How to avoid low valuation disappointment

Reply to the comment left by "Nick Pope" at "11/04/2015 - 16:29":

Thank you for your detailed and very informative post. It's great to read the views of a valuer 🙂
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Excellent comments Nick. I agree; the valuer has to consider the overall market value, no an individual's needs. It's a case of dammed if they do, dammed if they don't!

This is a fascinating thread and I feel compelled to add something based on my experience as both a Registered Valuer and a property investor.

Myself and my colleagues do hundreds of valuations each year and the vast majority will be in line with the borrowers' expectations. Obviously we won't please everybody all the time and it may be useful to offer the valuer's perspective. Many of the comment raised by others in this thread are very sensible.

As a grown up in the real world criticism goes with the territory, but even so the odd rant against us still hurts a bit, especially when it is often misplaced. I have been in the business for thirty years, with a formal education and ongoing CPD. Our reports are peer reviewed before issue (even for us seasoned partners) and reviewed by the banks' panel managers. These are the aspects which the borrower does not see. We are also mindful that our client is the bank - not the borrower.

Bank criteria is stringent but should not lead to undervaluing. However, in a rising market it can be difficult to justify values from the evidence offered. We have to provide details of at least three comparables which are sold and offer a methodology as to how we arrived at a value. There is scope for some subjectivity to support higher values than the comparables lead us to if we are absolutely convinced it is justified. Banks asks us a lot of questions!

The reliance of a drive-by for a new mortgage cannot lead to accurate values. The only drive-bys we do are here when banks cannot gain access, usually in preparation for a repossession. As a borrower it is perhaps worth questioning your lender as to whether they use drive-bys or proper inspections. Drive-bys, by their very nature, are full of caveats - how can we valuers do a proper job on this basis?

I also act as an Independent Expert and work for insurance companies when surveyors receive Professional Indemnity (PI) claims. In many cases I am sorry to say that I often have little sympathy with the valuers who have often done what I term "Friday Afternoon" jobs. Tick box reports are the worst.

Any report worth it's salt should have a clear section explaining how and why the final value has been arrived at. That way everybody involved knows and can dissect it. Valuers are not always right but at least if there is a proper explanation issues of difference can be narrowed down.

Are borrowers prepared to pay for proper reports? Many comments have referred to values' fees and they are correct to do so. It takes a good deal of time, even for simple properties, to correctly review and analyse comparables and details of the property.

We will certainly review reports on request and have been known to reissue where we can agree that factors have been overlooked. These may be factual (e.g. availability of a parking space, for example) or to do with evidence of other sales.

It is my own policy to discuss reports with bank managers where there seems to be some issue between what the borrower is expecting and my valuation. In most cases the bank manager will agree with me, saying that they have no option but to put a loan through to valuation even though they themselves think that the borrower is overstating the property's likely value.

What can borrowers do?

Arranging proper access is a good start. Valuers get cheesed off traipsing round agents offices picking up keys which then don't work. Ideally meet the valuer yourself (as already suggested by others) then point out the features (e.g. parking, access) as this saves reports going in with questions to be asked later on or a negative impression of the property. Just don't get in the way - time is precious - and it is unlikely the valuer will offer too much by way of comment on values but will hopefully listen to constructive information (which saves the valuer time).

A tidy property has an advantage. It's psychological. In theory it should make no difference but going into a house with all the curtains drawn (what is it about tenants living in the dark?) and the tenant's dirty dishes for the last week lying round the kitchen do not help. If the house looks in good order, well maintained and clean and tidy it will score higher.

Make sure the paperwork is in order. We need the tenancy agreement, at the very least, but will also confirm that the deposit is protected and there is a gas certificate. For HMO's we will need details of the licence. Does your extension have planning consent? Did works need building regs approval and have you got it? All these are relevant. If you are missing documents or not willing to provide them then the valuer should refer back to the lender and ask your conveyancer to get them.

A brief history lesson - in the noughties (up to 2007/2008) money was plentiful and banks were doing anything to lend it out cheaply. The valuation was nothing more than a tick list (often literally) along the way to getting money out of the door. I know - I borrowed enough of it! Times have changed. Banks have had their wings clipped somewhat since then. Many restrictions have been imposed on the banks and their procedures and the valuation process has become more rigorous. Banks are far more questioning about our work than they were ten years ago. Valuers are relied on increasingly to assess overall risk to the bank - maybe this is why there is conflict with borrowers. We also now have the RICS Registered Valuer scheme which imposes more bureaucracy and a greater requirement to act professionally. Many firms of valuers were subject to PI claims as a result of incorrect valuations during the noughties. My firm escaped fairly lightly and has a good PI record but our policy costs us nearly £100k per year - something to think about when you want to pay £50 for a valuation.

Finally, comparables - this is perhaps the crucial bit. We deal with mainstream lenders who want at least three comparables from within the last twelve months. If you have some to hand then feel free to provide them. Most valuers will be grateful. They do need to be relevant to your property though; it is difficult to be precise as to what that means. For larger houses comparables may be a few miles away but at the lower end there may be differences within adjoining roads. You could ask local agents if they have any sales which are with solicitors (i.e. not completed) as these may help - especially in a rising market.