There is a simple reason that no two Property Valuation jobs are the same; it is because no two properties are the same. But valuations are not just about the property itself. Valuing a property is a nuanced process and there are many aspects that can cause an inexperienced valuer to stumble. An incorrect valuation can be disastrous for investors and lenders alike, so getting it right is vital and takes a great deal of dedication and care.
Because the impact of an incorrect valuation can be significant, mitigating that risk is extremely important. One way this is done is through Professional Indemnity Insurance (PII). The level of PII recommended in the terms and conditions set out by RICS is designed to give peace of mind to all parties. However, this does have the knock on effect of causing valuations to become a key risk for insurers.
Since the 2008 global financial crisis, which lead to an increased number of claims against valuers for alleged over-valuations, insurers have been wary of further upswings in claims of this kind. The economic challenges the UK has faced since the first lockdown in March 2020 have resulted in a hardening of the PII market.
Detailed evidence; a key way to reduce risk
Here at AWH we work diligently to manage this risk for our clients and ourselves. Having worked in the London property market for over 25 years, we have carried out valuations on properties of all sizes and classes. This experience has highlighted the common pitfalls and challenges valuations can involve and how to take them into account in any valuation report we produce.
One crucial way to reduce the risk is by ensuring our valuation reports include detailed evidence highlighting the closest matches in terms of comparable properties. Understanding what similar properties in and around the local area have been bought for provides an invaluable way of gauging the potential value of a property.
Building on this and other equally necessary data, the experience and expertise acquired throughout their careers then enables our team to provide a suggested Valuation, grounded in sound rationale. Additionally, the large amount of data we gather as part of our investigations is all carefully documented so that it can be referred to and double-checked as part of our internal verification processes.
Subsequently, all of our valuation reports go through a strict review process before being submitted. This can range from a thorough peer review through to a comprehensive review hierarchy for high-value or specialist valuations.
We are incredibly grateful that we also work closely with some outstanding valuation panels, who provide an additional layer of auditing to the valuations we carry out.
Keeping risk mitigation at the fore
In addition to ensuring that our valuation reports are as detailed as possible, we keep risk awareness and mitigation in the spotlight through regular training and internal professional team audits. We believe that our chartered surveyors and valuers are some of the best in the business and we want to ensure their expertise is honed in every way possible.
As a further method of reducing risk, we have conflict of interest procedures in place for every instruction we accept, which include a notification to all in the company, a search of our database and escalation procedures to Director level if an involvement exists and/or a conflict is suspected. Any conflicts are disclosed to the client and the instruction is then declined.
Peace of mind for our clients
By following the RICS guidance and going beyond their recommended minimum terms and conditions we do our utmost to ensure that our clients understand the main risks and potential liabilities associate with surveying and valuation work we carry out. When arranging for any work to be carried out by our valuers and surveyors, our Terms & Conditions include key items that need to be considered in terms of risk.
In addition to the terms set forth in our T&C’s PII is a major factor of managing risk. We ensure that our PII is both consistent with RICS requirements and proportionate to the nature of the work we undertake. We have also passed all previous RICS regulatory reviews and there are no ongoing issues.
In order to protect our business and our clients, we do not work with any high risk/tertiary market lenders who accept poor credit rating clients and/or excessive loan to values.
Where we work with Short Term Lenders, we carry out a vetting process on their lending practices and verify that they are lending their own money so they have a vested interest in the success of the loan beyond meeting lending targets.
The majority of short term lending loans are:
- for periods of three to six months;
- with fully funded interest;
- with entry and exit fees.
Most have revolved and liability ended in these short periods and hence only a proportion are at risk at our PII cover renewal as opposed to our high street/prime bank lenders who generally work to 5-year terms and hence on risk for that period.
For all banking clients, a standard cap on liability exists to the limit of our PII cover or valuation whichever is the lower. Where possible, we negotiate a cap at the valuation amount or where possible a proportion of it.
For any non-banking clients, our standard position is that all work is capped through our terms and conditions at £1,000,000 liability unless negotiated higher on a case-by-case basis. This always requires approval from a Director and is relatively rare, even on the biggest jobs.
Get In Touch
Managing these risks is a day-to-day part of our work. Over the years, our team of property experts have learned to identify and mitigate risks early on, so you can rest assured that your property valuation is in safe hands.
For expert valuations on any class of property, speak to our valuation team on 0800 071 5517 or email admin@awh.co.uk.