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Understanding how valuations work, and why they sometimes go wrong, can help brokers avoid delays and keep cases moving.
In the latest Get More with Aldermore webinar, Ben Culley, head of property risk at Aldermore, shared some insight into the valuation process and the issues that affect brokers.
He also addressed two of brokers most common concerns: why valuations get delayed and how common ‘down valuations’ really are.
Ben kicked off by explaining the concept of property risk and why lenders place such importance on valuations.
Property risk is the possibility that a lender could suffer losses when property is used as security for a loan. It usually falls into three areas: property type, location and wider market conditions.
Certain property types carry higher risk, from new-build to high-rise flats. Location also matters: London can overheat, while places such as Aberdeen have been affected by fluctuations in the oil industry.
Market conditions are the third factor. Ben pointed to the disruption seen following the mini-Budget in 2022 as an example of how quickly wider economic changes can affect property values.
He then outlined the different types of valuations lenders use:
Mortgage valuation: this relatively brief inspection is carried out by a surveyor to confirm the property’s value and see if it fits within the lender’s risk appetite.
Importantly, this is not a full survey of the property’s condition.
“The surveyor isn’t there on the customer’s behalf,” Ben explained. “They’re working for the lender.”
Full Redbook: for more complex properties, lenders may require a full Red Book valuation. These detailed and freeform reports are typically used for large HMOs, commercial assets or more unusual properties.
Redbook Lite: This sits between a full Redbook and a mortgage valuation. It’s a shorter-form valuation on a pro-forma often used for smaller HMOs or multi-unit properties.
Automated valuation models (AVMs): these use datasets and algorithms to estimate property values based on comparable sales. Ben said they work particularly well for standard housing stock.
“I live in a street of 19 very similar houses on a cul-de-sac, where an AVM can be very accurate,” he explained. “There’s lots of comparable data. Where the housing stock is very similar, the data becomes incredibly reliable.”
Desktop valuations: where local surveyors assess a property remotely using satellite imagery, street view data and previous valuation records. These became more common during the Covid lockdowns when surveyors were unable to visit properties in person.
Valuation delays are one of the biggest frustrations for brokers and lead to poorer customer journeys.
However, Ben told us that “The reality is most delays aren’t down to the valuer.”
Last year Aldermore instructed more than 25,000 valuations, and around 9,000 experienced delays. Yet only 4% of those delays were actually linked to the surveyor. That leaves 96% that were down to the customer or the lender.
Delays are far more likely to come from the customer requesting specific times and dates, or access issues, where the surveyor attempts the valuation multiple times, but no one is home or they don’t answer. Missing or incorrect contact details and problems with supporting documentation are also common causes of delays.
Ben highlighted three practical steps brokers can take to help avoid these issues and keep valuations moving.
Another topic that frequently generates debate is properties being valued below the expected price – a down valuation or technically an ‘overestimate’.
Ben explained that Aldermore monitors these closely, and the data shows the picture is more stable than many brokers might assume.
An average 67% of valuations match the expected value exactly, with most of the remainder falling within small differences of between 1% and 10%.
“The data doesn’t show a big spike,” Ben explained. “Overestimates have been pretty consistent.”
He also addressed a common misconception - surveyors are not incentivised to reduce property values. “They don’t get a bonus for down valuing a property,” he said.
Instead, valuations rely on comparable sales evidence and professional judgement. Surveying is more of an art than a science, meaning different valuers could reasonably reach slightly different conclusions.
As long as the valuation is supported by evidence, none are technically wrong and it can still be considered valid.
Finally, Ben highlighted a few areas where brokers should take extra care when submitting applications, particularly around HMOs, local licensing requirements and property conversions. These rules can vary between lenders and local authorities, and missing planning permission or building regulation documentation on converted properties can create problems for lenders.
He also pointed to regulatory developments that will influence property lending in the coming years, including the proposed minimum EPC rating of C for privately rented properties by 2030, the Renters’ Rights Act, UK Basel 3.1 and leasehold reform.
For brokers, understanding how valuations work, and what can affect them, can make a real difference when it comes to keeping cases moving and managing client expectations.