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Hi Nigel, 

Thankyou, yes I am sure.  Read the CML Handbook and/or speak to any reputable mortgage broker to confirm that fact.

Was the purchase price disclosed to the valuer?  Was it the valuer sent out by the lender? Or did you have an independent valuation done, and then have the same valuer come out to do the valuation for the lender?

There is no lender that I know in the U.K. which allows 100% financing unless you are using some kind of development/refurbishment product?

I think there is some confusion going on.

1. The law society will not have an opinion as to the value. Lawyers do not set value. Lawyers handling a loan for a lender need to disclose all the details that are material to the transaction. That is not the same as saying the lawyer has a responsibility for determining the value.

2. CML has a view on disclosures in terms of the sale price and the value and any inducements or other incentives received or given.

3. Many lenders will only base the loan amount on the lower of two numbers, the sale price or the value. The lender is not establishing the value, they are saying what they will work with when offering the loan. That is why it is the lower of the two where only one is actually the value. The logic is clear and risk to the lender is reduced. That still does not mean the lender is setting the value.

4. RICS valuations need to reflect the material facts. There are many conditions when the sale price and the value might not match. A valuation does not have to take the lower of the two numbers. If the sale price is lower than the valuation it will be noted. The valuer is hired by the lender when the lender wants a valuation. That does not mean the lender sets the rules for how the valuation is processed. RICS sets their own standards.

John Corey 

Okay just checked the CML Handbook.

Can you give me guidance on which section your referring to re: Valuations (Section 4 on valuations doesn't seem to cover it).

Since as far as I understand, and I'm not a RICs qualfiied surveyor or solicitor, the CML Handbook gives guidance to solicitors rather than valuers, as a result I think you're wrong when you refer to the CML Handbook in terms of how a valuation is conducted and how the market value is assertained.

See section 1.4 of the Handbook

"1.4 - The Standard of care which we expect of you is that of a reasonably competent solicitor or licensed conveyancer acting on behalf of the of a mortgagee."

As a result, I'm pretty sure this isn't targeted towards RICs valuers but Solicitors??? 

Neither is Section 4.1 re: Valuation, which I just read, it instructs solicitors in regards to what to expect from a valuation not what a valuer should do??

I think what you're thinking of is the "Red Book", I just checked on the internet, which gives guidance to RICs qualified valuers , as the CML Handbook does to Solicitors. 

In regard to the specific case, YES the valuer was instructed as part of a BMS instruction.  YES the property was being purchased for £40k.  AND YES the valuation came back at £45k.

Nigel

I think we are getting side-tracked into issues of NMD and gifted deposits here. As far as I am concerned, they are mortgage fraud unless fully disclosed to the lender. Therefore I am not interested in a higher valuation for purposes of borrowing more at purchase. I’m quite happy to put in a 25% deposit. That is the new landscape we have to tread these days. I think we have to get on and deal with it.

What I want to know is what is the actual open market value. In the sense of, what could I reasonably expect this property to sell for, within a reasonable time, in present condition, on the open market?

I am suspicious of RICs valuations because they have no magic wand, they use the same methods as we would, ie comparables. Also, they can be inconsistent with what we as investors know. I have experienced this with my own props. We have the time to be more thorough, if thousands of pounds of our money depend upon it! They can also be inconsistent with each other. I know one investor who had two RICs vals done within a short period, and one came out at just 60% of the other!

Rich

Rich,

I'd always take a RICs valuation whether you're purchasing with a NMD technique or not, which like you say is irrelevant to the conversation.

Since if you're purchasing and using finance, you need to understand how a lender would value the property, i.e. through a RICs valuation.

This allows you to ascertain how much equity you need to put into the deal from a mortgage perspective (either initially or remortgaging six months later).

Also if a finder gets you a deal based on a RICs valuation, from say Colleys, which as a surveyor I've found to be generally fair but slightly conservative in terms of valuation. 

I'd take this as an ideal scenario, since you have a conservative valuation which also allows you to understand how much equity you need to put into the deal, if finance is required.

Nigel

Thanks Nigel, I will come back to you on those points.  And maybe a qualified mortgage broker or surveyor would like to add some input into this?

Just for clarification, was the purchase price of £40K disclosed to the valuer?  What purchase price was written on the mortgage application form?

Hi Vanessa,

The purchase price on the mortgage application was £40k which automatically was disclosed to the valuer, that's why I'm sceptical of your initial valuation assumptions.  Since a RIC's qualified surveyor seems to have used another basis for valuation, than you initially proposed.  Which seems totally illogical.

Also, they must have changed the rules in the last year.  Since I purchased approximately 30 properties from Jan '08 to Apr '08 by putting in mortgage applications at the market value, post valuation reducing the purchase price to the discount price then immediately taking a further advance from BMS, for the difference between purchase price and market value.  All fully disclosed to the lender.

I think BMS don't allow this now, but again it's probably best for a mortgage broker to explain if this still can be done.

Nigel

Nigel,

Thanks for the reply. If you are not a RICs surveyor, what kind of surveyor are you if you don’t mind me asking?

I think the point I am trying to make is that yes, as we will be using finance, a RICs val will be a necessary part of the process because yes the lender will require it. It is always comforting if they broadly agree with your own judgement, but I would not like to rely upon them solely to assess the OMV of anything I was buying. DYOR (do your own research) as I say.

I must admit I am curious as to how deal suppliers can state that such-and-such a deal is 25% below RICs, another is 32% below. Obviously RICs have a professional duty of care to perform the vals as diligently as reasonably possible. I wonder what they are valuing in these cases? My friend has been trying for months to get a genuine deal out of these guys and has failed. So, are they valuing the value of the prop when any renovation work is done perhaps? Or is it a ‘desktop’ valuation? Or a val disregarding problematic issues in the title which will not show up until conveyencing commences? He has encountered all of these, as I say. Or possibly with serious chronic subsidence issues due to mining, which is something I have come across myself, but which didn’t show up in the valuation survey. This is not uncommon in parts of south Wales and Bristol. Perhaps Colin can come back and tell us?

Actually I’m also curious about the gifted deposits too. Yes Nigel I believe the rules have changed. Perhaps Colin can come back and tell us, is this with full disclosure? A friend has just emailed me an eflyer dated 6^th November by Colin offering NMD with gifted deposit and cashback of £1,870. Colin, how does this work with full disclosure? Which lender will allow this please?

Rich