Morning everyone – it’s Friday again. I personally feel that the marathon mentality is now more important than ever; especially for you small business owners. There is, as you know, very little down time. Be kind to yourself and have courage to take some time off.
Today starts with a bit of a rant, as the methodology behind valuation figures is something really frustrating me. As you are all aware, there is an array of valuation figures available to surveyors; market value; vacant possession; 180 day market value; 180 day vacant possession; 90 day vacant possession; hybrid; fully commercial….. depending on the lender and property – but does it really make any difference currently to the figures that valuers are putting down?
I appreciate that these are uncertain times, but as an example we recently valued the same 5 flats on their own freehold through two different lenders and only a few weeks apart. The first valuation was on the 28th May and second was 23rd June. The first had a market value of £1,405,000 and a 180 day of £1,260,000, with demand under 3 months. The expected value was £1,575,000. The second valuation came in as £1,210,000 market value and no 180 day figure. How can anybody’s expectations be managed when this happens? How can anyone believe that the price is fair and not just a finger in the air depending on the time taken and the risk appetite of the valuer.
Yet it’s not all bad news
Prices on residential purchases seem to be there or thereabouts, and the valuations we are receiving don’t seem to be getting much of a haircut. This is encouraging for investors purchasing projects at the moment and we mustn’t forget this fact. It seems to be the end values that are being reduced.
So what are we doing about it?
What we need to learn from our frustrating week is that it’s so important to look at your figures and work our your worst case scenarios going into a deal. We also need to look at options on the term mortgage with minimal exit fees or a short term fixed rate where we can.
We have started working with a new lender who can not only look at a hybrid valuation for HMOs, but they also offer a tracker product with no early repayment charges. This is in response to needing a lender with more flexibility, while still offering what we need in terms of day one remortgages, and allowing investors funds and director loans. These, among other things, are integral to us offering products that work for our clients. Having the flexibility of a penalty free tracker will add another option for our clients to allow the current issues to pass and then look to refinance at a later point.
It’s a hard task trying to stay one step ahead at the moment, but that’s what you as investors need from your broker – we are doing our best to do that in challenging times!