For some the detailed methodology of inspecting and valuing property as security may seem like a dusty subject but it is worth remembering that it’s a fundamental element of the mortgage advance process.
Like many areas, best practice in the field should and does change over time.
I’d like to make a case that alongside reviewing their wider underwriting criteria in preparation for a return to high volumes, lenders also give consideration to what I think is now an anomaly in their approach to certain types of loans.
Typically, for further advance cases lenders appoint a valuer to revisit a property to perform a reasonably detailed internal inspection.
Remember, this is a scenario where the property has already been inspected for the lender and the borrower is known to them.
Presumably there is a track record of repayments that is easy to review when assessing the overall loan risk.
Conversely, for remortgages, where the customer is essentially a stranger, lenders on occasion are happy to advance considerable sums without any physical inspection of the property, relying instead on an automated valuation model or indexation to assess value.
While they have limitations, there is nothing fundamentally wrong with the prudent use of AVMs. But am I alone in thinking there would be more benefit for all parties if these approaches were the other way around?