How To Prepare For Your Valuation
If you’re refinancing a property you’ll be visited by the lender’s surveyor to value your property. As refinancing normally is the result of having done a refurb, you’ll need to be well prepared for this. Don’t assume that the surveyor will wander around your property and be impressed by what you’ve done!
It helps to know the surveyor's mindset when asked to value a property purchased a few months previously will be to value it at the purchase price paid, unless given compelling reasons not to.
Your mission is to get the highest valuation you can, but they aren’t interested in what the property is really worth, when it comes to valuation for refinancing, they’ll be strongly influenced by what you paid, especially if it’s a relatively recent purchase. Your job is to shift their focus.
Let’s look into the background of what influences a valuation. RICS valuers will always err on the side of caution, in fact lenders routinely instruct them to do so. This often leads to a mismatch of expectation and outcome of the valuation.
There is also a difference between the purchase valuation and that of a refinance - with a refinance valuation, lenders are acutely aware of the purpose of the revaluation, particularly if it occurs within a few months of purchase i.e. it is to pull out as much of the borrower's investment stake as possible. That puts the borrower's aim in conflict with the lender's aim - lenders view the borrower’s financial stake in the property as a risk mitigation i.e. they believe the condition the property is maintained at, is linked to the borrower's financial stake. Thus, the withdrawal of the borrower's financial stake is viewed as a risk escalation. Hence refinance valuations are even more cautious.
Lastly, the valuation you receive is directly linked to the robustness of evidence presented to substantiate the increase in value claimed over purchase price paid.
These are the keys to success:
- You need a works schedule, documenting the work that has been carried out helps to point the valuer to what has changed in the property since purchase.
- You need to provide photos. It helps to show visual, as well as written, evidence of the scale of the work you have undertaken.
- If it is already tenanted it will have that lived-in look, but if it is vacant, it can help to furnish it so it looks like a desirable residence.
- Find similar properties in the same or adjacent streets that have sold in recent months for comparable values. The valuer will still get their own sold comparable values rather than use yours, but they will see that you have made the effort.
All of the above should be presented to the lender's surveyor as a pack. Nothing will give you an absolute guarantee, but do all of the above and you are reducing the risk of a disappointing valuation.
Here is a video on my YouTube Channel discussing "Why Refinance Down Valuations Happen"
You can learn more here:
- Contact Kevin Wright over on his Facebook page.
- Book into the BRR Launchpad™ 2023 Event on the 11-12th March.
- Browse the Recycle Your Cash online training library by clicking here.
- Attend a 2023 Buy-Refurb-Refinance Summit Event - BRR Summit
