I recently read that some research carried out by More2life last year found that the most common reason for a lender declining an equity release loan application is based on the property valuation.
Whilst thinking about this, it occurred to me – as Countrywide Surveying Services also recently became a member of the Equity Release Council – that the role valuers play in later life lending is not a high-profile topic (despite its clear importance). Therefore, I thought it might be worth starting to provide some background on what we do.
How mainstream and equity release valuations differ
In many respects, valuations for life lending and equity release cases are no different to those that we carry out for other mainstream lenders; i.e., we provide a market valuation based on Royal Institution of Chartered Surveyors (RICS) Red Book requirements, with our assessment based on comparable sales.
This is usually scrutinised closely by the lender’s underwriters and also in accordance with our lender client’s policies and guidance, which is where there are some differences.
Unlike mainstream mortgage lending, our valuers are trained to understand that ‘the property is everything’ in equity release. Consequently, much closer attention needs to be paid, for example, to the longer-term saleability of the property – after all, lending isn’t for a two- or five-year fixed term, for a start.
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In this vein, our later life lending clients also have some noticeably different requirements regarding the properties that they are prepared to lend on; e.g., there may be strict limitations on the amount of flat roofing that is acceptable, while ex-local authority flats and properties connected to private drainage arrangements involving more than four properties may also not be acceptable, to name but a few.
Our valuers also need to be empathetic and suitably sensitive in their approach when visiting the homes of later life borrowers, who may, for example, not have had their property professionally valued for some time and consequently may have unrealistic expectations about the value of their much-loved family home.
While also being one of potentially only a few people to visit the property during the lending process, our valuers also need to be mindful of any potential customer vulnerabilities and ensure that any related concerns are also reported to our clients in this respect under the relevant terms of our contractual obligations, coupled with the lender’s guidance notes.
In the broader context, it is also worth noting that our valuations are always prepared strictly for our clients’ lending purposes only. They are not property condition surveys, and if a copy of the valuation report is shared with the customer, it should not be relied on in any way by the latter.
Adviser knowledge also helps
Finally, I was recently talking with someone who had been discussing the later life lending process with a highly successful adviser in the sector.
When asked what his secrets of success are, particularly in relation to the valuation process, he said he always did his homework very carefully upfront to prevent any unwanted surprises or delays later in the process, not least regarding the likely value of the property, but also regarding any elements of the property itself that might fall foul of the lenders’ requirements, such as those outlined above.
In the spirit of Consumer Duty and helping to ensure good customer outcomes, this all seems very reasonable to me.
