One of the biggest factors that prevent businesses and property investors from borrowing is when the security they are putting up is valued below what the owner thinks it is worth.
So what can you do?
The first thing is to recognise that there is a difference between an estate agent valuation and a proper surveyors valuation. An estate agent will give you a rough idea of what you could sell for, that is very different from what the property is deemed to be worth by a lender.
Surveyors value differently because if the lender cannot get that value for the property then they can claim on the surveyors insurance, there is recourse that doesn’t exist with estate agents.
There are still a few things you can do to help yourself.
Comparable Sold Properties
The value attached to your property will be based on similar sales of similar properties in your area. This is properties that have sold, not that are for sale.
You can check the land registry for details of recent sales, however, this is often a few months behind. With this in mind it may be worth doing some research with agents to see properties that have actually sold that are comparable to your own. You can supply these to a surveyor, it at least gives a steer as to why your property is worth what you say.
All surveyors comment on condition and upkeep. Whilst it shouldn’t affect the bricks and mortar value, it does. Lenders want to know what the property is like inside and out. With this in mind please check that;
- Cosmetically the property is tidy and decorated
- Check bathrooms and kitchens, paint any black marks or damp patches
- Repair any kitchen cupboard doors or other fittings that are in need of TLC
- Cut the grass and clean the windows
All basic stuff but lenders ask about the condition of the property. Sometimes a few cosmetic improvements can make a difference in the valuation and in what percentage the lender will advance (LTV).
Cladding & Mortgages
This has become a major issue and is one that is not going away. Properties with cladding will need and EWS1 certificate. Nearly every lender will decline to lend where an EWS1 is not available.
There are a lot of property owners who are not aware of cladding issues. Contact your freeholder or management agent and ask, get the EWS1 before spending on a valuation. Properties of all ages and heights are within the scope of what cladding can impact.
Tenant in or out?
Where the property is a buy to let or rental unit, consider whether you want the tenant in or out when the surveyor visits. As a rule, it is generally best to have the owner present to answer any questions. A tenant can provide a positive impact, equally they can do the opposite.
Standard or HMO?
Rental properties can be subject to a single AST or let as an HMO. Be aware of what you are declaring your property as. If your property was an HMO that is now subject to a single tenancy then be aware of what the surveyor may be seeing.
Most HMO properties have locks on doors as well as other conditions as per that local authority. It is easy for a surveyor to see these items and locks on doors and assume the property is an HMO when you say it isn’t. By clarifying this to the valuer you avoid a misunderstanding and creating a problem for yourself.
Much of this is common sense but they are all things we have seen impact on property valuations. For any tips on lending or borrowing against property then please get in touch.
By Dave Farmer