Mortgage Valuations have always been a hot topic but never more so than now! It is not surprising that this is a controversial subject as valuations are provided for the sole benefit of the lender but paid for by the borrower with no apparent advantage. Add to this the disparity in fees charged, the delays and unexpected outcomes and no wonder the borrower, and broker, question the cost, the choice and the results.
Let us first surrender to reality; not many loans will happen without a formal valuation from a Chartered Surveyor, paid for by the borrower. This is true regardless if it is a purchase or refinance, for a private dwelling, shop and upper part or a large commercial building or if the LTV is 20% or 70%. Lenders require the valuation and to rely on the valuer’s Professional Indemnity policy if there is negligence resulting in a loss. Not only do the lenders demand this but so do their funding sources.
A few major lenders allow the broker to select a valuer from their panel and to issue instructions in an agreed format. If the loan is declined for any reason, the same report is circulated to other lenders in the hope they will both agree to the loan and accept an inherited valuation readdressed to them. Sometimes they do but if the report has been prepared by one of a small number of firms, particularly favoured by brokers, lenders will question why.
Brokers and lenders are often at odds about the choice of valuer because their focus is significantly different. For the broker, it is how quick, how cheap and for the lender it is how reliable. The valuer will be concerned that they have adequate time to properly investigate the asset by checking comparables, investigating the planning permission and possible defects, contamination or specific property risks. And then there is the Brexit effect, a warning by the valuer to the lender that we are in uncharted waters and valuations are now less reliable because of this.
In the current, competitive market, valuation has become a marketing tool with some lenders offering loans without formal valuation by relying on their own research through web sites such as Zoopla and Rightmove Pro, backed up by statistics from the Royal Institute of Chartered Surveyors and the Office of National Statistics. However, this is limited to inexpensive owner-occupied homes and some buy to let properties where the LTV is sub 50%. An alternative to this is for lenders to commission inexpensive valuations, including drive-by inspections, which they pay for themselves.
Sometimes a report from a leading firm commissioned by the client and submitted to the lender for their future use will help to clinch the deal by providing an independent, positive assessment of the security at outset. However, if you use this strategy do ensure that the firm is undoubted and suitable both geographically and for the asset class; just remember, the valuation fee is at risk.