Brokers call for improved appeals process
Down valuations are on the rise in the property market, it’s reported, with some mortgage brokers calling for a more effective appeals process.
Properties which are valued by surveyors lower than an agreed sale price can be a huge headache for buyers and sellers alike, of course; most often due to market fluctuations, overvaluation by estate agents or sellers, property condition, or surveyors comparing a property to others which may have recently sold for less.
Ben Perks (pictured above left), managing director at Orchard Financial Advisers, confirms it is becoming a more frequent problem. “We have seen an increase in down valuations on remortgage cases lately,” Perks told Mortgage Introducer. “On the whole I think valuers are being a lot more cautious. The economy has been turbulent and house values have been impacted across the country, but the large scale depreciation that some feared hasn’t materialised and it would be great to see fewer down valuations going forward.” He continued: “I’d love to see the appeals process improved. Anyone that has tried to appeal a down-valuation will know it is often a pointless endeavour. You can collate good comparable evidence only for it to be referred to the original valuer who inevitably stands by his or her original decision.”
Sam Hutchins (pictured second from left above), specialist property finance adviser at Blueberry Specialist Lending, also thinks the appeals process needs addressing. “Down valuations are definitely becoming more common,” Hutchins said. “Is this down to clients and estate agents over valuing properties in the first instance? I do believe this has a role to play. I understand that surveyors are under a lot of pressure, but I do think some should be more open minded when valuation appeals are sent across.” In one of Hutchins’ cases, a surveyor valued a property at £450,000 and a week later a different surveyor valued the same property at £520,000. “These aren’t marginal differences and can have a big impact on clients,” he noted.
Down valuations over the past six to 12 months have been much more frequent as the market isn’t as buoyant, believes Graham Lock (pictured second from right above), mortgage & protection adviser at Lock and Key Mortgages. “They are a challenge,” Lock said. “We have more and more lenders now doing AVMs (automated valuation models). I had a case where the online lender’s house price index was showing one figure, they sent a surveyor out and it got given a new figure. We replaced the case two more times to two more lenders and each of the three surveys came back with different values. There should be some sort of standardisation for valuations that brokers can use. Most customers will do a Zoopla check, which can be misleading. It’s a complete nightmare to find out or have accurate values.”
Valuations are causing a huge bottleneck in the process, especially when deals are time-sensitive suggests Jessica Reehal (pictured above right), specialist broker at London Mortgage Solutions.
“A down valuation is honestly one of the most frustrating parts of the process, for both me and the client,” said Reehal, “but when it comes back as a zero, it’s on another level. It leaves the customer feeling completely deflated, like they’ve been left in the lurch after putting so much into the deal already, and the worst part is, challenging it rarely gets you anywhere. You’re left wasting more time and money trying to fix something that shouldn’t have been an issue in the first place. That’s why I’m starting to think AVMs could really be the way forward. They remove the subjectivity, rely on solid data, and the speed is a game changer. It gives my clients that bit more certainty, especially when timing is everything. But the issue is they’re only used in limited scenarios. Streamlining valuations and making them more digital-first could shave weeks off the process.”
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Are down valuations as big a problem in London?
Amar Dhanota (pictured inset), co-founder and specialist adviser at London-FS, hasn’t seen many residential down valuations recently -
she believes agents in the capital are valuing more sensibly at the outset and managing vendors’ expectations. Where there has been a trend in down valuations over the last year is for BTL properties and specialist investment properties, Dhanota added. “We are seeing surveyors stick to their guns with valuing these assets and the implications can be quite unsettling and have a deep financial impact,” she said. “Property investors are purchasing run down properties, adding value and converting them to HMO units, expecting valuations to come in higher, but are being knocked back on the property still being valued on bricks and mortar and not a yielding asset.”
Michael Welton, mortgage and protection consultant at WPP Financial Services, acknowledges that down valuations are causing delays and increased costs for clients. “Lenders are reluctant to challenge the surveyors and it’s very rare to get them overturned,” Welton said. “There needs to be a better system to challenge the surveyors and ‘drive by’ valuations to be scrapped as they don’t offer anything better than an AVM or full physical survey. I don’t believe lenders and surveyors are willing to change from the current model, based on feedback when expressing my frustrations.”
Meanwhile, Saam Lowni, founder of Merryoaks Property Finance and an active investor, recently conducted his own test. He wanted to achieve the highest possible valuation on a property, as he intended to release some equity to use elsewhere. “I proceeded with two mortgage applications using different lenders and valuers,” Lowni explained. “The result? One valuation came in at £395,000, while the other was £475,000 - a staggering 16.8% difference. Since my priority was to access the equity, I chose to proceed with the higher valuation. I had to pay for two valuations, two lender admin fees, and additional costs associated with the second application. However, in this case, the financial benefit outweighed the extra expense. if you strongly believe your asset is unique with limited comparables, or if achieving the highest valuation is a priority, it’s a strategy worth considering. This exercise reinforced what many already suspect - valuations are subjective and often inconsistent. Until a better system, perhaps leveraging AI and data aggregation, replaces the current process, this is simply a reality investors must navigate.”
Martyn Stones, director of technical services at Countrywide Surveying Services, commented that differences in valuations can be attributed to a number of factors. With unique or unusual properties, the range of acceptable values may vary more significantly due to limitations of directly comparable sales evidence. When dealing with remortgage cases, lenders may choose to use AVMs, which can also result in variations when compared to traditional full physical valuations, he said.
“Ultimately, RICS-qualified valuers act on behalf of their lender clients in compliance with strict professional requirements whilst balancing experienced judgment with extensive data analysis that is subject to audit scrutiny,” Stones said. “Nonetheless, the imperfect nature of the housing market may result in some differences of opinion at times, although in our experience the number of valuation challenges received is consistently minimal when compared to the total volume of instructions completed - typically low hundredths of a percent.”
