Despite the long-term economic forecast showing promising signs, the UK property finance market is still facing challenges. High interest rates and the decline of general purchaser appetite are causing more stringent lender criteria, something that we as brokers need to be aware of.
Other factors including uncertainty over build costs, slow sales and chain breaks, concerns over valuations and funding line challenges are all taking their toll on the business we carry out. Therefore, now more than ever, it’s important for advisers to demonstrate our value to clients.
The importance of broker understanding is now more crucial than it’s ever been. Staying on top of lender criteria, eligibility changes and product withdrawals means it’s never been more important for a broker to know how – and where – to get a deal done.
To help mitigate client time wasting, there are best practice considerations for brokers to ensure deals are presented well every time.
Firstly, understanding the deal thoroughly. This includes knowing the quirks inside out and pre-empting obstacles. By understanding the asset and need for finance, and most importantly the client and their background/experience, lenders can make a more informed decision at first sight.
Secondly, never underestimate the value of identifying issues early; pre-empt challenges and kill the element of surprise further down the line. Working closely with lenders, providing transparency and having regular communication all cultivate a good working relationship, so you can reduce the risk of facing a decline days before completion.
Best practice for valuations for brokers
Valuations often come with their own pitfalls. From experience, we can confirm that points to be aware of include:
- When the asset is multiple units, is it aggregate market value or block value?
- On a refurbishment, is it the current value or a residual value?
- On a commercial property, is it the investment value or vacant possession value?
- And for bridging finance, is it 180 days or an open market value that the lender uses?
Be aware – all these points are crucial considerations. Terms can be obtained from a lender, but if you do not understand what the terms are based on, you could have a dead deal before you’ve even started.
Understanding funding line process of lender crucial for brokers
Some lenders can approve the deal internally, while some will have to present to funding lines after credit approval, which could mean a decline later in the process if there is a difference of opinion and appetite internally. Proactive brokers who have the foresight to fully understand the lender’s funding line process can overcome this challenge in advance of it occurring.
We as brokers cannot dictate what a lender’s criteria are, nor can we moan at lenders if they decline due to criteria and a wrongly placed case. However, it’s our job to understand the criteria at the start of the process and feed back useful points that may help improve service.
The result? Better client service. It’s our duty of care to know the process inside out. Regardless of experience level or ‘years in industry’, our job as brokers is to act on behalf of the client. Therefore, we must be confident in the placement of our cases. Successful completions ensure happy and returning clients – and a job well done!
