MRV'S?

[robgil]

How do lenders evaluate a 'project'? Do you need a special mortgage or would they undervalue it because its in a state?

 

[Flyfisher]

I don't understand that acronym (not unusual) and Google was no help either (rather unusual), unless you're referring to optical communications or versatile 4x4 vehicles, which I suspect you're not.


Didn't you mention in another thread that it's national plain English day today? :lol:

 

[Moo]

My guess is that the M stands for mortgage, and the V is for valuation.
Haven't a clue about the R, though.

 

[robgil]

Yes it is , i dont know what the R means either, i just seen it on rip off britian.
I am concerned because we have 18 months to get this place into a state that we can get a mortgage on it but i am afraid they will under value it because it probably wont be finished.
If they under value it we will have to either find a large deposit or pay bigger interest rates , this is providing they dont value it at less than we need to borrow.

 

[Flyfisher]

Ah. Mortgage ReValuation perhaps?

The nearest thing I've heard of are self-build mortgages, where the overall project is taken into account but money is only released against an agreed schedule of completed milestones, up to the final agreed amount for the fully-built property.

I imagine that a similar sort of thing could be applied to a renovation project, but I've no direct experience of that.

A mortgage is just a secured loan, thus it would be a very foolish bank that would lend more than the security is worth ('toxic loans' anyone?). The lender must take into account that the owner/renovator might - for whatever reason - default on the loan payments and have to recover its capital from the house. Thus, it would have to be realistically valued for a quick sale in the state it is currently in.

As the owner repairs/restores the house and (hopefuly) increases its value, then the mortgage company should be willing to increase their loan.

I imagine that there are mortgage companies out there that specialise in this type of lending, thought I don't know of any personally.

 

[robgil]

In our case we dont want to borrow any more than the amount the house was bought for, i did read that these evaluations can be drive by's and sometimes the valuer doesnt even go into the property.

 

[Flyfisher]

I don't think your purchase price is particularly relevant. Lender's can only really work on the basis of current valuations and, perhaps, factor in what they think the market will do in the near future.

I've also heard of "drive-by" valuations, but wouldn't rely on such things. The last time I re-mortgaged a house (about 5 years ago), it was for only 30% of the market value but the mortgage company still sent a surveyor to come and have a good look inside. Admittedly it wasn't a full structural survey, but it was far from a 'drive-by' valuation.

 

[robgil]

Thats my worry FF, i see a rotten sole plate as a long weekends work and the price of a few materials where as a surveyor might see it as thousands of pounds worth of damage to the houses value.

 

[Pford75]

My advice (based upon my own remortgage experience) is that you need to do a bit of preparation for the valuation. (I seem to recall that Joce had a similar issue?)

Most valuers will rely on comparables and these can be tricky to find if your project is unfinished or the property is unique.

If I were you, I would put together a short document with

Purchase price
List of all works completed since purchase and apx. Costs (if done commercially...ie. What wld a builder have charged)
Remaining works, together with estimated cost ( as above)
Evidence of final value if available

Lenders will only look at the cost of commercial works, since if you defaulted on the mortgage they would have to pay full price to complete the works and not rely on someone doing it over several weekends. As long as you don't 'push' and can put forth reasonable arguments, most valuers will at least listen to what you have to say.

 

[JohnB]

Have you tried the Ecology Building Society? I think they may be more helpful from what I've heard.

 

[skier-hughes]

We remortgaged a year or so ago.
At the time we were looking for 60% to purchase price some 4 years previous.
When the surveyor came he had a good look round the house, considering our property is over 600 years old in places, it was what we expected.
He could see lots, as we had no kitchen, no ceiling, not upstairs bedrrom, no ceiling, so it meant he could see the roof was in a fair condition.
He valued it a little less than we thought it should be worth, be we were taking into account we'd finish kitchen and bedrrom, whereas he was thinking how much could we sell this for, quickly, if they don't pay up and we reposses, so all in all, we thought that was pretty good going.

 

[JoceAndChris]

I did have a similar issue, and took Pford's sensible advice - but despite best efforts the answer was no. No to remortgaging it with 40 k extra, and then, months later, no to remortgaging it for 20 k extra. The point of it was to raise money for the field, and my argument was that 6, or 3 acres, would put a goodly amount on the value of the house. But they didn't want to know. In the end my mother in law very kindly lent us the money for the field. We'll try to remortgage again next year, after a few months of Chris being on an increased salary.

As Rob doesn't want to borrow more than he paid I hope his experience is different to mine. The valuer who came here had a good look round, did a lot of drawings, had tea and admired the chickens. He didn't say anything about the chipped off render on the front of the house, but did comment that it's an impossible house to value as there aren't any comparables. It's the sort of house you either love or hate - for example the lo-oo-ong track up here, is it a curse or a blessing? How do you value not having any neighbours, or having to take your water from a well, or going underground into the kitchen? I guess a lot of our beloved period properties are like that, just not everyone's cup of tea. Still, that valuer valued us at 75 k more than we paid two years ago ( including the hypothetical owning of the extra 3 acres), so let's hope we have more success next year.

Good luck Rob, you will persuade someone I'm sure.

 

[Flyfisher]

Thats my worry FF, i see a rotten sole plate as a long weekends work and the price of a few materials where as a surveyor might see it as thousands of pounds worth of damage to the houses value.

Well, to be fair, a surveyor has to factor in the commercial price for such repairs because that will be the reduction in market value (at least) should they have to repossess and sell to recover their money. They are merely taking a business decision whereas you (and most period property owners) will have an emotional investment - quite understandably. Let's face it, they are not going to repair the sole plate themselves over a long weekend if the worst happens and they have to sell the house to recover their loan. You have to look at it from their perspective.

I can understand your desire to obtain a 'drive-by' valuation but, frankly, I'd be amazed if it happened. I agree with the other comments that you'll have to discuss and negotiate with potential lenders. Pford75's example of a formal list of major outstanding works is a good one. Then ask the surveyor to value the property as if it was in completed and sound condition with a separate value against outstanding item. Hopefully, the mortgage company would then agree to lend the 'good condition' figure but with certain amounts held back until the relevant works are completed.

So, your example of a rotten sole plate might be 'valued' at £10k and would be held back until the work is done. The good news is that completing that work would then be worth £10k to you when completed.

The key is to find a mortgage company with sufficient flexibility to be able to have such discussions, although I appreciate that's easyier said than done.

 

[AMc]

The ability to borrow money is also based on the ability to pay - we were unable to borrow as much money as we wanted for our works because they weren't prepared to take into account my income as a sole trader because I'd 'only' been trading for 18months on a pure profit basis

The valuation surveyor was particularly troubled by finding comparable houses, as ours is old, large but had the orchard and fields 'gobbled' for a housing estate in the 90s so there aren't 6-8 acres of horseycultural land and stables to include.

Also bear in mind that the market valuation for a mortgage is based around a quick disposal at auction following a repossession and so the lender will always value the house lower than the asking price on the retail market.

Robgil - I would register on the property listing sites for email alerts on similar properties in your general area and make your own list of 'comparable' buildings - both renovated and wrecked - then track the final selling prices on UpMyStreet - you can then pass that information on to the surveyor at the right moment providing it backs your case
I would also get professional quotes for the remaining works a few months before your revaluation again to help the surveyor come to an agreeable valuation.

 

[robgil]

A house up the road sold recently, it was thatched , about the same age but had been modernised, perhaps over modernised to my taste but i only seen it through photos , anyhow it sold for the asking price not too long after it went on the market and made 300k according to the estate agents.
We have been told this house will be worth much the same when it is finished which will be more than twice the amount we have to borrow for it.
In an ideal world if we had the house finished we would have little trouble getting a mortgage providing we could afford to pay it.
I guess i just have to put as much value on the house as i can and make sure i do all the work that would other wise cost a lot to get done, Which is just about all the jobs at the moment.

 

[Feltwell]

I presume you got your father-in-law problem resolved Rob?

He's not supporting a sole plate now is he??? :shock:

 

[robgil]

Lol , no , its all sorted now. I dont think he would be very good at supporting a sole plate anyway, no , hes much more use composting in the garden, helping to push up the daisies. :lol:

 

[Penners]

MRV

My bet is...

Market Related Valuation.

The lender will almost certainly lend less than the market value of the property as it stands today. He has to be certain that - should you decide to stop repaying the loan tomorrow - he can sell the property for enough to pay back the loan in full. That will not, of course, be the full market value - he'll always discount it to a "distressed" sale value.

 

[AMc]

A house up the road sold recently, it was thatched , about the same age but had been modernised, perhaps over modernised to my taste but i only seen it through photos , anyhow it sold for the asking price not too long after it went on the market and made 300k according to the estate agents.
We have been told this house will be worth much the same when it is finished which will be more than twice the amount we have to borrow for it.
In an ideal world if we had the house finished we would have little trouble getting a mortgage providing we could afford to pay it.
I guess i just have to put as much value on the house as i can and make sure i do all the work that would other wise cost a lot to get done, Which is just about all the jobs at the moment.

I would try and get a copy of the estate agents details and the price sold from the land registry (or the Upmystreet website) so you can pass them on when the moment comes. Sounds like a very handy comparison.