The RICS says surveyors are becoming increasingly cautious as house prices rise, basing valuations on comparables that have not ‘caught up’ with today’s market.
“If property prices rise quickly, comparable evidence never catches up” says Peter Bolton King, RICS’ residential director. The result is that lenders are willing to offer mortgages on less than the asking or agreed sale price of a property, leaving would-be buyers with a shortfall which they have to either make up themselves, or otherwise forcing them to walk away from the purchase.
Back in 2011 the NAEA - which then had Peter Bolton King as its chief executive - said sales and remortgage deals were collapsing because some lenders and surveyors were ‘deliberately undervaluing homes’, in some cases by as much as 10 per cent. At that time the RICS denied that surveyors were being over-cautious.
Research by the Daily Telegraph in 2011 showed that surveyors were facing large numbers of legal actions by lenders over valuations made before the downturn in 2008; earlier this month EAT reported that in 2012 LSL Property Services had to set aside £17.9m to deal with over-valuation claims relating to what it called a period of “high-risk lending” between 2004 and 2008.
Now with values rising sharply in some areas - but with the fear of a bubble and consequent price falls - it appears that surveyors are being cautious to avoid a repeat of the legal action of past years.
*source estateagenttoday