Could a survey help your client to secure a better rate?

Lenders are increasingly deferring to Automated Valuation Models (AVMs), and often don’t even offer buyers the opportunity to upgrade to a physical inspection of the property.

2 December 2021

This might seem advantageous for you and your clients, if you see physical valuations as a hold-up in the process, but that isn’t necessarily the case and an AVM could even prevent your client from accessing a lower rate.

AVMs are not the only phenomenon on the rise. Home improvements, renovations and extensions are also increasing at pace. The slow housing market and cost of moving, particularly for those who incur an additional 3% of Stamp Duty Land Tax, encourage owners to improve their existing property rather than trade up, and permitted development rights are making it easier than ever before for people to extend without getting caught up in red tape.

Permitted development rights were first introduced as a temporary measure to stimulate the economy in 2013 and are now permanent legislation. The rights are an automatic grant of planning permission to allow certain building works and changes of use to be carried out without having to make a planning application. These works include single storey rear extensions and there are even proposals to extend the scope of permitted development rights to include upwards extensions.

So, more property owners are making changes that are adding value, but AVMs, which are based on previous sale prices and the performance of properties in the local area, may not account for this increased value. A higher valued property may result in a lower LTV, which could result in a lower rate and so a physical inspection of a property by a surveyor, could benefit your client if it recognises an increased value.

A survey may mean your client incurring a small extra cost during the application process, particularly if they have the option of a fees-free package from a lender that includes a free AVM. But, in the right circumstances, it could ultimately save them money in the long run if it enables them to access cheaper borrowing.

So, don’t always automatically accept an AVM. There may be situations when a physical inspection provides a more accurate value of the property and a better outcome for your clients.