March 2019
By Stephen Todd, co-founder and managing director, VAS Group
Everyday a plethora of news stories remind us that 2019 will be a financial rollercoaster dictated by Brexit, and the undesirable ramifications for the residential, commercial and development property markets are resolutely entwined.
While this is hardly a ‘stop-the-press’ statement the fact remains that properties will continue to be sold and developments built out, and this is where the right valuer plays a more important role than ever in understanding current values and helping to reduce property specific lending risks.
While I’m continuing to state the obvious, everyone understands the importance of an accurate valuation. Valuations are based on many different parameters and each needs local knowledge and experience to determine.
Given the current economic uncertainty this makes life even more difficult for valuers as valuations are underpinned by transactional sales evidence. Lack of sales means valuers have to rely on historical data and their expertise to make the necessary adjustments to provide the most accurate advice possible.
This is why it is more important than ever for lenders to be working with the right valuers.
Choose wisely
As everyone knows, the ramifications of not getting an accurate valuation are very unpleasant.
Residential valuation requirements are generally more straight forward compared to commercial and development valuations. As such a good, local, knowledgeable, well-established practice is generally best placed to carry out the valuation.
Commercial and development valuations have a far larger and more complex set of rules and requirements and necessitate an additional skill-set.
As well as the building, location, condition, etcetera, a commercial valuer would also consider potential other variables such as tenancies, planning status, appropriate valuation methodology and a large variation of other important analytical data.
Here is the acid test. If a lender repossesses a property and puts it on the market, did they appoint the valuer properly at the outset and will they achieve a sale price in-line with the valuation advice provided?
Horses for courses
Alongside the skillset, speed and experience are also of the essence for clients, therefore finding the right valuation company first-time with the correct experience is critical to the specialist finance chain.
Let’s say we have a semi commercial property, with a ground floor retail unit with flat above. Why go to a large multi-disciplined practice, which would be more expensive and most likely take longer to complete when a local company can do the job far more efficiently.
On the reverse we would not advise giving a local practice a large scale developments site, when a multinational practice with an array of internal departments with different property sector disciplines would be best placed to provide an overall picture. This clearly contributes to achieving the correct valuation with robust methodology and justification.
Neutralise the anomalies
In an ever more uncertain market – securing the best possible valuation firm is critical to reduce property specific lending risks. People and business still want to buy and lenders still want to lend, but valuations have to be looked at more closely than ever to best manage the unpredictable.