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  • Mortgages & Finance

    Concerns over potential survey valuations

    I am concerned that I have had 2 valuations on 2 properties in Islington, Zone1, that the valuations will be coming in under the amounts I need to redeem the mortgages, as maximum LTV is 70% under the lender's conditions. For various reasons, the deposit is assisted and using bridging at a good rate of 7.49%. It will be refinanced out at 75% with improvements made in the next 3-6 months.

    Does anyone know of any second lending that could be used with the lender as the primary charge holder? It also needs to be done fairly quickly.

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    I am sorry I am unable to answer your question but because you did not tell us how experienced you are in the industry I felt it necessary to sound a note of caution considering the prevailing market conditions.

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    Experienced, very aware of the conditions in Zone 1, London.

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    We are starting to see regular prime london down valuations and have started recommending that homebuyers surveys are used so that valuations can be challenged better and there is a duty of care to the borrower. This is for refinancing too.

    The values are going to cause a recession the way they are going. Lenders are putting more pressure on values who react by down valuing when they act only for the lender.

    As to your circumstances one needs to know who your current lender is who would have to accept a second charge - if that is the right way to go. In prime LONDON there are also options to rely more on other assets in a private bank/non-Dom type capacity.
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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022


    Good tip there on homebuyers report.

    What do the lenders gain by undervaluing a property deliberately?

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    A lender lends say £1000 at a rate of 3%. He borrows that from the money markets (or depositors) at say 1%. The lenders margin is 2%.So they needs loads of loans to make money. 2% on £1000 is not a great return. So they need scale. If you ever think your LTV is high , have a look at a bank and it is quite frightening! They get scale by borrowing almost all the money they lend to you.

    If a loan defaults and they have to write say 50% off. That's a £500 loss. How many other loans do they have to do to make that up? 25. So they need to put £25k on the line to make up (without any profit on those 25).

    So banks are petrified of losing money. That's the issue. They are happy with down valuations if they think there is a general trend for an increase in potential losses. Publicly they cannot say they are closing the doors or changing their criteria but guess they find ways for less loans to be made.

    Remember arrangement fees largely cover the costs of making the loan not the cost of money.

    Obviously this is an over simplification but I hope it explains why lenders are so fussy. Investors of course have the chance of upside so accept more downside risk.

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022


    Thanks to both of you for your replies.

    I guess I am struggling to understand why a valuer has valued a property at 250K when it clearly is worth 325K+ in todays market - based on sold and advertised prices in a 0.25 radius going back 18 months. I paid just over 250K for this property, so am expecting a valuation of what I paid - its a very simple "deal" that they are making unnecessarily complicated, that too based on what I consider a bogus valuation.

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    But what was the basis of the valuation. The lender could have instructed a valuation based on a 90 day sale or even worse 30 days. If you HAD to sell your property in a short time period then price would be affected. Recently we found out that one lender (on a free valuation!) had changed their valuation policy and required valuers to have their opinion valid for 12 months. In a down market that is a major concern to any valuer as they can only be sued by the lender for too high a valuation and guess what the valuation was heavily reduced, That's why we suggest to have a home buyers as it ensures that the valuer cannot focus solely on the downside risk.

    Your broker should have established with the lender the basis of any valuation as it may mean you should not approach a lender and need to look elsewhere. It is not just a cost game. You have probably wasted money on a survey!

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022


     do not know the answer to that. Will look into it - thanks for the tip.

    I have another case where they valued a property "0"......

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    My friend also had a £0 valuation but after complaining another firm came in 2 weeks later and valued the property at £175,000.

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    what does a 0 valuation even mean?

    im in the process of appealing their valuation.

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