So, a client wants to remortgage. We have a Hometrack report valuing the property at £480,000. The existing lender values the property at £480,000. The lender that we want to move the client to sends out its surveyor and we receive the startling valuation back of £430,000.
Of course, that being the case, the remortgage to that lender doesn’t happen, instead we move to the next lender, who come back with a valuation of £480,000, and we proceed with the case.
The result is as follows – while the customer gets their remortgage, they have to accept a slightly higher rate; the potential new lender we hoped to remortgage to not only loses the business but they’ve also paid for a surveyor and a valuation which effectively flew in the face of every other available piece of evidence for that property. And this is just one case.
Multiply this across the market and we’re conservatively looking at millions of pounds in wasted fees paid out by lenders to surveyors and potentially billions of pounds in lost lending business incurred as a result of these valuations being returned. Plus, a huge amount of wasted time for all concerned, not least our client.
I’m aware I have something of a reputation for being less than kind to surveyors, however I can also acknowledge that every surveyor is different. The above example proves that.
But, there is also a truth which cannot go unmentioned, that when you have one surveyor coming back with a valuation £50,000 less than all others, are you not in danger of looking like a profession which can be utterly inaccurate, and therefore wholly unreliable? And these are not isolated cases happening one or two times a year; they’re a regular occurrence.
Here’s the rub: we have AVMs. We have desktop valuations. We have years of historic data, including real-time transactional evidence. And yet, we’re still working within a system that can allow that one surveyor to override all of this, often with little justification and zero recourse. Why are we still allowing this to happen?
Earlier this year, I highlighted how what used to be the occasional down-valuation had turned into something far more systemic. In February, 20% of our cases – both purchases and remortgages – were subject to a down-valuation from the surveyor. It developed into a tidal wave of disruption.
We had properties valued at less than when they were last mortgaged two or three years ago, despite a clear upward trend in the market. The reasoning? Due to the comparables used, which on closer appraisal, were revealed to be from properties on a different street, different types of property, and a different number of bedrooms. It would be laughable if the consequences weren’t so serious.
We’ve heard all the theories: lenders telling surveyors to be cautious, slowing pipelines, reducing appetite. But none of that stacks up against the reality on the ground – and certainly doesn’t stack up with the frustration I hear from lenders’ representatives who have to accept these valuations, especially when coupled with their competitive rates, active sales teams, BDMs hungry for business. Lenders want to lend.
In another case I recently spoke to a lender about, they had commissioned a survey for a high-value loan. The cost? £1,500. The result? A down-valuation that didn’t stack up against any other source, and the adviser walked the client away. That lender had a perfectly good borrower lined up, a case they were happy with, and they lost £1,500, the deal and the money they would have earned from that client. Again, how does that make commercial sense?
AVMs and desktops worked. During the pandemic, they were used successfully across the board in huge numbers. There was no great consumer pushback. Lenders relied on them, completed the vast amount of their business with them and got deals done quickly and efficiently. But now? Some are only using AVMs/desktops 25% of the time. We’ve gone backwards.
It therefore feels time lenders adopted a new rule: all property valuations should begin with an AVM or desktop. If the AVM returns a sensible figure and the property is not out of the ordinary, that should be accepted. If the property is more complex, unique, or otherwise unsuitable for such a valuation then, and only then, should a surveyor be instructed.
Why continue to spend £50 to £300 (or in some cases, as above, over £1,000) to have a deal blown apart because one person decided the value should be lower than all other data suggests? The current process is inefficient, inconsistent, and indefensible.
Honestly, this isn’t about attacking surveyors. These are educated and highly-trained. I’m sure they would much rather be out conducting Level 2/3 surveys on properties, rather than standard valuations on two-bed new-build homes in Milton Keynes, when there is a raft of technology, tools and data available to do just that, and from which our children could probably produce accurate valuations on.
This is about modernising a process that is no longer fit for purpose and utilising surveyors where they can add the most value. Lenders are burning money on these unnecessary valuations and losing good business as a result, while clients are being pushed into more expensive products or seeing deals fall through entirely, and everyone is having their time wasted.
Enough is enough. Let’s tighten up the surveying and valuation process and outputs. Use the data. Use the tech. And save the surveyor for when they’re actually needed.
Sebastian Murphy is group director at JLM Mortgage Services, the mortgage and protection network
