The debate over alleged ‘down-valuing’ by mortgage lenders has flared again with one leading agent claiming that surveyors are just “covering their backs.”
Emoov’s chief executive, Russell Quirk, says: "Surveyors are prophesying a [financial] crash. The system is built to protect them” adding that they are “covering their backs” in case the market turns down.
He says as many as one in five sales have been hit by down-valuations - just two years ago it was one in 20.
"Surveyors unfortunately have a bit of a vested interest. If the media are reporting about the market softening somewhat surveyors become concerned about their indemnity policies which are called in and of course are called upon by lenders if there’s an issue with the property market. My contention is that the market is very very sound indeed...the statistics say that - whether it’s Halifax, Nationwide, RICS, Hometrack. Prices are firm so there’s absolutely no need for surveyors to be downvaluing properties" insists Quirk.
His comments came on BBC Two’s Victoria Derbyshire show which was discussing a claim by mortgage company London and Country that the majority of its advisers are now seeing down-valuations.
The programme prompted the Royal Institution of Chartered Surveyors to go to social media to draw public attention to a blog it posted earlier this year called ‘The myth of down valuation - why a lender may value a property at less than the asking price.’
It covers familiar ground saying: “The valuation report carried out for the lender is normally carried out by an RICS Registered Valuer who has a duty to report independently and accurately the market value to the lender. ... The market value is based on comparable market evidence, which is usually confirmation of a minimum of three sales transaction of similar types of properties in the local area, and also the professional’s knowledge of the local market including supply and demand dynamics. ...
“When house prices are falling or rising at a faster rate than typical as they are in some areas of the country, or when transaction levels are perhaps not what they might be surveyors have to be very certain they can evidence the value on paper (as they can be sued for over valuing properties by lenders). ... The Bank or Building Society are asking the valuer to provide them with their opinion of the market value of the property to safeguard themselves both from any loss that may be incurred if they lend too much against an individual property, and also align their capital adequacy requirements under financial regulations.”
On the BBC programme yesterday Quirk clashed with a surveyor who said that the market was in a difficult position: Quirk cited indices and statistics suggesting that house prices were overall still rising, albeit gently.
Meanwhile the banking industry umbrella group UK Finance told the BBC: "Lenders have a responsibility to ensure that the value of property taken as security on mortgage loans is current and realistic. Although the valuation is carried out for the lender, borrowers also benefit from a realistic independent valuation as it could help them avoid paying over the odds for the property they are buying."