Yesterday, the government issued guidance for workers who must enter people’s homes, including surveyors, on how to work safely during the coronavirus pandemic. Within hours of the guidelines being made public, banks began booking in physical valuations for stalled applications.
Tens of thousands of valuations are thought to be have been put on hold, and surveyors predict it could take up to two months to clear the backlog.
Meanwhile, housing secretary Robert Jenrick announced that people in England were allowed to begin viewing properties and moving home, as the property market begins to reopen after being in lockdown for almost eight weeks.
Estate agent offices and show homes can reopen from today with social distancing measures in place.
Brokers say the news will allow them to progress urgent high loan to value (LTV) remortgages and purchases and cases where properties are worth in the region of £1m.
But they are concerned about how property valuations will be affected.
Positive first step
Lea Karasavvas, managing director of Prolific Mortgage Finance, received an email from HSBC just hours after the government’s guidance was published telling him they were ready to book in a physical valuation for one of his clients.
He said: “This is a great positive step in the first road to recovery and will certainly help those that were forced to hit the pause button midway through a transaction before the lockdown.
“What will be key are the valuation figures that are reported back. With many mixed views on where values will sit post lockdown, we will be waiting with bated breath to see what valuers will do.
“There has been much talk of down valuations ranging between three and 15 per cent but from what we have seen most renegotiations have faltered with vendors holding their nerve and refusing to budge on prices.”
High value properties
Managing director Richard Campo of Rose Capital Partners said his business had been disproportionately hit because most of his clients own or are buying homes worth at least £1m.
At this value he says most of his cases were excluded from lenders’ automated valuation models (AVM) or desktop valuation policies and were stuck waiting for physical valuations.
Campo says though for the majority of borrowers, AVMs and desktop surveys would be sufficient which is a recent development among banks which the public were not aware of.
He thinks the speed at which lenders have embraced technology to carry out remote valuations raises questions for the future of traditional surveying.
“While surveyors may be back out on the road shortly, lenders have proved that they really don’t need them as much as they thought,” he said. “It will be interesting to see how this shakes out in the long term.
“I suspect we’ll see a lot fewer physical valuations happen from now on with the exception of high value, unique or non-standard properties.
“Personally I think that is good thing as it cuts costs and speeds up the process for clients. It is also another value add for brokers because we can help our clients navigate this part of the process.”
No common sense
Simon Redler, director of Prudell Financial Services, found himself in a similar position and thinks the rules around physical valuations and high value properties lacks common sense.
“Our business has welcomed the news that the government has been quick to issue guidance on this situation,” he said.
“We have many cases that are unable to proceed because the property value is in excess of £1m which means that irrespective of the loan to value a physical valuation is required.
“This is due to surveyor’s professional indemnity requirements which seems a bit odd as a mortgage for £200,000 based on a £1,200,000 valuation cannot proceed whereas a mortgage of £200,000 based on a £350,000 valuation is fine.”
Redler said many urgent remortgage cases that were on hold because of the need for a physical valuation have resulted in clients reluctantly staying with their lender to avoid moving on to an expensive standard variable rate in the meantime.
David Hollingworth, associate director, communications at L&C, added: “The safety of valuers and homeowners will be paramount of course but this guidance will be warmly welcomed.
“Lenders have acted quickly to develop their automated and remote valuation capability and that will continue to play a crucial part in allowing a smooth flow of reasonable volume.”