Are agents experiencing any increase in uncertain valuations in the wake of the Brexit vote and do you consider them to be down valuations?
The RICS has published advice on its website to members about valuations post-Brexit.
It strongly implies that surveyors may be in danger of stating too high a price in their valuation reports.
It suggests a form of wording which essentially advises customers that the valuation may not be reliable as the “probability” of that price being achieved in the event of a sale “has reduced”.
UK valuation director Fiona Haggett is advising that surveyors add the cautionary note to their reports for clients.
On the RICS website, she suggests this form of wording: “Following the EU referendum held on 23 June 2016 concerning the UK’s membership of the EU, a decision was taken to exit.
“We are now in a period of uncertainty in relation to many factors that impact the property investment and letting markets.
“Since the referendum date it has not been possible to gauge the effect of this decision by reference to transactions in the market place. The probability of our opinion of value exactly coinciding with the price achieved, were there to be a sale, has reduced.
“We would, therefore, recommend that the valuation is kept under regular review and that specific market advice is obtained should you wish to effect a disposal.”
The advice appears to be aimed at reports only for members of the public, rather than valuation reports for lenders.
But are surveyors erring on the side of caution, in agents’ experience?
NAEA managing director Mark Hayward told EYE that he has not heard anything about an increase in down valuations since the Leave vote.
He said he was hearing about them earlier in the year when the market was moving quickly in some areas, and comparable figures were historic, not reflecting current prices.
Meanwhile, a story on This is Money could be telling.
A couple remortgaging their home believed it was worth £420,000 after finding the similar but smaller property opposite their home was listed on Zoopla at £425,000..
Nationwide did a desktop valuation on July 1 and valued the property at £395,000.
Checking Zoopla again, the asking price of the house opposite had also dropped, to £395,000.
How many RICS valuers have I heard say “if that price is achieved in the open market then it’s ‘Market Value’ ” ?
Is this not a bit like the addendum to your insurance / pension / endowment product thats says along the lines of ‘…the value of investments may go down as well as up’ ?
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As a surveyor I decided immediately following the BREXIT vote to put a phrase into my valuation reports, albeit not as detailed in wording as that now provided by the RICS.
I did this as I saw it as reasonable bearing in mind the uncertainty following the BREXIT vote and welcome the RICS guidance.
However I would like to take issue with the phrase “down valuation”. There is no such thing, albeit it’s a phrase I know Estate Agents like to use possibly to support their negotiations with buyers. Is this phrase used to try to paint the valuer as in some way less competent than the agent (or indeed vendor if they instructed the agent to market the property at a particular price)? A market appraisal used to sell a property is a totally different animal to a formal Market Valuation provided by an RICS Registered Valuer!
Let’s not forget that valuation is not a precise science and that a valuer’s opinion on value may well be different to that of those mentioned above, that does not however constitute a “down valuation” merely a difference of opinion and in fact one that is arrived at based upon different valuation assumptions and criteria in a large number of cases!
As a Surveyor (and I know some of my colleagues feel the same way) we need to get away from estate agents trying to blame valuer’s for essentially doing their job. An RICS Registered Valuer has to work within very specific criteria and the majority of agents I’ve come across are unwilling or indeed unable to assist properly when asked to do so.
When asked for comparable evidence for instance, some agents either ignore the request or send information that is either misleading or obviously chosen to influence the valuer in a particular direction in my experience. I’m still, after all these years of working in residential practice, disappointed that the majority of estate agents I come across don’t seem to want to work proactively and more closely with Valuers, preferring to use negative phrases such as “down valuation”, rather than explaining to their clients the process more fully.
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The specific criteria you mention is flawed from time to time. thus the problem in itself.
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Estate Agents act for the seller and are trying to achieve the best price for their client whereas surveyors are acting on behalf of the buyer and/or lender and therefore are trying to ensure they are not paying too much, hence a difference in opinion which I am happy to accept. My frustration is when a surveyor, who is not local to our area is provided with good comparable evidence and still sees the value differently to what the market clearly shows what is reasonably achievable. How is that “working together”? Thankfully we have a good rapport with the more local surveyors who know that generally our valuations are not done to impress the vendor.
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Ya fluter you are write the local price lenders and buyers are preparing the report over the survey on the behalf of that that reside the cost of the property. some other new rules and property valuation services and some common local analysis reports is here you can see it. https://goo.gl/kZfQCz
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‘However I would like to take issue with the phrase “down valuation”. There is no such thing, albeit it’s a phrase I know Estate Agents like to use possibly to support their negotiations with buyers.’
With respect – some lenders disagree.
This is a cut’n’paste directly from the Nationwide website from a 2014 article entitled “Things that could derail your house purchase“:
2. Your chosen property is down-valued
You’ve found the home that you want to buy, only for the mortgage valuation survey to state that the property isn’t worth the price you offered.
This means your lender won’t loan you the full amount of money you applied for. If this happens, you can re-negotiate with the seller to try to get them to lower the price. Alternatively, you could challenge the valuation report or try to raise the additional cash that your lender won’t provide.
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So people feel that asking prices represent values? That Zoopla computer generated figures are anywhere near accurate when individual property can be in rubbish condition or pristine? Desktop valuations are as inaccurate as zoopla! To arrive at a reasonable valuation you need to take into account so many variables that automated computer valuation CAN NOT BE ACCURATE. The valuer, be he an agent or surveyor, will use his/her knowledge, comparables, skill and “gut” feeling in arriving at figures. There will always be the special purchaser who will pay “over the rate” for their own personal reasons thus even sale prices need to be considered with some interpretation. The value to a lender is perhaps the value that a second purchaser would pay if the first buyer falls out of a transaction.
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Oh, regarding the RICS phrase. It could be more user friendly in my view (i.e. plain english). Perhaps that’s something for the RICS to consider amending?
The phrase I created is provided below. I’m expecting a lot of flack due to my post above, perhaps constructive feedback would be more beneficial though, happy to hear thoughts of agents of course.
“The current uncertainty resulting from the BREXIT decision could impact future property prices and/or saleability, potentially reducing prices and/or increasing marketing times. You should consider the implications and note the higher risks that currently exist.”
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It’s a plain and simple CYA caveat. Lets not dress it up as anything else. ” Don’t try to sue my PI if in the future the value falls. It’s not my valuation, it’s BREXIT”
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As a firm Remain supporter who forecast doom and gloom after Brexit, I have to bow to facts on the ground and accept that the market is exactly the same in the provinces as it was prior to the referendum. Indeed, we have just had our best month here for 5 years here in the south-west. London and The Home Counties don’t dictate values to rest of the country any more. Therefore to make statement in professional valuations that “The current uncertainty resulting from the Brexit decision could impact on future property prices etc.” is inaccurate and misleading. If the RICS is going to include such a phrase in reports it is duty bound to use similar warnings with regard to expected increases in interest rates or terrorist activity in specific areas, which it clearly would not and should not do.
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We are experiencing more down valuation issues.
Some are quite ridiculous, we had a house a couple of weeks ago have a 20k down value on a sold price of £250,000.
We had 16 viewings and 3 offers all around the same level. But the lender and Surveyor would not budge.
Customer closed the gap with additional cash as they couldn’t find anything close for the same money.
Currently we are getting down values on roughly half of all offers. This is up from about 1 in 10 prior to 23rd.
Our valuation process is an in-depth process using 20 touch points of data and generally seem to be in the middle of the ranges customers get given by agents. So I don’t believe we over value to win the instruction. Our average days to sell is the fastest in the area again suggestion that our asking prices are probably right.
I am concerned about this trend from surveyors.
In our local market we continue to see overall stock levels fall, but actually when you dig into the detail 3 bedroom or more is shrinking dramatically. With the oversupplied 2 bedroom stock levels growing making the overall figure look ok.
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Of course this article and all comments so far fail to acknowledge what we all know to be the case – that valuers’ obligations lie in the following order of priority:
1. Duty to protect the Lender against future market forces
2. Duty to protect their own PII against future claim
3. Duty to the purchaser (their paying client) to provide a valuation based upon TODAY’S market conditions.
We all know that today’s actual price and tomorrow’s potential price on anything are two different entities.
Maybe instead of trying to guess – worse still, influence what will be, RICS etc should grow a pair and simplify their caveats to something like
Tomorrow hasn’t happened yet. Yesterday has been and gone. This valuation has been carried out – and is only valid – today.
Sorry – I like to dream as much as the next guy…
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One thing I don’t understand with lenders is if a “down valuation” is contested, the lender requires 3 COMPLETED comps within 6 months. Usually these prices are completely out of date, and usually less.
However when the surveyors attend said property and call for comps, they ask for sale agreed prices in recent months and work off these when submitting their reports.
Surveyors are lazy, especially those out of the area who don’t tend to bother calling local agents for advice and go off of nethouseprices or rightmoves completed prices.
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And you might not believe it but some agents lie to Surveyors about comparable evidence to support their sale!
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Well they’re idiots.
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