Investors face huge buy-to-let losses after valuation errors
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Buy-to-let investors who are facing huge losses say a panel surveyor used by their Government-backed lenders over-valued their properties - in some cases by almost double.
The lenders which mortgaged the six properties in question - BM Solutions and Bank of Scotland, now part of Lloyds Banking Group, and Mortgage Express, part of Bradford & Bingley, say they are not responsible for the valuations. These were all carried out by the same surveyor, a firm on their approved panels, this week’s Money Marketing reveals.
The three investors bought the properties in the same area of Sheffield in late 2007 or early 2008, which were each valued by Lexicon Surveying Services, now in administration.
The investors have not been able to earn the rental income forecast, leaving them struggling to cover mortgage repayments. One investor, who did not want to be named, has had her two properties repossessed and owes BM Solutions and Mortgage Express more than £300,000 as they sold for less than half the valuation price. All six properties were bought from the same development companies, Shevell Properties and Pimlico Property Investments, which have since changed their names to Camden Symonds and Symonds Camden respectively.
The property firms referred the borrowers to mortgage broker Ambergate Business Services, which is now in administration. The investor whose properties were repossessed says she has no means of repaying this debt. Her first property was valued at £335,000 in 2007 and sold for £145,000 after repossession this year while her second was valued at £325,000 and recently sold for £160,950.
The Nationwide house price index shows that a property in the region valued at £325,000 in Q4 2007 would have fallen by around 12 per cent to the current date.
Single mother Maureen Macdonald, 39, has handed back the keys for her three properties to her lender, BOS. She says independent revaluations have shown her properties had been over-valued by between 75 and 90 per cent.
In the worst case, a property valued at £325,000 by the panel valuer in December 2007 was retrospectively revalued by independent surveyor Hale Saunders as having been worth just £165,000 at the time of purchase. The revaluation said rental predictions had been “grossly excessive”.
The third borrower, Chris Fletcher, 53, is struggling with mortgage repayments to BOS with rental income around £400 a month less than forecast and his property apparently over-valued by £100,000. His complaint to the Financial Ombudsman Service was rejected.
Fletcher says : “Sure, we have all made poor decisions in this process and we all have to learn our lessons the hard way sometimes.
“But when the banking fraternity get bailed out with billions of pounds of taxpayers money to enable trade tocontinue, I find it sickening that I cannot even get a face-to-face meeting with BoS to discuss how to manage our joint crisis.
“We have been left on our own to sort this out. And if it all goes wrong, after taking all that I own, they will send on the bill for the shortfall to the tax payers. Banks need to be accountable for the people they engage to further their commercial needs.”
Fletcher adds: “We need the banks to agree to a rescue package like the one they received from the British taxpayers - whereby a lower interest rate would enable us to maintain the property and get it back into good shape.
“I’m not looking for billions, like the banks received, just time to help me get back on track.”
Lloyds Banking Group and Mortgage Express say they acted in good faith as the valuer was RICS-approved.
A Lloyds Banking Group spokeswoman says: “For those customers who subsequently find themselves in financial difficulty, we always ask that they make contact with us as soon as possible.”
A Mortgage Express spokeswoman says borrowers are encouraged to get their own more detailed valuation reports and any suspicion of wrongdoing would be investigated.
Camden Symonds and Symonds Camden could not be reached for comment.
If you have been affected by any of the issues raised by this story, please contact leah.milner@centaur.co.uk.
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Readers' comments (11)
Anonymous | 7 May 2010 9:31 am
A vast overreaction to this will be why surveryors are now grossly undervaluing BTLs, both in terms of capital value and rental yield. I've got a client with a property currently let at £850pcm, but valued by the surveyor at £650pcm - ridiculous!
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Chris | 7 May 2010 9:33 am
If I were investing a third of a million I think I would be more careful. Sell to the greedy (this lot) buy from the desperate (probably the same people now) - first rule of investment.
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Anonymous | 7 May 2010 10:09 am
Single mother with three properties? Oh, bless. These are greedy speculators who got burnt and didn't do their own research, blinded by the rigged market. Hopefully the properties will be bought by people who need a home, not resource grabbing 'investors'.
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Dermot Brannigan | 7 May 2010 10:11 am
Since when do 'investors' like these ever pay any attention to a surveyors rental assessment?
If he'd undervalued the rental, they would have told him he didn't know what he was talking about.
Trouble is the market thinks differently.
The joke of it is that I bet each of these 'investors' considered themselves cautious investors, and yet put all their money in one property
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Is it me?? | 7 May 2010 10:24 am
Whatever happened to caveat emptor?
Does this mean that people should cross the road with looking and then claim compensation if the number 9 bus mows them down.
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Anonymous | 7 May 2010 10:40 am
Have to agree with the above comments. First rule of investing is do your own research!!!! Rather than sit at home watching Sarah Beaney thinking you can make easy money.
Nobody deserves to be swindled, but come on people. The banks have been tucked up just as bad as the customers and what will happen? Nada
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John Whipple | 7 May 2010 11:46 am
Buying into just one asset class is not "investing".
Speculating yes investing no. Come on MM try and educate where you can.
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Sam Jones | 7 May 2010 5:20 pm
As if the banks would deliberately put themselves at risk by arranging for properties to be overvalued. Not only that, but to suggest that they are somehow responsible because the 'surveyor was on their panel' is like saying a mortgage broker is responsible for the actions of every lender on their panel - ridiculous! Banks are required to look at all cases of genuine hardship sypathetically under BCOBS, and FOS is careful to monitor arrears handling complaints, but I agree with all the earlier comments - these are greedy people, who didn't properly research, probably self-certed their income, then wonder why it all went belly up.
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Chris Fletcher | 13 May 2010 10:22 pm
I said that 'we've all made mistakes'. I wasn't trying to be greedy; this was hopefully going to increase the pension I don't have - or ever will now.
The reason I want this story told is to change the way things happen. An FSA registered broker, RICS surveyor, Law Society solicitor and a high street bank. I bought my residential house using that formula and everything seemed to work fine. I buy a BTL investment, now I'm greedy and should have done more research.
When 23 properties are bought using the same circle of 'professionals' and then all go belly up with shortfalls of nigh on 4 million for someone to pick up the tab, call me old fashioned (and greedy if necessary) but I think this needs to be investigated.
Pip, pip.
The Greedy One
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Anonymous | 19 May 2010 5:44 pm
How many of the investors burnt had to stump up a 15% deposit for these properties? At £325k value that would have equated to just shy of £50k....I'm assuming not many did.
It is likely that the deposits were gifted, which made selling the initial proposition a lot easier.
I can sympathise with Chris Fletcher et al, as the assumption would be that the professionals are there to protect you.
The reality is that in "boom times" risky behaviour is prevalent among so called professionals and institutions which unfortunately endangers an unsuspecting (and unprepared) novice investor.
In a downturn however, an investor is much more "protected", but only as a side effect of increased financial regulation, and things such as banks protecting themselves (low loan to values), Surveyors protecting themselves (Conservative valuations) and Lawyers protecting themselves (more cautious due to increased litigation).
- They will all of course say these measures are in place to protect, YOU.
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