Bridging industry urged to move away from 'us and them' mentality when it comes to valuations

Last week, Bridging & Commercial and MS Lending Group hosted a virtual roundtable on how the plight of surveyors is impacting the bridging lending market.

B&C was joined by MS Lending Group’s managing director, Michael Stratton, and lending manager, Michael Street, VAS Audit’s managing director, Daniel Owen-Parr, Master Private Finance’s sales and operations director, Aaron Noone, Redi Finance’s property finance broker, Meir Peer, and Atlas Property Finance’s property finance broker, Adam Klein. 

The panellists began by discussing how bridging lenders’ approach to valuations has changed in recent years.

Stratton explained that he had seen the problems that valuers were having for quite some time in terms of turnaround times and costs, brought about as a result of the squeeze from rising professional indemnity insurance (PII) premiums. 

“We’ve had to evolve and think of ways to combat that while mitigating the risk to us as a business,” he shared. To do this, it has brought out new products that utilise desktop valuations and AVMs.

“I think it [needs to be] a collaborative effort from lenders, valuers and brokers to work together,” he said, explaining that it has become a “vicious circle” where lenders push valuers to do the job quickly and then blame them for being negligent, resulting in higher PII fees. 

Daniel stressed that we have to move away from the ‘us and them’ mentality. He added that valuers aren’t trying to protect their PII by being risk-adverse; their reports are simply evidence based. “Valuers don’t want to work against the market.”  

Street believes that the most vital change that is needed to sort out the PII problem concerns the insurance providers. “It’s for [all parties to] come together and say, ‘You’re penalising an industry because you don’t understand it.’ We need to educate the insurers to help them understand our business model, how it is successful and why it is so profitable for consumers, brokers, surveyors and lenders.” 

Adam suggested that brokers can help alleviate pressure by offering as much information as possible to valuers in a timely manner, such as restrictions on the property or marriage value. “It will give them the full picture to allow a swift turnaround on the valuation report.”

Daniel agreed that one of the biggest issues that VAS Panel faces is the lack of information. “I can come up with many different scenarios where we’ve not been given the full details upfront: we’ve gone [to a property] expecting a residential and it’s a semi-commercial, or we expect a full building [but find out] it’s partly knocked down.” 

Aaron said that the main challenge for brokers when it comes to valuations is a property being ‘downvalued’ due to Brexit, Covid and the impact on cost of materials. “House prices, because of the reduced stock, are through the roof. So, you’re in an area where someone will evidently pay significantly more for a property, but a surveyor will downvalue it.” He believes this is because they are afraid they will get sued later down the line if they get it wrong. “It’s the number one hostile point between us, because we’re arguing on speculations — we can’t win.”

He claimed that there’s no room to negotiate or offer valuable evidence to help change the valuation. “We feel left out of the discussion process, which makes us feel inferior to the surveyor, and then that creates a hierarchal fight between us, when actually we should be more collaborative. We need an overall relationship change.” 

Meir feels that there needs to be more cooperation between the surveyors themselves. “You’re seeing different reports for the same properties [from different surveyors], where one is very size-driven, while the other is very comparable-driven — but the numbers are completely different.” 

Aaron agreed that this “lack of strategy” and varied outcomes within the same parameters is where brokers question “what we’re actually valuing, and why is it so varied between the different surveyors?” He posited that maybe the valuation process should be a science and not an art. 

The full virtual roundtable can be watched below.

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