Bridging finance is a particularly versatile product and, in recent years, with increased broker and borrower education and engagement, more uses of bridging have been identified as solutions to a range of funding problems. One of the key features of bridging has always been speed and this remains today.
This is why the increased use of automated valuation models AVMs in bridging finance is so interesting. An AVM can save a week, or even more, on an application. It’s not simply the time it takes for a surveyor to complete and return a report, it is also a matter of surveyor availability. Often, experienced surveyor firms with local knowledge are in high demand and their availability is limited. When speed is a consideration, this local knowledge sometimes has to be sacrificed for a more transactional high-volume approach, which sometimes offers little more in terms of value than an automated model.
As much as borrowers are encouraged to start the legal process at the beginning of the application to speed up the process, they often prefer to wait for the valuation report to be returned, for understandable reasons. The issue here is that even lenders with the most efficient processes will not be able to complete on a loan particularly quickly if they need to wait for the outcome of the property inspection before the legal process can begin. Certainty of a property’s value at the point of application is critical as it not only impacts the loan amount, but also the rate. Lender pricing varies at different LTVs, and while a lender may have more favourable rates at one particular LTV, it may not have the most favourable rates at another.
An AVM can give a broker certainty at this stage, allowing them to confidently issues a term sheet that will not changes as a result of a valuation. The key thing is that, having established the outcome of the AVM, there is then the option to instruct a surveyor if the figure provided appears overly conservative. For me, as somebody advising clients, certainty of outcome and removing as many unknown elements as possible is absolutely key. Particularly if there is a deadline that needs to be met.
Another obvious advantage of AVMs is the reduced, up front, and overall cost to the borrower. There is ordinarily no fee for an automated valuation, whereas standard valuations can cost thousands of pounds, particularly if more than one property is being used as security. AVMs are certainly helping to streamline the bridging process and the increased use of automation will continue to prove a benefit to clients. If AVMs can be combined with a solicitor who is experienced with bridging finance and understands the nuances of this sector, there is no reason why speed won’t continue to be one of the biggest benefits for clients taking out bridging finance.
Originally published in Business Moneyfacts Magazine.