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Rateable Value And Mortgage Approvals

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A house in my area has just come on the market. My question is about rateable value. Asking price is 200k with the sellers i am told will be not accepting less than 190k. Its rateable value is 120k. However, this figure is well below what is should be comparing other houses in the area. Obviously. the owners had no reason to challenge such a low rateable value at the time but my question is now will the a new seller find it difficult to get a mortgage approved on such a property with an asking price well above rateable value.

More generally, in todays lending climate how important a factor is rateable value in terms of mortgage approval. Will banks make allowances for properties they see as being rated lower than they should have been. In general how much above rateable value will banks lend assuming the buyer is not putting up a very high deposit

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A house in my area has just come on the market. My question is about rateable value. Asking price is 200k with the sellers i am told will be not accepting less than 190k. Its rateable value is 120k. However, this figure is well below what is should be comparing other houses in the area. Obviously. the owners had no reason to challenge such a low rateable value at the time but my question is now will the a new seller find it difficult to get a mortgage approved on such a property with an asking price well above rateable value.

More generally, in todays lending climate how important a factor is rateable value in terms of mortgage approval. Will banks make allowances for properties they see as being rated lower than they should have been. In general how much above rateable value will banks lend assuming the buyer is not putting up a very high deposit

I doubt the lender would even be interested in RV, they only care what thry can sell it for.

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Well, yes, i would assume that a lender will look at the risk in terms of how much they could sell the property for. Their risk would mostly be dependant on the deposit the buyer is putting up. These two things i imagine would be weighed together and then the lender would want some insurance against future falls in prices.

So, would rateable value not even be any consideration when the lender is valuing the property prior to the approval of a mortgage.

If a lender valued this property at well over rateable value it does not give much confidence in the ability of the person who valued the property in 2005. One of them must be totally wrong.

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One poster gave us an idea of what the banks were currently lending at and I have the feeling it was about RV. It may have been tinbin.

RV +5% Several months ago. Sure to be revised downwards over time.

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A house in my area has just come on the market. My question is about rateable value. Asking price is 200k with the sellers i am told will be not accepting less than 190k. Its rateable value is 120k. However, this figure is well below what is should be comparing other houses in the area. Obviously. the owners had no reason to challenge such a low rateable value at the time but my question is now will the a new seller find it difficult to get a mortgage approved on such a property with an asking price well above rateable value.

More generally, in todays lending climate how important a factor is rateable value in terms of mortgage approval. Will banks make allowances for properties they see as being rated lower than they should have been. In general how much above rateable value will banks lend assuming the buyer is not putting up a very high deposit

What is the RV on the house? By what % do you think it has been undervalued? Just how comparable are these other houses - same type, size, year built? Have there been any recent improvements to the house since it was last valued for rates? Have these other comparable houses had any extensions added which can't be seen from the road? Did the EA tell you that the RV is too low? Playing devil's advocate, ask yourself honestly is it your sensible head that says its RV is wrong based on an objective assessment or is it your heart trying or justify a higher offer you might consider making to get this house.

In this regard, you can ignore the £190K minimum accepting price, vendors and EAs don't dictate prices in a buyers market. Just more mid games, you need to firmly dismiss such a comment from the outset and clearly establish that you are only interested in motivated sellers who are prepared to accept market value, and otherwise you are not interested in wasting your time when you have the pick of better priced houses available to you. Ask the EA directly if there is a basis for continuing your interest in this property with that in mind. Push them on it if need be until you get an acknowledgement that the vendor is willing to consider any reasonable offer (it will be your judgement of course as to what's reasonable but you don't need to disclose that just now)

Even if the RV is substantially wrong , I wouldn't ever signal acceptance that it is or might be. In fact I would dismiss any suggestion of that and maintain that the RV was right and base any initial offer I might make accordingly.

In my experience, if the RV is obviously wrong, its been so because there has been significant updating of the property since last valuation and not because of some error at the time the valuation was made. In any event + or - 5 to 10% is always going to be easily explainable in any subjective assessment like this one was. I would expect valuers would proceed on the basis that the valuation is correct unless there has since been some significant work done to the property which could not have been taken into account at the time. If I needed a mortgage, I would base any offer I made upon such an assumption. I can't see why the lender would take on potentially more risk in accepting a substantially higher valuation than RV, when there's plenty other more straight forward mortgage applications to approve without taking on any such a risk.

Edit: I see some of my points made already, didn't check before posting sorry

Edited by lolacarrascal

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In answer to a few questions. There are only a small number of other houses where this property is. A small group of semi detached houses. All are rated the same. In my view all are rated extremely low compared to houses rated at a similar value in the same area. I could not believe how low these house were rated when i checked. It is definately worth well above its rateable value.

The person who rated this house must not have had a clue about a houses worth in the area as he rated a house in a very nice area with a huge garden and established neighbours the same as a house the same size but with a small garden in the least desireable area of the town.

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In my personal research, I found a very strong correlation between RV and Sq. M. So a prop of 180 Sq m invariably had a RV of either £180k (or £175k/£185k or about 5% variance - anything else was very rare) so much so that I could almost guess the Sq M of a prop from its RV.

Not very scientific but try it for yourself, especially for this house and others nearby. Would be interested in your/others findings.

Be aware, if you think the RV is wrong, you buy the house and then it is re rated in the future (for any reason - jealous neighbour?) then your rates will obviously be higher and may even be backdated, at least until when you moved in.

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The banks get their valuations done by their surveyor, typically Countrywide. Countrywide will look at the rateable value, but they will also look at the cost of the house in relation to other houses in the area, so if other similar properties in the area have recently sold for in excess of what you're buying, you should be fine.

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Yes, its pretty obvious to me that this house was rated solely on square footage. With absolutely no consideration given to other factors in a houses worth. I would sell my granny as a galley slave to buy this house at rateable value plus 20%.

Has the person who originally valued this property severely damaged the sellers chances of selling it given the current lending criteria by banks. It will look very strange if the sellers asks the property to be reassessed for rateable value 5 years on when they seemed happy with the original valuation at the time.

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Has anyone any definitive answers to the following questions.

1. When houses were rated in 2005 was it the case that they were solely done so on size and no other factors were considered.

2. Were other factors considered but the people who rated the properties not very good or consistant in determining the added value of additional factors such as desireability of area, garden size, and how established an area the house was set in.

I think i am correct is saying that houses were rated on a standard interior so obvious allowances should be made for how under or over average an interior was.

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Has anyone any definitive answers to the following questions.

1. When houses were rated in 2005 was it the case that they were solely done so on size and no other factors were considered.

2. Were other factors considered but the people who rated the properties not very good or consistant in determining the added value of additional factors such as desireability of area, garden size, and how established an area the house was set in.

I think i am correct is saying that houses were rated on a standard interior so obvious allowances should be made for how under or over average an interior was.

Let me try to help.

I have posted on this before, not sure where to link - mod may help. RV causes arguments. Some view it as a cack handed, amateur, pen pushing, under resourced, exercise riddled with inconsistencies and with little merit. One reason it is disliked, in my opinion, is that it introduces transparancy to prices where previously there was none. Let me explain - LPS have a database of 2005 prices and as surveys report prices reverting to 2005 values we have a useful, easy to access reference. This dovetailing makes it important - there is no other publicly available source of prices - actual or estimated.

On a practical level it is used to get tax from people. People don't like paying tax so any system must be seen to be equitable (as much as possible) and stand up to public and political scrutiny. It can easily go wrong - cf the Poll Tax. It is legislated for. I believe this system - whilst far from perfect - is no mickey mouse, back of the fag packet operation. EA's take this negative view (now), even though they were involved and, no doubt, paid - it demystifies their valuing expertise and the 'science' they use if you can just look up a list for free. There was a fuss at the time that it was so comprehensive, it even put a cost on the views from a prop. Also, CV stops at £400k, I think, meaning very top end props pay less than some may think they 'should'.

There may be some human error and some outliers but I would hazard a guess that the margin of error is tiny, for such a large, comprehensive exercise. I have more confidence in 'professional' valuers, especially non commission based and rule bound public sector ones, than EA's - even though EA's were, inevitably, involved in this exercise at source.

On the downside (for me - us?), I'm sure they didn't include 'distressed' sales - repos or auctions for example - which many would argue are part of the market so there could be an element of overvaluation. Also estates may have become more or less 'desirable' in the past 6 yrs. Say developer went bust, unadopted, high level of rentals, high crime rate. Or your mum may live there or you may move to work there (new hosp say) and you will pay over the odds for emotional or practical reasons. These things can not be captured 'with hindsight' but perhaps on a reval - though depends on level of weight attached to each issue.

You could ring them, I am sure they will provide a robust defence and provide some useful info. Obviously there will be a web presence. I intend to ring over the next few days and will report back. - not expecting too much different, though.

My view is that it was a comprehensive exercise, with an appeal process, carried out as professionally as they could within resource limits. By definition it cannot be perfect but I would suggest it is good enough for the purposes of getting a guide price for a prop (the level of accuracy you attach is up to you). Estate agents were used to provide local prices over 25 market areas. Even views from the property were taken into account and this made the news. Whole council estates could have been easily valued - all houses the same, so drive by appropriate or computer modelling as below.

From LPS

Capital value is the amount your property could reasonably have sold for on the open market on 1 Jan 2005. To keep values fair, we assume all properties have the same standard of kitchen and bathroom for their age, type of property and location. Assessed capital values are based on property market sales.

Between 2002 and 2005 we inspected domestic properties that sold on the open market.

CAMA (computer aided mass assessments - a world recognised standard approach) models were produced for 25 market areas. Each model represented a formula which explained the relationship between sale price and property characteristics for that locality. Preliminary estimates of capital value were produced by applying the characteristics of each property in each market area to the appropriate model. All values thus produced were reviewed, and amended if necessary, by locally based professional and experienced valuation staff who took into account market evidence and the relativity of assessments.

What property characteristics are important in explaining sale price?

Our analysis indicated that the majority of sale prices can be explained by the interaction of the following property characteristics, the most important of which is habitable space- ie, size.

Habitable space - M sq

Ancillary space

Outbuildings size

Primary classification (private/public build)

Sub classification (detached, semi, terrace)

Grade of construction

Age band

No. of Storeys

Sewerage provision

Water provision

Power provision

State of repair

Garage

Site positive features

Site negative features

Neighbourhood

Location (Urban, Rural, Suburban)

Access Type

It's good enough for me (and obviously the Govt. for their tax take). Banks use it.

The ball's in your court.

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Thank you for taking the time to write such a detailed reply Shotoflight. You answered everything i was looking to know and more.

When i have tried to bring up rateable value with estate agents as a reference point for todays house prices its as if i have spoken a rude word. Yet i know for a fact the same estate agent has the LPS website saved on their favourite list on their computer. When i mention a house has a very low rateable value in relation to its asking price i get told by estate agents not to get hung up on rateable value. I am told the people who carried it out had just graduated from college and were usually valuing properties from a different area from where they lived so had no local knowledge.

Foolishly i actualy bought some of the things i was being told and believed the error of judgement in rateable value was fairly wide. After reading the above reply my views have definately changed and i dont think the error of judgement should be so wide.

One thing which i do think has changed since 2005 is the desireability of certain areas and estates. A lot of the new estates that were valued in 2005 have turned into very undesireable areas with such a high turnover of rentals. As a result i would suggest more stable and longer established estates and areas have become more desireable.

I personally think the number of rental properties in an area has a direct influence on what type of an area that place is to live. I am not sure the valuers in 2005 took this into account or saw the consequences of high rentals in an area in terms of the long term desireability of a property.

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I better say i am a not a snob who looks down at people who rent. I rent myself at the moment and was brought up in a council estate. But in the council estates of the past people lived with the same neighbours most of their lives. There was far more stability than in the private housing estates now where most of the houses are rented and you have no control over who is going to be living next to you from one year to the next.

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I better say i am a not a snob who looks down at people who rent. I rent myself at the moment and was brought up in a council estate. But in the council estates of the past people lived with the same neighbours most of their lives. There was far more stability than in the private housing estates now where most of the houses are rented and you have no control over who is going to be living next to you from one year to the next.

Ten things to devalue your home - bad neighbours (outright owners/mortgage debtors/renters - no distinction is made) are there. All classes of neighbour may also change whilst you live there - you have no control of who your neighbours are full stop.

Unexpected development is another good one.

http://www.lovemoney.com/news/property-and-mortgages/house-prices/11343/10-ways-to-devalue-your-home

The increasing growth in (accidental or BTL) rental of houses in what may be described as 'private estates' is a mostly recent phenomenon due to investors and some people not affording their mortgage, so letting out and living with partners/parents as well as inheritors who will not sell for current market price and thus rent or leave vacant (which will be ratable from Oct - encouraging sale or rent).

I know of developers renting in their new developments because they can't or won't sell at market price. The stability in ex council estates, as you have alluded to, has also fragmented due to investors. This is Govt policy - don't build houses but subsidise private landlords.

Many developments also, I think, have to include a certain amount of 'social' or (don't laugh) 'affordable' housing (as opposed to what, unaffordable?

Many renters now perhaps have no choice or are in it for the longer term. As it becomes more common, perhaps it becomes more acceptable and any price premium for wholly mortgaged or owned estates diminishes (or perhaps increases).

The behaviour and social mores of renters v mortgage debtors v outright owners, and societies views on these classes is a discussion I don't want to get into. People will have their own views.

Spending a large amount of money on a house may bring certain expectations with it - but as you have pointed out, this is not always the case.

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I would like to apologise if i give the impression that folk who own a property are nicer people than those who rent. I would never say that.

When i was differentiating between housing areas mostly owner occupied and housing areas with mostly rentals i was highlighting the stability element. I think people develop friendships over time and when you live in an area where there is a high turnover of house occupancy there is not the same level of community. My next door neighbour has changed 3 times in a year. I nod to them when we meet but we dont know each others names.

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I would like to apologise if i give the impression that folk who own a property are nicer people than those who rent. I would never say that.

When i was differentiating between housing areas mostly owner occupied and housing areas with mostly rentals i was highlighting the stability element. I think people develop friendships over time and when you live in an area where there is a high turnover of house occupancy there is not the same level of community. My next door neighbour has changed 3 times in a year. I nod to them when we meet but we dont know each others names.

Absolutely nothing to apologise for, especially not to me, I'm not having a go. Just pointing out things aren't always black and white. Everyone has different experiences and opinions and are very much entitled to them. All the points you make seem quite sensible.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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