Understanding how valuations work, and why they sometimes go wrong, can help avoid delays.

Property risk is the possibility that a lender could suffer losses when property is used as security for a loan. It usually falls into three areas: property type, location and wider market conditions.

Certain property types carry higher risk, from new build to high-rise flats.

Location also matters: London can overheat, while places such as Aberdeen have been affected by fluctuations in the oil industry.

Market conditions are the third factor. The disruption seen following the mini-Budget in 2022 as an example of how quickly wider economic changes can affect property values.

Different types of valuations lenders use:

Mortgage valuation: this relatively brief inspection is carried out by a surveyor to confirm the property's value and see if it fits within the lender's risk appetite.

Importantly, this is not a full survey of the property's condition.

The surveyor isn't there on the customer's behalf, they're working for the lender.

Full Redbook: for more complex properties, lenders may require a full Red Book valuation. These detailed and freeform reports are typically used for large HMOs, commercial assets or more unusual properties.

Redbook Lite: This sits between a full Redbook and a mortgage valuation. It's a shorter-form valuation often used for smaller HMOs or multi-unit properties.

Automated valuation models (AVMs): these use datasets and algorithms to estimate property values based on comparable sales. They can work particularly well for standard housing stock.

For example, if you live in a street of very similar houses on a cul-de-sac, an AVM could be very accurate. There's lots of comparable data. Where the housing stock is very similar, the data becomes more reliable.

Desktop valuations: where local surveyors assess a property remotely using satellite imagery, street view data and previous valuation records. These became more common during the Covid lockdowns when surveyors were unable to visit properties in person.

What really causes valuation delays

Delays often come from the customer requesting specific times and dates, or access issues, where the surveyor attempts the valuation multiple times, but no one is home or they don't answer. Missing or incorrect contact details and problems with supporting documentation are also common causes of delays.

1. Make sure tenants know an inspection may take place
In buy-to-let cases, surveyors will often contact tenants directly to arrange access. If tenants haven't been warned, they may assume the landlord is selling the property and refuse entry (even if the valuation is for a remortgage).

2. Provide accurate contact details
Missing or incorrect contact information is another frequent cause of delays. Providing as many contact options as possible, for the tenant, landlord, managing agent or estate agent, helps surveyors arrange access much more quickly.

3. Check documentation requirements carefully
If lenders request additional reports, such as damp or structural reports, they may need them to be produced by specific qualified professionals. A report from the wrong professional can lead to it being rejected and the process effectively starting again.

The truth about ‘down valuations'

Another topic that generates debate is properties being valued below the expected price - a down valuation or technically an ‘overestimate'.

Valuations rely on comparable sales evidence and professional judgement. Surveying is more of an art than a science, meaning different valuers could reasonably reach slightly different conclusions.

If the valuation is supported by evidence, none are technically wrong and it can still be considered valid.

Issues to keep on the radar

You should take extra care around HMOs, local licensing requirements and property conversions. These rules can vary between lenders and local authorities, and missing planning permission or building regulation documentation on converted properties can create problems for lenders.

Regulatory developments that will influence property lending in the coming years, including the proposed minimum EPC rating of C for privately rented properties by 2030, the Renters' Rights Act, UK Basel 3.1 and leasehold reform.

Get in touch with our friendly and knowledgeable team for more information.

Some forms of Buy to Let mortgages are not regulated by the Financial Conduct Authority.