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Clear valuation guidelines needed to avoid £0 HS2 confusion

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  • 14/01/2016
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Clear valuation guidelines needed to avoid £0 HS2 confusion
Mortgage lenders and the Royal Institution of Chartered Surveyors (RICs) have been called on to produce some ‘definite guidelines’ for the valuation process, to prevent the ‘buck stopping’ with surveyors.

According to a recent report published in the Evening Standard, a Londoner seeking refinancing for a property purchased at auction received a zero valuation after the surveyor concluded: “The property is located almost above the tunnel portal for the HS2 rail link and as such, at this point we would not recommend the property for loan.”

The report did not publish which lender or surveying firm the client was dealing with.

Rather than the property being worthless, a number of surveyors explained that the nil valuation was likely to be a result of the surveyor concluding the property was not mortgageable under the lender’s rules.

London’s Surveyors and Valuers director Richard Taylor, said: “The property clearly does have a value, but this case is a distortion of something that occurred because of a lender’s criteria, which might say zero for mortgage valuation purposes.”

However, director of Kings Group Karl Knipe, said that surveyors are often relied on to assess the risk of a property if there is no clear lender policy in place.

He added that this problem is further exacerbated by the pressure surveyors face from professional indemnity insurers.

“Just because you’ve never had any claims, getting professional indemnity insurance is still difficult. Not many insurance companies want to play in that field, quite rightly so because they’ve had their fingers burned in the past, so it puts a hell of a lot of pressure on surveying firms who in turn put that pressure on the surveyors.

“While buyers might front the cost for the survey, we’re acting for the lender and because of that surveyors are always going to err on the side of caution.”

A spokesperson for Santander explained that in circumstances similar to the HS2 case, it relied on the advice received from independent third party valuers to assess the property’s risk.

“We ask a valuer to create a report, advising us of the market value of a property. The location of a property is one of the most important factors affecting the value and saleability of a property. In a small number of cases, valuers do advise that environmental factors are considered to be so detrimental to future saleability that the property is unacceptable for mortgage purposes.”

RICS UK valuation director Fiona Haggett, added: “When a valuer puts a zero valuation on a property it’s either because it falls outside a lender’s policy or it’s because the valuer needs additional information before they can put a price on it.

“As with any issue, the valuer must reflect the market, they don’t set the market. If the market says a property has no value, then it has no value. If the market says it has a value, then the surveyor is required to reflect it.”

But Knipe said lenders and RICS should be working together on these and similar issues, to get clear guidelines in place quickly.

“It’s the same old story that the left hand doesn’t link up with the right hand. The big issue at the moment is flood plains, and going forward that’s going to be a massive area of discussion.

“We need to get to get together all the interested parties to collectively take a stance and have some very definite guidelines on what the right way forward is. Currently, the buck stops with the surveyor unless there are clear lender guidelines in place.”

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