Tuesday, February 9, 2010

Some worried surveyors out there!

Threat to valuers as lenders blame them for losses

Article a few days old I know. Precisely the same thing happened in the last property downturn, and I predicted on this site a few years ago that this would occur this time too.

Posted by p. doff @ 12:42 PM (1406 views)
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8 thoughts on “Some worried surveyors out there!

  • They were all happy to bury their heads in the sand when prices were rocketed but are now crying like a baby – go figure! Maybe this will work in our favour, if surveyors are too afraid to value high then they will start to value low. I would imagine the risk of being sued by a seller is far less of a worry than the risk of being sued by a lender.

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  • little professor says:

    Bradford & Bingley, the taxpayer-owned mortgage lender, is threatening surveyors with legal action for over-valuing properties during the housing boom.

    Completely ridiculous. The banks were complicit in the inflation of house prices, not innocent victims. They wanted bigger mortgages to generate bigger profits. Only when they realized the mortgages were going bad did they start to moan about overvaluations.

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  • No real threat to valuers IMO.

    If there was prices wouldn’t have risen between 7 & 15% in the last year as other than low interest rates (which in theory are temporary) the rise is totally unjustified.

    If there was any sort of real threat to valuers they’d all simply be going round valuing properties for mortgage purposes at late 2008 levels.

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  • In practical terms this is a bit of a non-story. Hundreds of similar claims were made after the 1989-92 crash and the law was defined pretty tightly, allowing the lenders to make only limited claims. The starting point is the difference between the value given and the “true” value at the time the valuation was given. They can’t claim any losses caused by the fall in the market and they can’t claim at all unless the valuer was so far out as to be negligent. Even if a claim is established the amount payable in damages can be reduced if the lender was also careless – for example not making proper checks on the creditworthiness of the borrowers. It was not unusual for damages to be reduced by more than 50% to reflect the lender’s own sloppy practices. An awful lot of potential claims are not worth pursuing because the time and cost of doing so is out of proportion to the amount the court can award.

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  • 2. little professor said…’The banks were complicit in the inflation of house prices, not innocent victims’

    Spot on. The more aggressive lenders who were chucking money at sub-prime and self-cert borrowers were the first to complain if valuers had the audacity to downvalue. Funny how these are the ones now screaming the loudest. However, most repossessions stem from remortgages, second charges and secured loans, not purchase valuations where the valuer at least has a market transaction to substantiate his figure. Problem was, it was standard practice with many dodgy brokers to submit bogus inflated sale prices on the application to fool the unwary valuer, and these bogus transactions would then appear on the valuers database of comparable sales evidence. This would inadvertently help to justify the next overvaluation, or support a stupidly high sale price.

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  • Good thing interest rates have hit a record low (http://www.timesonline.co.uk/tol/money/property_and_mortgages/article7020435.ece) and more people can buy homes with the rise in 90% mortgages. It’s a lot easier to put down 10% instead of the old standard of 25%.

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  • honest valuer says:

    I had it on good authority that the Halifax in house valuers were called to a meeting in the early 2000’s on the appointment of a new lending director and were basically told to rubber stamp all sales values (particularly new build) – they didn’t want any down valuations because they were going for market share. Very unprofessional and I remember at the time saying that they should have been reported to the RICS for unprofessional conduct etc.

    Ask any valuer working from 2002 onwards about the inordinate amount of pressure we received from banks/brokers if we dared down value – I eventually used the tactic “well if you want to lend and my valuation is not high enough why don’t you change your lending policy so that you lend a higher LTV rather than me change my value?”. That normally worked and boy am I now glad I down valued some of those new build flats from 2006 onwards.

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  • This is nothing new. FSA has closed the following

    1) Lawyers
    2) Valuers
    3) Estate agents
    4) Financiers

    The question to ask what were these guys doing between 2001 to 2008???

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