The value of a property is integral to the procuration fee paid, and as such, while the valuer works for the lender, there is always a healthy chance the valuation may not reflect the broker’s or the client’s opinion.
The derivation of value, and the robustness of the methodology, is constantly under review. The RICS redbook is updated to reflect changes in thinking about sustainability and new build issues to name a few. Arguments over actual value aside, brokers are rarely as upset than when capacity threatens to strangle the market.
As a result of the credit crisis, regulation and commercial scrutiny have focused on sales, distribution, and financial prudence. In a market now intent on de-risking, and retrieving the margin lost to more rigorous regulation at the front and back end of the business, the focus is turning to managing operational risk and asset risk. This means re-engineering the valuation process.
Of course, on one level this is not entirely new. Automated Valuations (AVs) have been in place for some time dealing with remortgage and a limited volume of purchase business as well as underpinning the value of securitsations.
However, the scale of what is being considered now is breathtaking by comparison. This has major ramifications for brokers, whose new business if it is vanilla enough may never hit a valuer’s desk – but equally, if it is a difficult case, they will know an expert is looking at it and this will impact turnaround times. The actual physical valuation may therefore take slightly longer but will nevertheless be delivered more quickly with fewer valuations overall being required.
What’s more, the on-site valuer is now using on site mobile technology that references comparables there and then – meaning less delay in getting a full report back to the lender and more productive surveyors who are not working into the night because information is unavailable in the field.
Ultimately the valuer gains too as decisions on value become more defensible as the data available and technology to leverage it deliver standards that go way beyond what many can do today.
This re-engineering across the industry is underway and lenders realize that the old way of doing things is no longer satisfactory. Brokers’ and valuers’ destinies are more tightly knit together than you may care to realize – even if they ultimately very often work for the same super groups. The property risk value chain starts with customer and the property and ends with issuance of a mortgage and payment of a procuration fee. Brokers and valuers should sing together harmoniously – watch this space.
Mark Blackwell is lending and surveying services director at Etech Solutions