Saturday, October 31, 2009

Blame the valuers for the cheap money glut?

Lenders threaten to sue valuers for negligence over home repossessions

Mortgage lenders are using “no win, no fee” solicitors to threaten property surveyors with negligence claims for valuations on homes that have since suffered steep falls in value and been repossessed. So-called “confetti letters” are being sent to valuers on behalf of lenders, after a number of solicitors approached banks offering to investigate the accuracy of valuations by their surveyors, The Times has learnt. The letters question whether the original valuation was accurate at the time the borrower bought the property and notifies the valuer that they are under investigation.

Posted by quiet guy @ 11:04 AM (998 views)
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12 thoughts on “Blame the valuers for the cheap money glut?

  • …as predicted on HPC a couple of years ago.

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  • If the surveyors take the blame, won’t they now down value all properties?

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  • Price(s)less.

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  • mark wadsworth says:

    Tee hee! Glorious! Sharks have now run out of minnows to eat and are turning on each other!!

    Also, I second what Will says/asks.

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  • but how can they sue the valuer as his valuation might have been correct at the time banks state when you take out a mortgage that the value of your home can go down as well as up so i don’t see how they have suffcient grounds to file a suit against the valuer ?

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  • How are they going to establish what the real value of a property should have been? I doubt the mortgage lenders have a chance with this – maybe they think they are going to be sued eventually themselves. But I agree it is great news for bears.

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  • This is nothing new. In the last crash I recall receiving letters from various lenders asking me to justify a valuation carried out several years earlier. They were mostly from what we now call sub-prime lenders who could be more aggressive, and where the borrower was a risky bet in the first place. Many of my colleagues experienced the same thing. In most cases a simple response providing the comparable evidence that was used to support the valuation was enough to resolve the issue. However, in those days some firms/individuals were not so hot on putting comparable evidence on file, which would make life difficult for them, despite accepted valuation error tolerances.

    Since that time, valuers have (or should have) tightened up on comparable evidence procedures, and in fact some of the computer software programmes developed for valuers (e.g. Quest System) automatically printed out a list of comparables with the site notes/ inspection pack.
    This was however open to abuse as some bonus seeking high earners pressurised by the more profit driven employers would simply stick a few random property addresses on file to make it appear they had complied with company procedure – these properties might not be comparable however and could prove useless if the valuation was challenged.

    @2 above. Valuers cannot ‘downvalue all properties’ as the valuations would be routinely challenged by the lender, applicant or broker. In some cases the lender has a ‘downvaluation procedure’ where the valuer has to write a separate report justifying why his valuation differs from the customer’s estimate. Any valuers caught out in the last crash would however be inclined to adopt a less cavalier approach, particularly if they anticipated another market collapse which would highlight their mistakes.

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  • indeed d’oh. 😉

    As I said back then, I hope the solicitors do well. I can only be in the interests of more realistic valuations

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  • I also commented that if the valuers are at fault, then the homeowner should be able to sue since if there is negligence, why should he or she suffer poor or vested interest advice.

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  • @ 7
    In general, clients are perfectly entitled to sue in cases of professional negligence provided they have suffered loss. Most overvaluation claims by lenders relate to remortgage cases where there is a shortfall when a property in possession is sold. The lender may have lost money but the borrower is in no worse position than before the valuer turned up (i.e. he still had his property, and also pocketed/spent the further advance), so the borrower has effectively not suffered a financial loss to sue for.

    Overvaluations when a client purchases a property are obviously a different matter as the valuation may have induced the buyer to pay too much – therefore suffering a loss. The same applies with valuations of property in possession – an undervaluation my result in the dispossessed owner suffering a loss when the property is sold too cheaply, which is actionable.

    Just as an aside, you would be suprised (even in this litigious environment) at the things people try to sue for. For example :- not mentioning in a basic mortgage valuation that there was no underlay present beneath the fitted carpets: not mentioning that a back yard was too uneven for the buyers toddler to play on; not mentioning that there was condensation behind a fitted wardrobe – discovered when the buyer had stripped out pending refitting a bedroom. I’m even aware of a case where a houseowner claimed that the valuer had caused her house to be repossessed by not submitting the (over)valuation she needed to get the funds to pay her debts. Needless to say, these did not proceed but it’s a funny old world innit.

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  • 2 words : “Good Luck”

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  • markj69 str05 says:

    ‘Buyer beware!’

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