Sadly, all too common.
This is a subject I feel very strongly about because, in my opinion, a down valuation is just as negligent as an over valuation, but it appears I’m on my own on that one.
It’s true that valuation is an opinion, and so rather than being a defined single figure, it’s accepted that valuations are a range (to reflect a range of opinions).
The range is not open ended but, as with everything around valuation, where that range should lie is a matter of opinion!
Anyway, I go into a lot more detail of my thoughts and experiences in the video so please do take a look.
Since posting this video on YouTube I’ve had this question from Mark:
If you don’t get the valuation required and it is critical to get the right valuation, is there nothing stopping me trying 3 or 4 lenders until one gives me the valuation I want !!??
I appreciate I may have to pay the fee 3 or 4 times, but many banks offer free valuation don’t they ?
Or if 2 valuers both value it at say, 90k but you think it’s worth 100k. would you give up and accept you will be unlikely to get higher?
But if it is out by a lot, I’d say 5k plus , then it is worth spending the time/money to get more valuations.
would approaching 3 or 4 lenders affect credit rating ?
Let me give some quick answers to what could be a long and in depth subject.
Firstly, in theory there’s nothing to stop you going to 3 or 4 lenders until they send out a valuer who comes up with “the right answer”, assuming they do come up with the right answer of course.
A couple of points on that.
Number one – are you confident that your opinion of value is right? Is it based on due diligence and well researched comparables or a bit of wishful thinking?
Number two – some banks employ their own in-house valuers. Other banks use ‘panel valuers’ – valuers from independent firms (they can be specifically valuation firms, or they can be valuers/surveyors employed by local estate agents) so it’s possible that if you go to say 3 or 4 lenders, 2 of them might use the same panel valuer anyway. So that might not help.
Number three – if two valuers value it at £90k but you think it’s worth £100k, would you give up? probably. It might suggest I am over-optimistic in my view of value. Or that valuers are generally “tightening their belts”.There’s no point appealing, the bank will support the valuer at that level of difference. You could try another lender to get another valuer, but it’s a lottery.
Number four – if it’s out by a lot then I might be tempted to keep going. But ‘a lot’ is a relative and subjective term. £5k would be a lot on a £10k property, but not a lot on a £100k property. As a rough rule of thumb, going back to the range, 10% each way is considered normal but the courts have ruled it could be much more than 10% each way.
So a £100k property valued at £90k or £110k is not considered out by ‘a lot’, it’s considered to ‘be right’. I wouldn’t go to a new lender for £5k on a property worth £50k or more, but I might if the difference was £25k+. But not if it was a difference of £25k on a £300k property. You’d need to look at each case on its own merits.
Number 5 – Would approaching 3 or 4 different lenders affect your credit rating?Perhaps, if you put 4 applications in all at the same time on the same property. But don’t forget that applying for mortgages is what property investors do, so it’s no surprise, or worry to a bank, if you make multiple applications. But don’t make them all at the same time! Do them sequentially, one at a time.
Also, don’t forget that many lenders do a ‘soft search’ when you make an application which won’t affect your credit score.
Now I’ve answered Mark’s specific points, let me give the answer.I know I keep banging on about this in my articles and videos but there is a simple truth we all need to recognise, accept and embrace.
If you want to have the best chance of raising your finance you need a good, or great, mortgage broker.
Not all mortgage brokers are the same, some are very good, some are very poor.
You need one who is pro-active (hate the word, but it describes what we need) and who understands the subtleties, nuances, processes and systems in dealing with lenders, and who understands what you are trying to achieve with your valuation.
And please, please, please don’t come back with “But some of them charge fees”, or, “How do I find one who doesn’t charge fees?”. You get what you pay for. If a broker can get you the finance you need, pay them whatever they ask. I take the view that when, in 10 years time, I’ve added another 50 properties to my portfolio I’m not going to be lying in bed at night unable to sleep because I’m worrying about how much in fees I’ve paid my broker.
I’ve made the offer before but I’ll make it again. If you’d like me to put you in touch with my really good broker please email me and I’ll happily do so.
Here’s to successful property investing.
Peter Jones B.Sc FRICS
Chartered Surveyor, author and property investor
PS. By the way, I’ve rewritten and updated my best-selling e-book, The Successful Property Investor’s Strategy Workshop, which is an account of how I put together my multi-property portfolio, starting from scratch and with no money of my own, and how you can do the same.
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