The 180-Day Valuation: Why Lenders Discount Your Property Value

A 180-day valuation, also known as a restricted marketing period value or forced sale value, is an assessment of what a property would achieve if it had to be sold within a maximum period of 180 days, approximately six months. This figure is always lower than the open market value because it assumes a constrained sale timeline that does not allow for the full marketing period that a seller in a normal transaction would expect. The discount reflects the reality that a lender in a default situation cannot wait indefinitely for the best possible price. They need to recover their funds within a reasonable timeframe, and the 180-day value represents their realistic recovery expectation.

In development finance, the 180-day valuation is used by lenders as part of their downside risk analysis. While the headline loan metrics are usually expressed against the open market value or GDV, the lender's credit committee will also consider the 180-day value to assess what they could recover in a worst-case scenario. If a site has an open market value of £1,000,000 and a 180-day value of £825,000, the lender knows that even in a forced sale scenario, they would expect to recover at least £825,000, which provides a floor for their security assessment.

The 180-day valuation is not a new concept. It has been a standard feature of commercial and development lending for decades, and the methodology is well established within the RICS framework. However, many developers are unaware of it until they receive their valuation report and see a figure significantly below the open market value they expected. Understanding the 180-day valuation in advance allows you to plan your equity requirements more accurately and avoid unpleasant surprises during the finance application process.

The 180-day discount is expressed as a percentage reduction from the open market value, and the size of the discount varies depending on the property type, location, and market conditions. For standard residential properties in liquid markets such as Greater London, Surrey, and Berkshire, the discount is typically 10-15%. For properties in less liquid markets or areas with lower transaction volumes, the discount may be 15-25%. For commercial properties, specialist assets, or properties with limited appeal, discounts of 20-35% are not uncommon.

The valuer considers several factors when determining the discount. Market liquidity is the primary consideration: how quickly do properties of this type sell in this area under normal conditions? If the typical marketing period for comparable properties is 8-12 weeks, the 180-day constraint is not particularly onerous and the discount will be modest. If the typical marketing period is 6-9 months, a 180-day constraint represents a significant limitation and the discount will be larger. Seasonal factors also play a role. A property coming to market in December in a rural area will likely require a larger discount than one offered in spring in an urban centre.

For development sites specifically, the 180-day discount is often more severe than for completed properties because the buyer pool for a partially completed or undeveloped site is much smaller than for a finished home. A half-built development site may attract a 180-day discount of 25-35% from the open market value, reflecting the limited pool of buyers willing and able to take on a construction project mid-build. This is one of the reasons why lenders are particularly cautious about overexposure during the construction phase and structure drawdowns conservatively.

While most lenders calculate the headline facility against the open market value and GDV, the 180-day valuation influences the lender's internal risk assessment and can indirectly affect the terms offered. Some lenders explicitly use the 180-day value as a secondary lending metric, requiring that the loan does not exceed a certain percentage of the 180-day value at any point during the facility. For example, a lender might offer 65% of GDV but also require that the loan never exceeds 85% of the 180-day value. If these two metrics conflict, the more restrictive one applies.

Consider a practical example. A development scheme has a GDV of £3,000,000 and a 180-day GDV of £2,550,000, reflecting a 15% discount. At 65% of GDV, the maximum facility is £1,950,000. At 85% of the 180-day value, the maximum is £2,167,500. In this case, the GDV metric is more restrictive and the facility remains at £1,950,000. However, if the 180-day discount were larger at 25%, the 180-day GDV would be £2,250,000 and 85% of that would be £1,912,500, which would become the binding constraint and reduce the facility by £37,500.

The 180-day valuation has a more significant impact on the day-one advance against the site value. If the site has an open market value of £900,000 but a 180-day value of £720,000, and the lender requires the day-one advance not to exceed 75% of the 180-day value, the maximum advance would be £540,000 rather than the £585,000 available at 65% of the open market value. This £45,000 difference increases the equity required at completion and must be factored into your funding plan. For help structuring your equity contribution, submit your scheme through our deal room.

Several property-specific and market-related factors can cause the 180-day discount to be larger than average. Non-standard construction methods such as steel-frame, timber-frame, or modular construction can attract a higher discount because these properties are harder to mortgage and therefore have a smaller buyer pool. Properties in locations with planning restrictions, such as green belt fringes, conservation areas, or areas of outstanding natural beauty, may also attract larger discounts because the development potential that underpins the value is constrained.

Market conditions at the time of valuation influence the discount applied. In a rising market with strong buyer demand, valuers will apply a more modest discount because properties are selling quickly and the risk of a lengthy marketing period is low. In a falling or uncertain market, the discount will be larger because buyers are fewer, mortgage availability may be constrained, and properties take longer to sell. During the market uncertainty following the 2022 mini-budget, we saw 180-day discounts increase by 5-10 percentage points across many property types as valuers reflected the reduced market liquidity in their assessments.

Scheme-specific factors also matter. A development of standard three-bedroom family homes in a popular commuter belt location will attract a modest 180-day discount because the product type has broad market appeal. A development of large five-bedroom executive homes priced above £1,500,000 each may attract a larger discount because the buyer pool at that price point is smaller and properties take longer to sell. Similarly, developments in areas with significant new-build competition may see larger discounts because a forced sale would be competing with other developers' stock in the same area.

While you cannot eliminate the 180-day discount, there are strategies to minimise its impact on your facility. The first is to develop schemes with broad market appeal. Standard two and three-bedroom homes and apartments in established residential areas with good transport links and amenities will attract the smallest discounts because they sell quickly in any market condition. Niche products such as luxury apartments, eco-homes, or properties aimed at very specific buyer demographics carry more risk and attract larger discounts.

Pre-sales and reservations significantly reduce the 180-day risk from the lender's perspective. If you can demonstrate that 30-50% of units are already reserved or sold off-plan before the valuation is conducted, the lender has greater confidence in the exit strategy and the valuer may apply a smaller discount to reflect the reduced marketing risk. Some lenders will even recalculate the 180-day metrics on the unsold units only, which can meaningfully improve the overall facility size. We have seen cases where off-plan sales of four units out of twelve reduced the effective 180-day discount from 20% to 12% on the remaining stock.

Working with lenders who do not use the 180-day value as a binding lending metric is another approach. Not all lenders apply this constraint, and those who focus primarily on LTGDV and loan-to-cost ratios without a secondary 180-day test may offer larger facilities on schemes where the 180-day discount is significant. We have access to lenders across the full spectrum of risk appetite and can identify those whose credit criteria are most favourable for your specific scheme. For schemes where the 180-day value is a concern, development exit finance arranged before completion can also help demonstrate a clear refinance exit that reduces the lender's reliance on the 180-day figure.

The 180-day discount varies considerably by property type, and understanding these differences helps you anticipate the impact on your scheme. For completed standard residential units in prime locations, the discount is typically 10-12%. For completed residential units in secondary locations, expect 12-18%. For partially completed residential developments, the discount ranges from 20-35% depending on the stage of construction and the amount of work remaining.

Commercial properties attract wider 180-day discounts because transaction timescales are inherently longer than residential. A standard commercial property in a good location may see a discount of 15-20%, while specialist commercial properties such as car showrooms, petrol stations, or purpose-built student accommodation may attract discounts of 25-40%. The reasoning is straightforward: these properties have limited alternative use and a small pool of potential buyers, so a constrained sale timeline significantly reduces the achievable price.

For land, the 180-day discount is particularly relevant. A development site with full planning permission in a desirable area may attract a discount of 15-20%. Land with outline permission or subject to a planning application may see discounts of 25-35%. Land without any planning permission but with development potential carries the highest risk and can attract discounts of 30-45%. These discounts reflect the fact that development land is a specialist asset with a limited buyer pool, and purchasers of land in a forced sale scenario are typically looking for bargains. For guidance on how land values are assessed in the first place, see our guide on site value versus completed value.