Asbestos, Japanese knotweed and locality – Kuflink’s senior underwriter Stuart Boag reveals the secrets of a good property valuation…
PROPERTY valuations are a core part of peer-to-peer lending. The valuation process will dictate whether or not a loan is approved, and how much money can be lent against the asset. A good valuation can even help to inform a prospective lender about the finer details of their investments.
With years of experience in the property lending business, Stuart Boag, senior underwriter at P2P property lender Kuflink, knows exactly what to look for, and what raises alarm bells.
“Japanese knotweed is a major red flag,” says Boag. “Unless it’s being treated correctly, there are minimal lenders out there that will provide lending against it.”
Asbestos is another huge problem for prospective properties. If even a hint of asbestos is found on a site, Kuflink will order a full asbestos report to make sure that there is no risk of contamination.
“Obviously we look at the locality, the demand, and the type of security,” adds Boag. “We will want to know if there’s any planning permission in place, if there’s any potential value for development potential, etc.
“We’ll also look at the comparables to make sure that it is being valued in line with similar properties.”
But this is just the beginning of an incredibly detailed – yet surprisingly speedy – process that will either end in a property loan application being approved or rejected.
Kuflink has partnered with independent valuers and brokers across the country, and they conduct a thorough check on every single property. Boag then reviews their quotes and speaks directly to the valuers to talk through any issues which may have come up.
“One of the valuers we use provides an audit on every valuation,” says Boag. “They have their own panel of valuers who look at any given property – so it has already had a four-eye check before it lands on my desk.”
In cases where an independent audit has been carried out on a property, Kuflink’s investors will be able to read the report on the listings section of the platform, before they decide to invest.
From the borrower’s perspective, one of the biggest advantages of P2P property lending is that the approval process can be much faster than it would be at a big bank. Boag knows this better than most – before joining Kuflink, he was a real estate portfolio manager at NatWest.
“In my own experience, the valuation process can take four to five times longer at a mainstream bank,” he says. “Whereas here, as soon as I have the valuation report I can make my recommendation and do a credit paper, then it goes straight to our credit committee and they can say yes or no within a matter of hours.”
Before any property has been valued, it will already have undergone an initial assessment as well as a credit check on the prospective borrower. This initial process will lead to at least 50 per cent of all applications being rejected. After the valuation process has been completed, Boag will usually reject a further 10-15 per cent of these loans.
Given that Kuflink has seen no losses to date, this expert-led process is clearly working.