By Bob Howard
BBC Radio 4's Money Box
There are strict rules for how surveyors value properties
Homebuyers are being prevented from buying many properties because lender valuations are coming in too low, say estate agents.
Mortgage providers routinely commission surveys to ensure the price agreed reflects the property's current value.
A valuation should show what a willing buyer and seller would be prepared to pay on the day of the survey.
But in a falling market estate agents claim surveyors are undervaluing to avoid being sued by lenders.
One buyer, Chris, wanted to purchase a one bedroom flat earlier this year in south east London, which was on the market for £175,000.
To secure his mortgage offer, his lender needed to make its own valuation.
When it came through, it scuppered his plans, as he told BBC Radio 4's Money Box: "The survey came back at £140,000, which we found astonishing."
Chris believes the low valuation was a result of his surveyor looking at the price similar repossessed properties were selling for at auction.
There are strict rules for how surveyors are supposed to value properties, which is what a willing buyer and seller are prepared to pay on the open market.
Barry Hall represents the Royal Institution of Chartered Surveyors on issues regarding residential valuations.
He agreed that surveyors are not supposed to base a valuation on the price repossessed properties reach at auction, and added: "When the market is difficult, there's a temptation to be cautious, if not overly cautious. That's a temptation to be avoided."
If the property is repossessed and the lender is forced to sell below its purchase price, it can sue the valuer for negligence.
Peter Bolton King, from the National Association of Estate Agents, fears that in order to play safe, some surveyors are ignoring the principle of the willing buyer and seller.
"To my mind there's no excuse for taking the absolute worst case scenario, and then knocking something else off it as well," he said.
Money Box asked three of the biggest lenders whether they had tightened their valuation procedures.
Whilst Halifax and Abbey said they had not, Nationwide said it had.
All three insisted they still ask for valuations based on the open market, not on forced sales.
But Michael Coogan, director general of the Council for Mortgage Lenders, admitted there are cases when banks are forced to do this.
"Some flats have lost a lot of value, and they're concerned that the only resale value you'd get is through a forced sale," he told the programme.
However, some surveyors firmly reject suggestions that they are too cautious when valuing and this is in any way affecting sales.
Chris Shaw, managing director of surveyors and valuers Countrywide, said many sellers still have unrealistic expectations of what their property is worth.
"People still tend to look at the asking price of unsold properties nearby and base their expectations on these figures instead of known sales. Houses that are priced correctly are selling," he said.
BBC Radio 4's Money Box was broadcast on Saturday, 4 April 2009 at 1204 BST.