‘Down Valuing’ tactics by lenders posing problems for quality builders

Posted under General by Alan

Thousands of new homes are being down valued by the lenders, which may sound as great deal, but is posing serious problems for the borrowers and hitting quality builders hard.

Some lenders’ deplorable approach is stalling new purchases and causing potential distortions in house price indices.

The Royal Institute of Chartered Surveyors and the Council of Mortgage Lenders, the authors of guidelines for impartial estimates by valuers said that several lenders were now insisting that mortgage offers were automatically dropped to second-hand values of newly built houses and flats. This may sound good for buyers but is likely to sabotage other transactions.

According to Lee Holland of Town and Country Mortgages, buyers are left in the lurch since they agree a deal possibly considering a price cut, but on applying for a mortgage, lender is doing valuation at an automatically lower value. The deal collapses if buyer fails to make up the shortfall.

On September 1, CML and RICS issued guidelines on quantifying incentives like stamp duty payments and furniture packages but some lenders were disregarding new guidelines and down valuing new homes.

However RBS and HBOS are satisfied with new incentives-disclosure arrangements, and are making reasonable offers on basis of RICS-CML guidelines, said Halifax spokeswoman.

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