Complex Buy To Let
TSLE2020: HMO valuation process must be clear for lenders and brokers
Brokers must be clear what circumstances houses in multiple occupation (HMOs) will be valued under and lenders should “put their weight” behind challenges where they are valid, The Specialist Lending Event 2020 has heard.
Speaking at the event at Sandown Park, a trio of specialist lenders addressed brokers’ questions about why HMO properties were frequently given unexpectedly low valuations.
One adviser also told the panel that a surveyor had down valued a property because “they thought there were going to be redundancies within local companies and that the economic outlook for the UK was dire”.
Investment or bricks-and-mortar
Octane Capital CEO Jonathan Samuels (pictured) told brokers to ensure they knew the basis which a lender instructed the valuer and added that lenders needed to be clear about that.
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“Are you instructing them on an investment basis or an as-is bricks and mortar basis?” he said.
“You could instruct on those two different approaches and they come out with a wildly different answer on the same property. As a broker, you might see two different valuations and you can’t believe it.
“There should be clarity and you should ask the lender what basis they are going to be instructing the valuer to value the property,” he added.
Samuels explained that his firm used seven bedrooms as the cut off point between the two approaches as this was where planning rules change significantly.
Regarding the down valuation example citing the economic outlook, Samuels added that surveyors should not be trying to predict what a property will be worth in six months or a year.
“That’s what we would expect, so it’s really up to the lender to challenge them,” he continued.
“Fine, you’ve got a bleak outlook, but what’s it worth today? Or [the lender should] request a second valuation.”
Put weight behind appeals
OneSavings Bank sales director Adrian Moloney said lenders had a responsibility to give clarity to brokers at what point the valuation changes from bricks and mortar to investment.
Regarding challenging valuations, Moloney noted that getting the right evidence and comparable properties could make a difference.
HTB sales director of specialist mortgages Alex Upton said she had some sympathy with valuers.
“There is no science to it, it is an art,” she said.
“We do have a panel manager and we make sure we engage with that panel manger because there is a clear review process and audit process. We manage our appeals quite closely and we have had some success with it.
“You have to make a call on the appeals, we believe we have expert underwriters who really understand the property market and if an appeal has got legs then a lender should put their weight behind it too because these valuers can be wrong,” she added.