There are several factors which may affect the value of a property. Firstly, a mortgage valuation must not be confused with an estate agent’s valuation. An estate agent’s “valuation” is a suggested figure to market a property to try to get the best price for the vendor, while at the same time being realistically pitched to obtain interest from potential buyers. This figure can be adjusted during the marketing process, depending upon the level of interest. This article deals with mortgage valuations rather than estate agent’s valuations.
A valuation for a mortgage is prepared to advise a lender whether a particular property is suitable security for an advance. It is typically carried out by a Chartered Surveyor who has experience in valuing that type of property in that particular area. A valuer will look at details of comparable properties, check their sale prices, consider how long they were on the market, and make allowances for any differences and any changes in the market. The valuation figure is arrived at after careful consideration and the valuer carries a high level of responsibility.
Factors which affect the value of a property include:
1. Location – A house in a sought after suburb will have a higher value than an identical house in a less desirable part of town due to a higher level of demand.
2. Size – In many cases a house with more bedrooms and other accommodation will have a higher value than a smaller property. However, most house buyers are aware that some areas of their town offer “better value for money” than others and therefore size is not the only factor to affect the value of a property. Size needs to be considered alongside a number of other factors.
3. Neighbouring properties/adverse land use – If a house is situated next to or close to something which a typical purchaser would find undesirable, this is likely to have an effect value. This may include a property which has not been maintained and is unsightly, a business which generates noise, smell, a large amount of traffic, etc.
4. Condition – A valuer will take into account the condition of the property and the approximate cost of improving. However, remember that the inspection for a mortgage valuation is not a survey.
5. Tenure – Tenure can also affect the value of a property. Freehold flats often have a lower value than equivalent leasehold flats. Some mortgage lenders do not lend on freehold flats and this affects saleability, and in turn, value. Also, a property with a short lease or any other onerous restrictions is likely to be less saleable, and therefore have a lower value, than a property with a longer lease and no onerous restrictions.
6. Parking – Most households have a car, and many have more than one. A property with ample parking will be more desirable than a comparable property with no parking, particularly if street parking is restricted (possibly with the exception of some prime city centre locations).
7. Alterations without consent – If a property has been significantly altered or extended without the required Planning or Building Regulation approval then in some circumstances this may affect value, particularly if works have been carried out recently and enforcement may be required. Also, alterations carried out without the required consents may be substandard, and possibly dangerous, eg, where electrical wiring has not been carried out by a competent electrician, and this may affect the value of a property.