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Rise in complaints about HMO valuations

complaints about HMO valuationsAccording to The Mistoria Group, the number of formal complaints made by landlords and investors about the valuations they have received for their HMOs (both licensed and unlicensed) has risen sharply.

Mistoria’s research found that the complaints focus on valuers’ property valuations and the excessive fees they charge. The report revealed that a large proportion of landlords and investors find that valuations are up to £50,000 below market value and do not take into account the rental income or any improvement works carried out on the property.

Instead, they give valuations based on sales comparisons on the same road, or they base it on the rental income for a family of four (aka a buy-to-let property), which is significantly lower than the income a HMO would generate. As well as this, it’s alleged that they fail to take into account any major refurbishments made to the property, and they also value it based on a property of a similar size that is not of the same quality and standard.

“This is a big problem in the market and needs to be addressed,” Mish Liyanage, Managing Director of The Mistoria Group, said. “In the recent past, we have challenged these valuations and lodged complaints to both the lenders and valuers with little success.”

He added: “The comparisons we have provided on a like for like HMO sales have been totally ignored. We believe this is not just a one-off problem; it is a widespread, growing problem. Valuers and HMO lenders need to be honest and upfront about what type of valuation they are doing and what rental income they are taking into account.”

In addition, Mr Liyanage thinks that valuers should stop charging for HMO valuations. “In reality, they are carrying out standard buy-to-let valuations on unlicensed HMOs which are typical 3–5 beds,” he argued.

“Recently, a valuer was asked to look at the value of a 4 bed house share. The HMO valuation was £80,000 and it failed to take into account any consideration of HMO sales comparables. These included 4 bed HMOs in the area that sold in excess of £130,000 during the previous 12 months. The valuer was paid £700 for the HMO valuation.

“Subsequently, another group of valuers gave a buy-to-let valuation of £90,000 on the same property, for which the charge was £170,” Liyanage concluded. “So this begs the question – how can an HMO valuation be less than a buy-to-let valuation and why are HMO valuations so expensive?”

This article first appeared on Property Investor Today on 1st August 2014

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