Property Valuation Guidelines

Each lender lends against different values which is not always declared by the lender and our guide below talks about some of the common areas/themes.

We pride ourselves on understanding the methodology that our lenders are asking the surveyors to the apply within the valuation reports.  

Assisting Your Valuation

Speak to your local agents and get your own list of sold and letting comparable.

  1. Make a list of comparable sales/lets comparing to your own property in terms of size and location.
  2. On newly completed property its good to get the units let before valuation. This gives the surveyor clear evidence on the property rental in today’s market.
  3. For development, please provide the surveyor with a detailed breakdown of costs, warranties/architects certificate and all professionals undertaking works on the scheme.
  4. For all types of development provide relevant planning documents and make sure that any pre-commencement conditions are understood together with being underway ideally.
  5. Provide any leases or licences associated with letting.

Send these or provide the valuer with these at the inspection.

Commercial Property Valuation

Open Market Value:
  • The valuation of the property sold on the open market in a reasonable time frame.
  • For investment when let to a strong tenant(s) a premium is added for the length of lease without break and the quality of covenant i.e., Tesco on 15-year lease.
  • For multi let units the surveyor will look at the blended average age of the remaining lease lengths, the quality of the tenants, how much each tenant accounts for which determines any premium above the vacant possession value.
  • The value will be based on similar investments on a yield basis and the local sales value on a pounds per square foot.
Vacant Possession Value:
  • The value of the property vacant.
  • Surveyors will value against the comparable market rent on a yield basis and sold comparable on a pound per square foot basis.
  • The value may be further reduced if there are any incentives required to let the property together with how long it would take to let to a new tenant. 

Residential Valuation

Market Value:
  • The value of the property in the open market with no time restrictions to sell the property.
  • The value will be based on similar unit house/flat sales nearby and rental comparable for buy to let.
  • New homes often have a premium which some lenders will not use.
Investment Value:  
  • The investment value is based on similar units sold as investments usually on a yield basis (this is the annual rent divided by a percentage according to comparable investment property locally).
  • This method is typically used for blocks of flats, multiple properties on one title, C4 HMOs and sue generis HMOs.
  • Some lenders will request the surveyor considers a discount for sale to an investor when lending on these types of investments and may also deduct costs associated with running the property that are not passed on to the tenants.
  • Small C3 HMOs and C4 HMOs in an article 4 area can be considered on the hybrid valuation which sits between the market value and investment value. To be considered on an investment value the property needs to have been materially converted into an investment i.e., it would cost considerable amount of funds to convert back and ideally have investments sales comparable nearby to support investor demand.

Trading Business Property

Open Market Value (MV1):
  • This is the value of the property sold in the open market with the benefit of at least 3 years trading accounts together with any good will associated with the business. 
Open Market Value Closed (MV2):
  • This is the value of the property sold in the open market however the business has been closed or there are no available accounts.
  • The surveyor will work off projections and what they believe to be the fair maintainable trade levels.
  • This type of survey is typically used by an existing business buying another trading property where they have experience of owning and managing similar assets i.e., a hotel etc. 
Vacant Possession/Closed Value (MV3):
  • The value of the property closed with no trading accounts. 
  • The surveyor will work off projections and what they believe to be the fair maintainable trade levels.

Development Finance

Redisual Land/Property Value (RLV):
  • This is the value of the land that a developer would pay for the site and is usually based on all costs including finance costs where the profit is expected to meet 20% as a minimum down to 15% on large developments.
  • For smaller sites the value is often worked back to a profit value in preference to a specific percentage. 
  • Either outline or detailed planning needs to be in place or alternatively within permitted development rights.
  • Properties that will be an investment on completion will be valued on their estimated rental value with the surveyor using a yield based on similar investments.
Residual Value (RV):
  • This is the same as the above however used for part completed schemes.
  • The surveyor will including the costs spend to date deducting the cost to finish with the value based on the expected profit that a developer would expect to make if sold at this stage.
Gross Development Value (GDV):
  • The value of the units sold on an open market basis at practical completion together with the value of the freehold. 
  • Values are based on similar property being sold, under offer or on the market which this typically being shown on a pound per sqaure foot.

Other Lending Factors

Lenders will often ask that the above values are also considered with the below: 

90 Day Value:
  • This is commonly known as the forced sale value and often the auction price.
  • Most lenders don’t lend off this figure it’s considered a worst case. 
180 Day Value:
  • You would not expect a difference in the open market value on a straight forward properties which have a good demand for sale however we often see a difference on large or high value residential houses, complex properties, unusual property and property outside (20 miles) of major towns/cities. 

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