those two things get blurred together more often than they should.

The deal hadn’t changed. The fundamentals were still there, the structure still worked, and nothing about the underlying opportunity had suddenly weakened just because a report had come back differently.

It was the interpretation that didn’t stand up, not the asset.

So we went back through it properly.

Not to argue a number, and not to try and force an outcome, but simply because the reasoning didn’t quite get there and needed to be worked through again.

The lender gave us the opportunity to respond, and we re-ran the comparables ourselves — looking at one- and two-bedroom flats within roughly a 1.4-mile radius, focusing on genuinely like-for-like stock rather than purpose-built units — and set everything back out so it actually reflected what was there.

Once that was done, it aligned with where we had the deal originally, if anything slightly stronger.

At that point, the next step becomes fairly straightforward.

The valuation is now being redone, and Dan will be there when it happens — not to influence the outcome, because that still sits with the valuer, but to make sure what’s being assessed on paper lines up properly with what’s there in reality, and that nothing gets lost between the two.

Situations like this aren’t especially rare, but the way they’re handled tends to vary quite a lot. Some people accept the report as final because it’s been written professionally. Others challenge it, but without really grounding that challenge in anything solid, which usually doesn’t get you very far either.

In both cases, you’re stepping away from the responsibility of deciding what actually stands up. A more useful way of looking at it is simpler than that.

If the reasoning doesn’t hold, it needs to be challenged properly — not because the number isn’t what you wanted, but because it doesn’t accurately reflect the underlying evidence.

There’s a difference between respecting something because it’s been produced professionally and relying on it because it’s actually sound.

And over time, that distinction matters far more than any single valuation.