Any reason for lender to over-value a house? (Remortgage)

[stoofa]

We recently went through a remortgage - decided to lock in to something low for the next 7 years, let Bexit sort itself out!
We went into that process with a rough idea on the value of our property. This was based on what we paid, what we've seen similar properties sell for, general increase in value etc. We aired on the side of caution and based our entire remortgage on those figures.

The lender sent someone out to complete an inspection and valuation on the property. When that came back it was around £35k higher than we expected.
Obviously we're happy with that and we now feel we have more asset value than we had before. I'm just wondering if a remortgage valuation is usually a fair valuation on a property?
These isn't any reason for the lender to increase the value of a house at all?

Cheers.

 

[DanTheMan]

I know when I worked for a bank / large mortgage provider, most of the time the value of the property was determined by their own calculations based on location / size and many other factors. Similar properties sold nearby were not really factored into it.

I'd just do what you've done and make the most of it to get a better loan to value / interest rate.

 

[fastwunz]

Im a surevyor.

A mortgage valuation survey will ignore the estimated value that you gave the bank to some degree - although ill be honest sometimes the figures people give the bank are utterly laughable.

The value is worked out using the CAM method (comparble method) whereby the surveyor will write a report comparing your property to three others that have typically sold within the past 6 months of a similar size and nature. Those properties are sourced using information that is only accesible to surveyors on Rightmove and other sources.

That then provides the surveyor with a value range and he/she will determine where within that range your property sits.

Technically they havent 'over valued it' - they have simply 'valued' it.

Admitedly its not that often that a surveyor will increase the estimated value given to them primarily because the owner on a remortgage tends to over egg it a bit anyway.

 

[b0rn2sk8]

Does it really matter? As long as they are not 'undervaluing' it and giving you a worse rate due to being in a higher loan to value band then happy days.

 

[SeatIbiza]

Im a surevyor.

Not sure what one of these is...

In essence, it's finger in the air and looking at what has sold in the vicinity - the very, very basics of valuation. All previously sold property information is publicly available on Zoopla and the Land Registry and I'm not really sure what Rightmove is going to give you over these other than perhaps a greater level of individual property detail (Which is never useful as no two properties are ever alike).

To answer OP, there isn't any financial reason for the bank to have done so (unless you are doing an equity release and then the higher "value" means more interest if you take it). There could be other matrices such as RPI/CPI involvement and their take on future borrowing rates etc. However, I cannot imagine they'd do this on purpose given the PPI scandals etc. - if it were to come out that they had been purposely over inflating property prices then won't likely go down well for them...

 

[The_Abyss]

These isn't any reason for the lender to increase the value of a house at all?

To answer OP, there isn't any financial reason for the bank to have done so

I very much doubt that there's anything 'organised' going on, but there is of course a very obvious reason why higher valuations would benefit a lender. That is, a higher value, on paper at least, increases the security held against their loan. In very simple terms, a £100,000 loan on a £500,000 property is inherently less risky than the same loan on a £150,000 property.

Using the example above, if property values fell by 50% over a few years, the bank is comfortable in the first scenario. In the second scenario it is Northern Rock 2.0.

 

[BUDFORCE]

I very much doubt that there's anything 'organised' going on, but there is of course a very obvious reason why higher valuations would benefit a lender. That is, a higher value, on paper at least, increases the security held against their loan. In very simple terms, a £100,000 loan on a £500,000 property is inherently less risky than the same loan on a £150,000 property.

Using the example above, if property values fell by 50% over a few years, the bank is comfortable in the first scenario. In the second scenario it is Northern Rock 2.0.

That's complete cack.

The surveyor will be independent to the lender. Lender has pretty much no control over what they surveyor (person who decides the value - to answer an earlier question) comes up with.

The earlier reply from the surveyor is pretty much spot on.

To the OP, if your house was valued higher than your estimate, you simply didn't estimate correctly, as posted about, a lot of people over egg their estimates to try and get lower LTV (loan to value) products. You were one of the fewer to do the opposite, but congrats, finding out your house is worth more than you thought is only something to be celebrated.

- mortgage underwriter, for over 10 years.

 

[The_Abyss]

That's complete cack.

Which, if you read fully, you’d see I stated that there would unlikely to be anything organised like this going on.

 

[BUDFORCE]

Which, if you read fully, you’d see I stated that there would unlikely to be anything organised like this going on.

Yes you are right, I was a bit too aggressive there, apologies.

 

[Maccapacca]

Having just filled out my new professional indemnity application as a chartered surveyor only a fool would over value a property and let a mortgage company rely on that valuation.

The premium questions are getting tighter, if a valuation is over 25 miles from the companies address they now want to know how the company ensure the valuation is correct.

 

[alexakasloth]

I find this interesting how the bank would value a property, but when it comes to the application itself what would be the best course of action to state to the bank accurately (and with honesty) what you believe the value of the house is worth?

We will be looking to remortgage next year and have made some improvements to the property such as new central heating and kitchen, and general decorating throughout as it was very dated and shabby. It's difficult to guess what sort of value this adds when the broker asks.

 

[BUDFORCE]

You won't get in any trouble if you are out with your valuation estimate, it's an estimate at the end of the day.

What you might find though is internal condition, cosmetic condition that is, which I'm afraid is your kitchen and decoration probably won't affect the value that much.

 

[GeX]

The value is worked out using the CAM method (comparble method) whereby the surveyor will write a report comparing your property to three others that have typically sold within the past 6 months of a similar size and nature. Those properties are sourced using information that is only accesible to surveyors on Rightmove and other sources.

What more is there other the sold prices bit of the site, that anyone can access? Set postcode to your own, within 0.25mile, set house type and bedrooms to be the same and look at results?

 

[Psycho Sonny]

Im a surevyor.

A mortgage valuation survey will ignore the estimated value that you gave the bank to some degree - although ill be honest sometimes the figures people give the bank are utterly laughable.

The value is worked out using the CAM method (comparble method) whereby the surveyor will write a report comparing your property to three others that have typically sold within the past 6 months of a similar size and nature. Those properties are sourced using information that is only accesible to surveyors on Rightmove and other sources.

That then provides the surveyor with a value range and he/she will determine where within that range your property sits.

Technically they havent 'over valued it' - they have simply 'valued' it.

Admitedly its not that often that a surveyor will increase the estimated value given to them primarily because the owner on a remortgage tends to over egg it a bit anyway.

thanks for confirming that surveyors don't do anything we all couldn't do with a 5 minute google.

i can see the sold prices of any home anywhere. i don't have any special access to anything either.

obviously if my home is in better nick than a similar one sold next door then mine is worth more. if it's in worse nick then it's worth less.

if mine has had work done on it (extension, landscaping, bigger driveway, monoblock, patio, decking, etc) then it's worth more too.

i do my own survey whenever i look at a home report and can see most properties have usually been overvalued by the surveyor to keep the seller happy.

 

[fastwunz]

thanks for confirming that surveyors don't do anything we all couldn't do with a 5 minute google.

i can see the sold prices of any home anywhere. i don't have any special access to anything either.

obviously if my home is in better nick than a similar one sold next door then mine is worth more. if it's in worse nick then it's worth less.

if mine has had work done on it (extension, landscaping, bigger driveway, monoblock, patio, decking, etc) then it's worth more too.

i do my own survey whenever i look at a home report and can see most properties have usually been overvalued by the surveyor to keep the seller happy.

I’m not entirely sure where to start with any of this.

So I won’t. It is however categorically incorrect.

A five minute google will not provide you with the information that a surveyor requires to complete their report - there is a completely separate part of the site that is not accessible to the general public that provides a significant amount of information that they cannot see. This is a fact.

Crack on though.

 

[BUDFORCE]

Nah he's right, they spend years getting their MRICS or FRICS degrees to learn how to Google for 5 minutes. That is really all there is to it.

 

[Psycho Sonny]

I’m not entirely sure where to start with any of this.

So I won’t. It is however categorically incorrect.

A five minute google will not provide you with the information that a surveyor requires to complete their report - there is a completely separate part of the site that is not accessible to the general public that provides a significant amount of information that they cannot see. This is a fact.

Crack on though.

information on what exactly?

everything is in the home reports. what it was sold for and when. size of property. EPC the lot is all available.

it's not rocket science. valuing a home is as simple as;

1. check local area
2. property size and condition, as well as age, features etc. a lot of this can be gathered from the photos on the listing but ideally you want to do a viewing to gauge what the owners are like and what has been missed from the pictures but you should be able to get within £10-20K of the real value from the listing alone.
3. what similar properties sold for in that area. all on right move, zoopla, land reg, etc. then see what is different with this property. you associate more money with the more work done and less money with work that needs doing.
4. check home report to see if any major issues reported. this is Scotland only however most home reports are 99% useless anyway. they are done by unqualified copy and pasters. again i take their worth to be as much as the surveyors valuation.

don't make it out as if your job is any more advanced than that. i could value any property in my estate with a 5 minute google.

i had a mate who was looking to buy in my area. he showed me the house and sent me the home report. i told him it was £20K over valued. he was like but the buyer paid £60K more than what he's asking (this was in the hype right before the crash). i said well that isn't your problem he overpaid that doesn't then mean you should overpay. I then showed him a home around the corner which was up for £100K less than what the buyer paid yet still hadn't sold in 4 years. on his theory then it was a bargain if so then why had nobody touched it in 4 years? because it was still overpriced by £50K.

he then went into details about his viewing and how the house was not being lived in yet was untidy as in it had used cotton buds lying around. i was like i'd deffo not want to overpay by £20K if that is the case as it doesn't reflect well if the owner can't be bothered to clean up a house he's asking top dollar for.

the house sold but it sold for £5K more than what I told him to bid on it. his bid wasn't accepted and it took an additional 3 months for someone to offer £5K more. so my valuation was pretty much spot on.

knowing the area well helps. but i reckon i could value any property anywhere in the UK after spending 1-2 hours on google checking properties nearby and what they sold for.

 

[fastwunz]

Nah he's right, they spend years getting their MRICS or FRICS degrees to learn how to Google for 5 minutes. That is really all there is to it.

Lol - yeh it’s a walk in the park.

Christ.

 

[The_Abyss]

I’m not entirely sure where to start with any of this.

So I won’t. It is however categorically incorrect.

A five minute google will not provide you with the information that a surveyor requires to complete their report - there is a completely separate part of the site that is not accessible to the general public that provides a significant amount of information that they cannot see. This is a fact.

Crack on though.

Don’t rise to him. He’s a self-confessed expert on everything.

 

[BUDFORCE]

Lol - yeh it’s a walk in the park.

Christ.

Off topic but I thought I'd get this in, do you do valuations for mortgages?

Do you get underwriters questioning you?

If so, I promise you about 99.9% of the time it's because we have to, because some money greedy mortgage broker is going ape **** at us because it's our fault the property got downvalued or what comes up they don't like and start throwing their toys out of the pram.

Obviously I couldn't ever say something like that on a company email but I am not there to disagree with you guys promise, just to get these bloody knob end brokers off my back.