Getting a property valuation is one of the first steps when applying for a bridging loan.
Without it, lenders can’t assess the security properly or determine how much they’re willing to lend. But many borrowers face delays or disappointment when they don’t understand what type of valuation they need or how the process works.
If you’re in a hurry to complete a property purchase, fund a renovation project, or break a property chain, these delays can be frustrating and potentially costly. You might miss out on an auction opportunity or lose a deposit if funds aren’t available in time.
With the right knowledge, you can ensure the valuation process goes smoothly, helping you secure the finance you need when you need it.
Understanding Bridging Loan Valuations: The Basics
A property valuation for a bridging loan is an assessment of a property’s market value that helps lenders determine how much they can safely lend against it.
Unlike mortgage valuations, bridging loan valuations often need to be completed more quickly and may take different approaches depending on the loan purpose.
When you apply for a bridging loan, the lender wants to know that if you can’t repay the loan, they can recover their money by selling the property. That’s why the valuation is so central to their decision-making process.
It gives the lender confidence in the security and helps establish the loan-to-value ratio. This ratio is simply the amount of the loan compared to the property’s value, expressed as a percentage.
For example, if you’re borrowing £150,000 against a property valued at £300,000, your loan-to-value (LTV) would be 50%. Most bridging lenders offer loans up to 75% LTV, though this varies depending on the property type and purpose of the loan.
It’s important to understand that a valuation differs from a survey.
A valuation primarily serves the lender’s interests by confirming the property’s market value, while a survey provides detailed information about the property’s condition for your benefit as the buyer or owner.
Types of Valuations
Once you start looking into valuations and surveys, you realise that there are different types offering varying levels of detail, accuracy, and speed.
The right one for your situation depends on factors like property type, loan purpose, and lender requirements.
Physical Valuation
This is the most comprehensive valuation type, involving a qualified surveyor visiting the property to inspect both its interior and exterior.
The surveyor assesses the property’s condition, size, location, and comparable local property sales to determine its value.
In-person physical valuations provide the most accurate assessment and are often required for higher-value properties, unusual buildings, or where significant refurbishment is planned.
They take longer to arrange (usually 3-7 days) and cost more than other options, but give lenders the most confidence in their security.
Drive-By Valuation
As the name suggests, this involves a surveyor assessing the property’s value from the outside only. They’ll check the exterior condition, location, and visible features without entering the property.
Drive-by valuations are quicker and less expensive than full valuations.
They’re often used for straightforward residential properties or where the loan amount is relatively low compared to the property value. However, they can’t identify any internal issues that might affect the property’s value.
Desktop Valuation
Desktop valuations don’t involve a physical inspection at all.
Instead, a qualified valuer uses available data like recent sales of similar properties, online listing information, and property records to estimate the value.
These valuations are faster and cheaper than physical inspections but rely heavily on the quality of available data. They’re most suitable for standard properties in areas with plenty of comparable sales data.
Automated Valuation Models (AVMs)
AVMs use computer algorithms to calculate property values based on statistical data and mathematical models. They provide almost instant results at minimal cost but offer the least detailed assessment.
Lenders might use AVMs for initial screening or for very low-risk situations, but rarely rely on them alone for bridging loans due to their limited accuracy for unique or non-standard properties.
Read more: What is an Automated Valuation Model (AVM)?
RICS Red Book Valuations
Many lenders require valuations that comply with the Royal Institution of Chartered Surveyors (RICS) “Red Book” standards. These valuations follow strict professional guidelines and are carried out by RICS-registered valuers.
Red Book valuations give lenders additional confidence in the accuracy and reliability of the valuation, which can be particularly important for higher-value loans or complex properties.
Open Market Value vs. 180-Day Value
Bridging lenders can look at both the Open Market Value (OMV) and the 180-Day Value of a property.
The OMV represents what the property might sell for with normal marketing time (up to 12 months), while the 180-Day Value indicates what it could achieve if sold within six months.
A lot of bridging lenders base their lending decisions on the 180-Day Value as it provides a more realistic assessment of what they might recover if they needed to sell the property quickly.
When is a survey not a survey?
When it’s a property valuation.
A property ‘valuation’ is primarily for the lender’s benefit and use. For them it establishes the value and condition of a property, and it’s suitability for use as security.
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Valuation Requirements by Bridging Loan Purpose
The type of bridging loan you need affects what kind of valuation is likely to be required.
Chain-Break Bridging Loans
For chain-break bridging loans, where you’re buying a new property before selling your existing one, lenders will need to value both properties.
The existing property provides security for the loan, while the new property’s value determines the amount you can borrow. Because time is often of the essence in these situations, lenders might accept faster valuation methods for standard residential properties.
Auction Purchases
Auction purchases present unique challenges for valuations.
With completion required within 28 days of winning a bid, there’s limited time for a full valuation process. Some lenders might initially use the auction price as an indication of value, but will still require their own valuation to confirm this.
If you’re planning to bid at auction, it’s worth arranging auction finance in advance so the valuation can be completed quickly after a successful bid.
Refurbishment Bridging
Refurbishment bridging loans involve properties that will increase in value after renovation work.
For these loans, lenders need to understand both the current value and the expected value after improvements (known as the Gross Development Value or GDV). A detailed schedule of works is required alongside the valuation, showing what improvements you plan to make and their expected costs.
Commercial Property Bridging
For commercial property bridging, specialist commercial valuers are needed who understand factors like rental yields, lease terms, and the specific market for that property type.
These valuations tend to take longer and cost more than residential ones due to their complexity.
Non-Standard Properties
Non-standard properties (those of unusual construction or in poor condition) almost always require full physical valuations by experienced surveyors who can accurately assess their unique characteristics and any associated risks.
Read more
Survey Types and Their Importance
While a valuation tells you and the lender what a property is worth, a survey tells you about its condition.
It’s important to understand that while valuations are required by lenders, surveys are completely your choice as the borrower.
In the UK, there are several standard survey types:
RICS Level 1 Condition Reports
These offer a basic overview of a property’s condition, highlighting obvious problems but without going into detail. They’re suitable for newer, standard construction properties in good condition.
RICS Level 2 Home Surveys
Formerly known as HomeBuyer Reports, these provide more detail, including advice on defects, repairs and maintenance issues. They’re appropriate for conventional properties in reasonable condition.
RICS Level 3 Building Surveys
These give the most comprehensive assessment of a property’s condition, including detailed advice on repairs and maintenance.
They’re recommended for older properties, unusual buildings, or those in poor condition or needing significant renovation.
The decision to commission a survey rests entirely with you as the borrower.
Lenders are primarily concerned with the property’s value, not its condition – unless issues are so serious they affect the value.
However, as a borrower, you should be very concerned with condition, especially for properties you plan to keep or renovate.
For bridging loans, especially those involving refurbishment or older properties, a thorough survey can save you thousands down the line, adds Matthew Archer. It helps you understand exactly what you’re taking on and can inform your refurbishment budget more accurately.
While it might seem like an unwanted expense when you’re already paying for a valuation, a good survey can prevent costly surprises.
This is particularly true for auction properties, older buildings, or properties requiring renovation where hidden issues could significantly impact your plans and budget.
Costs and Timeframes
Understanding the likely costs and timeframes for valuations and surveys helps you plan your borrowing more effectively.
Valuation Costs
Full physical valuations for residential properties usually start around £400 for lower-value homes but can exceed £1,500 for high-value or complex properties. Drive-by valuations are cheaper, about £100-£150, while desktop valuations cost around £70-£300.
AVMs are very low cost or even free.
Survey Costs
Survey costs also vary by type and property value.
As a rough guide, expect to pay £300-£900 for a RICS Level 1 Condition Report, £400-£1,000 for a RICS Level 2 Home Survey, and £630-£1,500+ for a RICS Level 3 Building Survey.
Timeframes
Full physical valuations usually take 3-7 days to arrange and receive the report. Drive-by valuations can be quicker, often 1-3 days. Desktop valuations might be completed within hours or 1-2 days.
AVMs provide almost instant results.
Remember that these timeframes can be affected by surveyor availability, property access arrangements, and complexity. It’s always wise to build in some extra time.
How Valuations Affect Your Bridging Loan
The outcome of your property valuation directly affects several aspects of your bridging loan offer.
Loan Amount
Most obviously, the valuation determines how much you can borrow.
If you’re hoping to borrow £150,000 against a property you believe is worth £200,000 (75% LTV), but the valuation comes in at only £180,000, the maximum loan at 75% LTV would be reduced to £135,000.
Interest Rates
Valuations can sometimes affect the interest rate you’re offered.
Properties valued lower than expected or identified as having issues might be considered higher risk, potentially resulting in higher interest rates. This occurs when the down valuation moves the LTV into a different bracket.
Down-Valuations
A “down-valuation” occurs when a property is valued lower than expected or lower than the purchase price.
This is particularly common in changing market conditions or for unique properties that are hard to value accurately. Down-valuations can be challenging as they might reduce the loan amount available or even make the loan unviable.
Property Type Assessment
Different property types are assessed differently by valuers.
Standard residential properties in good condition are usually straightforward to value, while commercial properties, development sites, and non-standard constructions present more challenges and might receive more conservative valuations.
The valuer’s comments about a property’s condition and marketability form a key part of the lender’s risk assessment.
Issues identified in the valuation might lead to loan conditions being imposed, such as works that need to be completed before the full loan can be released.
Common Valuation Issues
Several common issues can arise during the valuation process, but with proper preparation, many can be avoided or mitigated.
Access Problems
Access problems are a frequent cause of delays.
Ensure the property is accessible for the valuer on the appointed day and that all areas can be inspected. For tenanted properties, coordinate with tenants in advance to ensure access.
Documentation Gaps
Documentation gaps can slow things down. Have relevant documents ready, such as planning permissions, building regulations approvals, leasehold information, and any previous surveys or valuations.
Property Condition Issues
Property condition issues often lead to down-valuations. Before the valuation, consider addressing obvious problems like broken windows, leaking gutters, or visible damp.
Even minor improvements can create a better impression.
For refurbishment projects, having detailed plans, costings, and contractor quotes ready can help the valuer understand your vision and provide a more accurate assessment of the post-works value.
Present the property in its best light, advises Sean Horton. Tidy up, fix minor issues, and provide clear information about any improvements you’ve made. This helps the valuer see the property’s true worth.
Handling Down-Valuations
If you receive a down-valuation, you have several options.
You can challenge it by providing additional evidence of comparable sales, reduce your loan amount expectations, find a different lender who might take a more favourable view, or renegotiate the purchase price with the seller using the valuation as leverage.
Working with Brokers
A specialist bridging loan broker can be invaluable in arranging a bridging loan and the associated valuation.
Experienced brokers understand different lenders’ valuation requirements and can match your case to lenders whose criteria align with your property and circumstances. This can save you from wasting time with inappropriate lenders or facing multiple valuations.
We know which lenders are more flexible with different property types or valuation methods, explains Matthew Archer. For example, some lenders are more comfortable using AVM’s for residential property where the LTV is below 60%.
Brokers can often recommend surveyors who are approved by various lenders, potentially speeding up the process.
They can also help you prepare for the valuation by advising on what documentation to have ready and how to present the property effectively.
If you do face a down-valuation, a good broker can help you challenge it effectively or find alternative lending solutions.
Next Steps
If you’re considering a bridging loan, think about the valuation requirements early in your planning. For auction purchases or time-sensitive deals, speak to a broker before bidding to understand what valuation process will be required and how quickly it can be arranged.
Prepare your property for valuation by addressing minor issues, gathering relevant documentation, and ensuring good access.
Remember that valuations serve the lender’s interests first and foremost, so having your own (independent) survey can provide valuable additional information about the property’s condition and any potential issues. Consider whether a survey would be beneficial for your own peace of mind, particularly for older or unusual properties.
Working with an experienced bridging loan broker can make the whole process simpler and more efficient, helping you secure the finance you need with minimal delays and complications.
FAQ
The type of valuation depends on your specific circumstances. For standard residential properties with lower LTVs, a desktop or drive-by valuation might be sufficient. For higher-value loans, unusual properties, or refurbishment projects, a full physical valuation is usually required. Commercial properties typically need specialist valuations. Your lender will ultimately determine what’s needed based on their risk assessment.
Usually not. Lenders require valuations to be carried out by surveyors on their approved panel to ensure impartiality and adherence to their specific requirements. However, you’re free to commission your own additional survey for your personal use. Some lenders might consider valuation reports from specific RICS surveyors if they meet certain criteria, and when the LTV is low.
Many UK bridging lenders require RICS Red Book valuations, especially for loans over £500,000, commercial properties, or complex scenarios. Red Book valuations follow strict professional standards set by the Royal Institution of Chartered Surveyors and provide lenders with greater confidence in the valuation’s accuracy. Your broker or lender will advise if this is necessary for your specific case.
Some bridging lenders accept AVMs for lower-risk scenarios, particularly for standard residential properties in established areas with plenty of comparable sales data. AVMs are more likely to be accepted for lower LTV loans (typically below 50-60%) and when the property is straightforward. However, many bridging lenders still prefer physical valuations due to the short-term nature of the loans.
Refurbishment projects typically require two valuations: the current value (in existing condition) and the Gross Development Value (GDV) after improvements. Lenders will need to see a detailed schedule of works outlining the planned improvements and their costs. They may release funds in stages as work progresses, with further valuations to confirm improvements have been completed as planned.
Yes, properties of non-standard construction (such as timber frame, concrete panel, steel frame, or thatched roof) typically require full physical valuations by surveyors experienced with these construction types. Lenders may be more conservative with their LTV ratios for these properties, and the valuation will need to carefully assess any specific risks associated with the construction method.
Yes, poor condition will affect your valuation and consequently your loan amount. However, bridging lenders are often more flexible than mainstream mortgage lenders when it comes to property condition, as they understand many bridging loans are used specifically for refurbishment purposes. Be upfront about the condition and provide details of your improvement plans to help the valuer understand your intentions.
In urgent situations, some bridging lenders can arrange valuations within 24-48 hours, though this often comes with additional fees. Desktop or AVM valuations can sometimes be obtained almost immediately. For physical valuations, the availability of surveyors in your area will be a factor. Working with a specialist bridging broker can help expedite the process through their lender relationships.
If you already have a valuation report, lenders will almost always still want their own valuation. This is because they need a valuation addressed specifically to them for legal protection.
In some cases, if your existing valuation is recent (usually within 3 months), the lender might allow the valuer to update and re-address it to them. This gives the lender legal recourse against the valuer if the valuation proves inaccurate and they lose money as a result. Re-addressing a valuation comes with a fee, but it’s much cheaper than commissioning an entirely new valuation.
For a lender to consider this option, your existing valuation would need to be from a RICS-registered valuer, meet the lender’s quality standards, and ideally be from a surveyor on their approved panel.
