Property depreciation rose as the market stabilized amid Brexit uncertainty as mortgage advisors struggled to manage expectations about customer home values.
As a result, this can cause brokers to lose some trades.
Then, Mortgage solutions asked this week’s Marketwatch panel, how brokers are approaching this issue, as well as how they support their clients.
Terry McCutcheon, Managing Director of The Finance Planning Group
The term “down-valuation” is enough to cast doubt on any potential purchase, let alone the customer’s ability to borrow. This is where the value of the mortgage broker comes in.
There are no algorithms online that can educate and restore confidence while establishing a solution to the problem. Yet that’s exactly what a good mortgage broker does: provide a solution.
Those in the new construction arena will be subject to this more than others, as they distinguish between a surveyor’s sometimes yellowish view of a new build premium and a developer’s optimistic view of the market. .
These mortgage brokers will also find an additional challenge in demonstrating to the developer that they can add value to them in a positive way that does not involve reducing the purchase price.
The job of a good mortgage broker is to provide the financing to facilitate the purchase of the property. The tools are knowledge, experience and the ability to tie the client to the guaranteed funds.
Sometimes this will involve an often tedious process of providing comparables, sometimes negotiating, and approaching and discussing a number of lenders.
We can compare this with a client going directly to a lender – all he gets is a rejection letter, which suggests that the house he fell in love with was not worth what he thought.
Mortgage brokers are able to add value by explaining the process, working with the client, and offering a variety of options to make their dreams come true.
Rob Brennan, Director of The Right Equity Release
If a lender disagrees with a property’s value, don’t despair – it’s not all pessimistic for advisors. Of course, with loans based on a percentage of the property’s value and the age of the youngest applicant, declining value is obviously a serious threat to the equity release process. So what can advisors do to avoid the completion disaster?
By studying the local real estate market, advisors can realistically manage expectations about the value of clients’ homes. However, this is by no means foolproof. And, with the sometimes inevitable shortage of funds or rate hikes, they have two options: accept the offer or reconsider it.
Before disappointing the client, a good advisor will rework the market to explore other options, coming back to their client armed with positive solutions. When discussing options, they can also choose to use the Iress provisioning system, which now displays rates and net release of lenders funds.
As a result of this proactive approach, less than five percent of our recent cases failed to secure an acceptable bid, with construction or location issues compromising more completion than downgrading.
With lenders now responding by offering medical improvements, offering new plans with higher LTVs, cash back rewards and contributions to increase advances over standard LTVs, the alternatives are on the rise.
So, to challenge yes, but all is not pessimistic. With a little more work and research on the advisor’s part, you can still successfully move on to completed file, satisfied clients, and those very important referrals.
John Phillips, Group Director of Operations at Just Mortgages and Spicerhaart
In the current climate, with the uncertainty of Brexit, we have certainly seen a marked increase in property devaluation.
Surveyors are too cautious because they think house prices are going to go down, so they are pricing properties down.
I don’t really think house prices will go down. But fully understand why this is happening.
When this happens, it can be very difficult for the borrower, because if the property is judged less good by the lender’s surveyor, the lender may reduce the amount they will lend. In this case, as a broker, we will do a comparison and get a second or third independent property valuation.
If these valuations are consistent with the decline in value, then the buyer either has to find a larger deposit to make up for the smaller amount the lender is willing to lend, or to find another lender.
It’s a tough situation, but as brokers we always work hard to prevent the buyer from losing the sale. In some cases, if the property has been severely depreciated, the buyer may not want to move forward, but if they do, then we will do our best to get them another mortgage deal. which allows him to move forward. and buy the property.