Anyone who has remortgaged or plans to remortgage in the near future is aware that in the vast majority of instances, an independent appraisal is required. This may be a frightening and eye-opening experience in today’s real estate market. Property valuers have been adopting an increasingly pessimistic view of the UK property market, which has major consequences for sellers, buyers, remortgagers, and, most crucially, mortgage brokers and IFAs. Check Valuations ACT – Property Valuation Canberra.
According to Hometrack, a London-based data services business that provides a decent indicator of a property’s worth, home prices dropped for 18 months in a row until December of last year, when the average house price in the UK rose just 0.1 percent.
Last year saw the slowest – if any – increase in home prices in more than a decade in most regions. There is little question that 18 months of decreasing average prices, or at the very least a significant slowing of growth, has eroded homeowner equity and harmed consumer confidence. The national average home price in December was £160,900, down 1.6 percent from £163,474 in December 2004 according to Hometrack.
The signals to sellers are straightforward: supply exceeds demand, and it is a buyer’s market. The number of available properties increased by more than 30% in the first quarter of last year.
Last year, the average time it took to sell a home increased by more than 20% to eight weeks. In 2004, the average time from listing to confirmed sale was 6.5 weeks. Importantly, the selling price as a proportion of the asking price fell to 93.5 percent last year, confirming that buyers had considerable negotiating power over sellers and were able to get big reductions.
In practical terms, a seller who puts his home for sale at the national average of £160,900 last year would, on average, get an agreed selling price of £150,441 and have to wait two months to close the transaction.
The consequences for remortgaging are substantial, and a cautious assessment may make the professional mortgage broker or IFA seem a little foolish.
Last year, brokers and lenders saw an unprecedented number of down values, in which the property’s value is substantially lower than the customer’s original estimate. On remortgage applications, most lenders demand that a valuation be done, especially if the loan-to-value ratio is more than 70%. The biggest challenge confronting mortgage brokers is accepting a customer’s assessment of their perceived home worth at face value, which is almost always too high. This is where the good times begin.
Let’s take a look at a typical mortgage broker’s selling procedure. You spend many hours doing research, preparing an independent disclosure statement, and assuring your customer that you are a properly qualified, Certificate in Mortgage Advice and Practice-endorsed, FSA-registered advisor.
You inform your customer that you have over 4000 mortgage options to pick from and that you’ll discover one that’s perfect for him. The LTV ratio, which is based on the customer’s assessment of his property’s worth, is a critical component of the decision.
This estimate will be based on many factors, including knowledge of other homes that have recently sold in his street or neighbourhood, the news, and a healthy dose of intuition.