Advisers warn remote surveys produced undervaluations

Advisers warn remote surveys produced undervaluations

Mortgage advisers have warned of undervaluations from remote surveys during lockdown when physical inspections were restricted.

Sebastian Riemann, financial consultant at Libra Financial Planning, said automated valuations had produced some “extreme responses”.

He added: “We have witnessed properties being valued at 25 per cent less than the purchase prices of 2018. Taking into consideration strong growth in the 12 months to Q1 in 2020 this did seem a little extreme.”

Likewise Chris Sykes, mortgage consultant at Private Finance, said he had some cases with “extremely unexpected” down valuations, despite many sales of comparable properties in the area.

Mr Sykes cited one case of a flat valued at £680,000, which the client had purchased for £720,000 two years ago. He said that flats in the local area “and even in the same block” had sold for £750,000 and £730,000 within the last year.

Mr Sykes said “the inherent issue with [online] valuations is that it is one person’s opinion”.

Mr Sykes thought the valuation might have over-accounted for the other, comparable flat in the building being situated on a higher floor with a better view, but added they “don’t get much of a justification for the value”.

Mr Riemann said the probable cause of undervaluations was a combination of lack of data, in addition to surveyors and lenders “taking an extremely cautious approach factoring in a likely contraction of the markets in the coming months and potential house price reductions”.

Under the coronavirus lockdown valuers were not allowed to enter buildings to carry out on-site valuations, leading to a number of firms carrying out remote valuations.

Commenting on whether remote valuations can sometimes result in undervaluations, John Baguley, tangible assets valuation director at RICS, said: “Remote valuations are based on information provided to the valuer, which would normally be received as part of the mortgage application.

“The valuation of a property is based on the information that is known about the property, and a remote valuation like a physical valuation is still an assessment of market value based on the information known at the time of valuation. 

“If a valuation is less than expected, and value affecting attributes exist which would not be apparent from remote valuing or the information already provided, then the advice is to present that extra information to the lender to be considered in the process by the valuer.”

But Joe Arnold, managing director at Arnold & Baldwin Chartered Surveyors, said: “It is worth remembering that surveyors are independent professionals carrying out due diligence.

“Our role is to provide an accurate valuation within the framework of the RICS Red Book guidelines and the lender’s own guidance notes and we have no bias or incentive to value a property in any other way.

“This applies to remote valuations, just as it does to physical valuations. There is no such thing as a ‘down valuation’ as the surveyor’s valuation is often the only formal valuation that has taken place.