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"It is important buyers are educated fully on the risks of relying on an automated or desktop valuation"

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ended 16. July 2024

A broker on Newspage had a client recently who received a mortgage offer for a residential purchase based on an automated valuation. The borrower opted for a HomeBuyer Report, which uncovered progressive subsidence. If they just relied solely on the desktop valuation, both lender and customer would have inherited a cash cow problem. Newspage asked brokers if it is wise to rely on desktop/AVM’s on purchases — and whether buyers, especially first-time buyers, fully understand the implications of the free vals/desktops/AVM's? Their views are below. The brorrower in questions is happy to be a case study.

9 responses from the Newspage community

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Michelle Lawson
Director at Lawson Financial
It is important that buyers are educated fully on the risks of relying on an automated or desktop valuation. It can be an expensive mistake to make and can have serious financial consequences for the buyer. I recently had a client who had a mortgage offer issued on a purchase via an automated valuation and progressive subsidence was found through the independent HomeBuyer Report they chose to pay for. This enabled the buyer to withdraw from the purchase rather than inherit a costly problem, which could end up leaving people with an unsellable property. A HomeBuyer Report might feel like an additional cost borrowers want to avoid but my client's experience highlights the important role they can play. Relying on a desktop valuation can be financially damaging. As for lenders, they are all about gearing up for speed, which is great, but it comes at a cost potentially for the consumer and even for the lender itself if it becomes a security that is hard to sell on.
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Ben Perks
Managing Director at Orchard Financial Advisers
A computer cannot spot a ‘bodge job’ extension, the dreaded Japanese Knotweed or a recently Spray Foam-Insulated loft. This means sometimes a desktop valuation can be detrimental. Investing in a more detailed valuation when purchasing a property can be a financial life saver. Over the years desktop valuations have worked their magic in speeding up the time it takes to get a mortgage offer on cases deemed low risk by lenders. Whilst this is great for lenders, it doesn’t mean that borrowers should rely solely on them.
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Jack Tutton
Director at SJ Mortgages
The key here is education and ensuring that clients are made aware of the alternative surveys that they can do to protect themselves. Getting an additional survey is an added expense when buying a property, however they are worth their weight in gold if they uncover things such as subsidence or damp issues. Given that a lot of lenders cover the costs of a valuation, they will try and do a survey as cheaply as they can to assist with their margins. Lenders are all about risk management but then often rely on desktop valuations, which immediately create risk as this example shows.
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Imran Hussain
Director at Harmony Financial Services
The whole purpose of desktop valuations and AVMs is for speed; the onus is on the client who is purchasing the home to ensure they understand what a free valuation is, and if they are using a broker, they should always be made aware of the types of surveys and the significant differences the majority of clients I work with will always opt for home buyers report as a minimum from a local reputable surveyor as no one wishes to purchase a money pit AVM's are there purely for the lender to indicate the value of the property.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Desktop and Automated valuations are key to efficient processing of applications without large delays for mortgage surveys. Lenders will all have risk tolerances as to when they accept these, usually with low loan to value cases, and where the confidence of the automated or desktop valuation is also high with plentiful supporting evidence. What is key to make borrowers aware of, is the limited information such remote property assessment provides about the property they are buying and being committed to maintain. I would always highly recommend a HomeBuyer report or building survey on any non-new build property so they are fully informed on any potential issues and can then withdraw or renegotiate the purchase if required.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
When committing to property purchases worth hundreds of thousands of pounds, it is essential for home buyers to obtain thorough valuations rather than rely on desktop or automated assessments. A detailed valuation by a qualified surveyor provides a comprehensive understanding of the property's true condition, offering insights that computer-generated estimates cannot match. This in-depth evaluation is crucial for making informed decisions and ensuring the investment is sound. Property defects such as structural issues, damp, subsidence or faulty wiring are often missed by automated valuations but can lead to significant repair costs, potentially amounting to thousands of pounds. An on-site survey can identify these problems early, allowing buyers to negotiate repairs or adjust their offers. Relying solely on automated valuations risks overlooking critical defects, jeopardising the buyer's financial stability and long-term satisfaction with their purchase.
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Dariusz Karpowicz
Director at Albion Financial Advice
This would definitely speed things up, but we already have lender valuations that don't check much. Buyers should always consider a specialist report like a HomeBuyer Report. Relying solely on a desktop or AVM instantly adds more risk to a transaction. Many buyers, especially first-time buyers, mistakenly believe the lender's valuation is thorough, but it's often not. In the case mentioned, the HBR uncovered progressive subsidence that a desktop valuation would have missed, leading to significant future issues for both the lender and the borrower. Desktop/AVM valuations can leave critical problems undetected, so while they are faster, they are not always in the buyer's best interest.
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Chris Barry
Director at Thomas Legal
From a legal perspective, the buyer's lawyer should always advise their client that the bank will do a valuation for their own purposes of security and this is not in the interest of the client. Clients should always consider a HomeBuyer Report or full structural survey to help protect them both now while they are buying but also in the future when they plan to sell.
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Elliott Benson
Owner at Sett Mortgages
It's very important to make clear to clients that the free valuation is basically just making sure the property is standing. In most cases we do not see the report and we just get told yes it's worth what you are paying or no it is not.

If you want detailed info on the property, you must always go for at least a Level 2 survey