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Valuers’ Brexit clause is holding back the market – Jonathan Sealey

by: Jonathan Sealey, chief executive, Hope Capital
  • 06/10/2016
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Valuers’ Brexit clause is holding back the market – Jonathan Sealey
There is a growing irritation in the lending world directed at valuers over the clause they added into their valuations shorty after Brexit. Hope Capital's Jonathan Sealey takes a closer look.

The ‘Brexit clause’ effectively says that the valuers only stand by their valuation as long as property prices are not negatively affected by Brexit.

Ultimately this puts doubt in the mind of the lender and makes the valuation almost worthless. As a consequence many lenders in both the short and long-term lending markets are lowering their loan-to-values (LTV) in order to cover themselves in the event that property prices drop and they need to repossess the property. However, it should not be this way; it should be down to the valuer to value the property properly and stand by their valuation, then lenders can lend a decent amount against it.

Of course some lenders, reliant on external funding, are also downgrading their lending because they have had funding lines pulled, but this is a different issue entirely. It is left to the unfortunate broker to work out which lenders are lowering their LTVs because they do not have the money to lend and which are doing it as a cautionary measure to hedge their bets against a valuation that may not stand the test of time. In this case using a lender, especially in the bridging space, who has their own funds can provide a broker with surety that the funds will be forthcoming.

The irony in all of this is that some of the valuers who are including the ‘Brexit clause’ actually have huge research departments and spend much time talking about, or putting into print, the findings from these departments. Therefore surely it is these large valuation firms who are in the best position to make the call on the market and what might happen, as they employ full-time staff and invest significant amounts of money into researching exactly these issues?

Of course there is no crystal ball, but let’s not get away from the fact that it is the valuer/surveyor’s job to use their expertise to price a property at its current market value. This is what they are trained and experienced in doing. To say that they will not stand by this makes it barely worth the paper it’s written on. So come on valuers, we value your expertise so please provide us with factual information that we can stand by, and then all lenders can lend proper amounts of money, helping both borrowers and the whole housing market.

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