The RICS has hit back at persistent reports that, as the housing market picks up, sales are falling through because of mortgage valuation delays caused by lack of surveyors.
The RICS said the problem has nothing to do with surveyor numbers, which it insists are adequate.
Instead, it blames market conditions, including low pay and the very real risk of being sued, for the reluctance of some surveyors to take on mortgage valuation work at all.
It says that some valuation jobs are simply not worth doing, because lender panel fees have been squeezed so much that the work is unprofitable. Unsubstantiated negligence claims, with the strain placed on surveyors’ insurance premiums, add to the problem.
The Times said there were delays in arranging valuations in the most sought-after postcodes.
It said mortgage brokers have reported that some buyers are having to wait five weeks for their prospective purchases to be valued.
It quoted Springtide Capital which said that six months ago, it was usually possible to get a property valued within three days, but it now took a week or longer.
Similar stories have appeared elsewhere, putting valuation delays down to a lack of residential valuers.
But the RICS said that around 8,500 residential valuers are currently registered in the UK.
In a statement, the RICS went on: “However, with so many qualified valuers out there, the issue is not one of capacity but of the unsustainable market conditions under which valuation professionals are forced to operate.
“Of the 8,500 residential valuers currently registered, 5,500 list residential valuation as their primary activity, and around 2,000 work for the largest 20 firms in the UK, while the remainder are SMEs or independent practitioners.
“Since the housing market crash of 2007, a great number of valuers have been subject to unsubstantiated negligence claims from lenders, an insignificant number of which actually go to court. These have forced many insurers to greatly increase premiums for Professional Indemnity Insurance (compulsory for all valuers).
“In tandem with this, the amount valuers are paid per valuation by the company panels concerned has reduced to such an extent in recent years that the expenditure involved in carrying out a job often outweighs the reward and the risks which are forced onto the valuer.
“Significantly, in many cases, the surveyor carrying out the valuation receives only a fraction of the arrangement fee paid by the consumer. All this results in it not being in the valuer’s interest to take work which is unprofitable.”
The RICS said it is committed to helping the industry find an answer to this conundrum and is bringing together the key players, including banks and insurers, to find a sustainable solution for the valuation profession and the market.
It is now calling for evidence to feed into a new independent commission.
Alan Collett, RICS president, said: “There are enough valuers out there to meet market demand, many working in small and regional practices.
“The problem isn’t one of capacity but the fact that the market in which they’re operating is wholly unsustainable. Insurance premiums have risen so considerably in recent years due to the sheer volume of unsubstantiated negligence claims against valuers.
“What’s more, the fees professionals receive per job are being squeezed and they simply are not willing to carry out the work where it is unprofitable.
“Clearly, there is a serious problem with the market, but blaming a shortage of valuers is not addressing the real issue.
“We are wholeheartedly committed to helping the industry find a solution to this problem and are in ongoing talks with all concerned. What we want to see is a sustainable market operating in the public interest. At present, we are far from this becoming a reality.”
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Comments
do surveyors value anyway?? the usually ask us for our opinion or take a stab from comps on nethouse prices. Why Worry???
'cheesedoff' - the incompetency of the HR department of one firm of surveyors is hardly food for thought at RICS Towers, I am afraid.
If you are an Agent- then this hiccup should hardly ruffle your feathers and affect less than a handful of ongoing sales - or simply lose that firm the business when the jobs are given instead to the next on the panel that CAN carry out the surveys in an acceptable timescale.
If you are not - then apart from delaying a potential mortgage offer by a few days, I would ask why this situation should get your hackles so upended as to comment?
Just wondering...
One very large firm of surveyors have allowed their two local surveyors to take their holidays at the same time, leading to two and three week delays in having surveys and valuations done. If RICS think this doesn't have a negative affect on the market then that's rather worrying
Andy Jones, why do you think RICS and NAEA do not challenge the online valuation tools that are creating a lot of the discord in the valuation world?
I posted a reply to Realising Reality last evening and in thinking about that reply [why Agents are not to blame for low sales volumes] wondered why Valuers, Surveyors, Estate Agents and the professional bodies that represent them are not challenging the online advice on value tools that are being made available to the public and lenders.
Most of the valuation tools I have seen simply take a postcode, the number of bedrooms, guess the rest and magically come up with a valuation. This valuation is then the basis of vendor and lender expectation. I am fairly certain everyone on EAT has experienced or can find examples evidence of flawed valuation advice that has caused a problem with a pre sale valuation or with the progression of a sale. Why is the industry allowing the portal providers of the information to continue supplying such bad advice?
Surely from an Agents perspective they want to be judged on the professional opinion they offer rather than their skill at talking down a vendor from their internet advised ambitious expectation or worse still their acceptance of the erroneous valuation figure simply to win the instruction.
Given that the very same methodology is being used for establishing mortgage valuation, it is any wonder why Valuers are caught between a rock and a hard place, but are also paying heavy PI premiums to be there? A Valuer isn’t going to be popular and won’t remain on Valuation Panels for long if they are constantly “killing sales”; down valuing agreed deals where vendors and buyers are ‘internet convinced’ theirs is a fair agreed price and the Agent in all honesty can’t believe their good fortune. If they [the Valuer] scupper the deal that doesn’t stack up they are damned, if they rubber stamp it their duty of care means that the unspoken gratitude of a excited buyer very quickly turns to condemnation and litigation when post sale things go wrong.
It seems to make sense for Agents to insist the Portals remove the flawed valuation tools and are allowed to give unbiased advice on value and it makes sense for the Surveying professional bodies challenge the quality of valuation advice being dished up.
I can imagine the comments of the RICS disciplinary board if a Valuer admitted that the extent of their valuation was postcode and number of bedrooms with no consideration for; size, aspect parking, neighbours, social demographics and all the factors a physical Valuer ought to normally consider.
There is more money and less risk and possibly more general public esteem by being a short order cook rather than a valuer. Why conservative valuations ? Is it not obvious.......valuation is tight rope walking with no balance stick or safety net with applicant and lender waiting for perceived mis-step.
This is wholly my personal view and does not possibly reflect that of the RICS.
Why is it that surveyors always have to ask a local agent what a property is worth, then reduce it by up to 10% when the applicant only requires a 60% advance? Answer: They don't know local values.
How do I know this - it happened to a friend on a BTL remortgage, and the lender reduced the amount they wanted to borrow based purely on the (inaccurate) valuation, when a similar property had sold in the next road in under 2 weeks for rather more than their own figure.
Surveyors are their own worst enemies. Some of the fees quoted by here today gone tomorrow internet firms are ridiculously low. Small wonder they have to charge up and down the country to make a living turning out as they do poor quality work spoiling it for more established firms.
The nationals are no better creaming I understand over 50%
of the fee. Fees have to go up substantially to attract good quality surveyors into self employment for it is only those that have their own professional indemnity policies to safeguard that will do a decent job.
I have worked in various fields in the Property Industry since '99. I wanted a change without completely leaving the Property Industry, so had been thinking about training as a RI Chartered Surveyor...not so sure now after reading this. I am a 33-year-old female but might just change fields and go into the Building trade - it seems it may well be more rewarding!
Ampersat, that is a well thought out post but I cant help losing sympathy for you guys when it comes to valuations. I reckon most DEA's spend more time at properties than valuers, lets face it, it's not a great deal of work is it?
Your comments about interest rates are also spot on but its not your job worry about whether the mortgagee can afford the repayments. Is it worth what they are paying? Thats it.
Any valuer who has let an affordable housing sceme go through better watch out..people trust new home builders without knowing thet are paying upto 30% to much.
A few years down the line they work it out pretty quickly.
Dont blame them,,money for old rope , except old rope burns easily when things go wrong.
If someone wants to buy a house I dont see why the banks needs to worry now 20% ltvalue is required...all the risk is with the buyer and its rare a buyer doesnt know the value of something as technically they are the market.
At last, our revered Royal Institution has come off the fence and acknowledged the long known scandal of the panel manager "fat cats" taking exorbitant cuts from the surveyor fee scales. The exposure to risk and the actual work is done by the surveyor with the panel manager purely distributing the jobs electronically and offering so called " audit checks" for the lazy lenders who could and should do it themselves.
However, the RICS are kidding themselves if they think there isn't a crisis growing with the numbers in the workforce of GP surveyors. Ask them what the average age of those 5,500 and you will find it is nearer 60 than 50. This has been a dead end profession for years, plumbers, bricklayers and electricians can earn far more without the overhang of PI risk.
The problem is simply down to panels taking their cut, probably paying someone a 'thank you' for the referral and the surveyor, who actually provides the service, getting a fraction of their worth. This is a problem in many industries. Perhaps the RICS should promote website and surveyor's, where they are contacted directly by the public and not via an intermediary. Mortgage lenders may need to look at this and talk directly to RICS. Of course, some lenders have in-house surveys, but they will be salaried.
Very well said Ampersat!
Fuelled by seemingly fantastically affordable mortgage rates the property market has become stupidly extended;
£1000/ month interest currently pays the interest (rent) on £600,000 with another £2000 required to pay back £600k over 25 years.
I believe that the fundamental problem of over valuing is that in London and the South East affordability is over inflating the market. Mortgagors are not too worried about repaying the mortgage capital and instead are relying on capital appreciation to repay sky high mortgages when the time comes to retire, relocate or downsize to the country.
In a self fuelling frenzy it is easy to find comparable evidence that 29 Acacia Avenue is now worth 4% more than No31 and submit a valuation that adds to the price inflation. After all erroneous algorithm Valuation tools are supplying more than enough evidence to fuel vendor ambition and provide supporting evidence to Valuers. Effectively a perpetual finance machine has been created.
Where is the problem? Everyone wins and gets rich! I am fairly confident in my ability to value property accurately, I do not think the problem is one of being sued for over valuing but more it is a case that very few people in this country can afford to repay Capital and interest mortgages on the properties they call home. Many are being allowed to pay interest only and are being allowed to use the repayment element to fund even greater extended borrowing; as an example the £3000/ month that ought to be buying a £600k home is funding £1.8 million interest only mortgages.
My concern as a Valuer is that it is not economically prudent for the government and lenders to perpetuate the Hyper -boom in London and the South East and therefore there is a real moral and social stress that says this in not right.
Right now a 0.5% rise in interest rates will double some mortgage payments and a 1% rise is a 200% increase.
Hands up any Valuer who thinks that is sustainable, keep your hands up if you do not think a 1% rise in interest rate rise could not suddenly spring forth as we get closer to May 2015 and the financial market turmoil that is likely from the very real threat of having Balls and Cooper moving into No 11.