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Three risk road bumps to avoid

Matt Smith Matt Smith
Posted on Jun 27, 2019 | in Blog

As Pos always steals the limelight, I thought that I’d have a pop at a blog post this month. And who knows, if it goes down well, perhaps I’ll start blogging regularly. I’m not just a pretty face.

So, as someone on the risk (and not fluffy marketing and sales) side, I thought I’d start by looking at three areas where deals can hit road bumps – and how brokers can avoid them.

Be realistic with your valuations

The first area where deals tend to come unstuck, or at the very least get delayed, is the valuation. Now brokers will typically provide a valuation figure based on their research on websites such as RightMove, the Land Registry or Home.co.uk.

More often than not, these sites will provide a decent guideline for a property’s true value before we instruct our own valuers. But in recent months we have seen a number of transactions hit a wall as there is a huge disparity between the broker’s valuation of the property and the figure we get back from our own valuers.

For example, if a broker comes to us with a bridging finance application that has the property valued at £425,000 and then our valuer delivers a verdict of £375,000, this will understandably cause problems.

My advice to brokers is to be as realistic as possible with your valuation estimate, and at least that way the inevitable road bump won’t arise. More importantly, it will allow you to focus your time and efforts on deals that have a better chance of proceeding. 

Always have proof of a B2L borrower’s deposit to hand

A second area where deals sometimes get delayed is in relation to AML. This is particularly the case with buy-to-let loans through SPVs, where clear and legitimate proof of the source of the borrower’s deposit for the transaction is key.

This information really does need to be provided at the earliest stage possible in the deal, or it will be hard to get the application out of the blocks. So as much as a pain as it can be, don’t skimp on proof of the source of funds.

Be thorough with refurb schedules

A third area where deals can hit a road bump applies to refurb applications and the lack of sufficient information coming across.

When submitting an application for a refurb bridge, always be sure to include a detailed schedule outlining all the work that will be carried out, the various fees and costs payable (contingency, planning and professional fees alike).

Given the intense demand for refurb bridges at present, as professional landlords up their game to keep pace with PRS developments or convert properties into HMOs, this is all the more important. 

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