Is a home really worth what someone is prepared to pay for it? It’s the type of question that sparks lively debate.
The truth is, without proper research a buyer’s offer is nothing more than a stab in the dark.
If it’s taken on face value, the mortgage journey kicks off on a wing and prayer.
Swift but shallow start
Not checking and challenging a valuation before a mortgage application begins gets brokers and borrowers off to quick and painless start.
Everyone’s friends, the customer is happy.
But relationships built on shallow foundations aren’t ones that are built to last.
So how could using technology to check and challenge a customers’ valuation pre-application help to build better client relationships and strengthen ties with lenders?
Pre-application technology
It helps to know what pre-application technology could offer brokers.
Similar to AVMs used by lenders, a broker AVM would equip intermediaries with a tool that gauges the valuation range of a property and the most likely value that property would fetch if it was sold today.
Unique and complex data attached to the property, that borrowers hardly ever know, such as the year it was built, the type of construction and tenure could be conjured up with a press of a button.
On the surface of it, a broker AVM tool sounds like a great way for intermediaries to reduce the number of down valuations experienced by their clients.
But having all this data at their fingertips offers brokers a lot more opportunities.
Efficiency and speed
These days, efficiency and speed aren’t ‘nice to haves’, customers demand them.
Customers are used to frictionless online service, intuitive technology, clear communication and fast results. More and more they’re expecting the same of their mortgage broker.
Speeding up the pre-application process may win early brownie points.
But those points will quickly dwindle if the lender lowers their mortgage offer mid-way through the application because there’s a lack of comparable evidence to back up the estimated valuation. Or even worse, the lender declines the case because the construction type is non-standard.
A broker who has the tools to check a borrower’s valuation; who can clearly and quickly state if that figure is sensible; and who can identify the property’s nuances so the right lender is chosen is a broker who can offer a slick service with the power to impress.
Meaningful conversations
There’s lots of tips online about how homeowners can do their own research before making an offer. Guides on the power of negotiating with vendors can be found on lots of homebuying websites.
Let’s be honest, how many homebuyers has anyone met who follow the rules when they’ve fallen in a love with a home?
Pre-application technology like a broker AVM allows brokers to have useful and tactful conversations with their clients when they’ve found a home they want to buy and they are considering their offer.
If that offer falls into the highest range of the AVM’s valuation, brokers have the opportunity to explain what happens if they make the offer and the lender later disagrees. More importantly, encourage their clients to consider how they’ll react.
Would they prepared to walk away if a lower loan was offered?
Or would they be tempted to raid their savings, earmarked for emergencies or furnishings, to fund the difference?
Brokers can talk through these outcomes before their clients become too emotionally detached to the property and are not thinking clearly.
Building up a bespoke service
Mortgage advice is already personal. Getting to know their clients’ unique set of circumstances and matching them to the right mortgage deal is what brokers do best.
Technology that verifies a homeowner’s valuation can elevate that bespoke service to the next level.
Having a strong indication of what a valuation will be allows the broker to choose a mortgage rate based on a more accurate assumption of the loan to value. By underestimating the valuation, borrowers could miss out on the best rates kept for those with the most equity.
Clients who want to raise capital by remortgaging will have a more accurate picture of the cash they can release from their home. It may be more than they thought.
Being equipped to provide information that can help shape a client’s home improvement project, for example, is a valuable service to offer. And who doesn’t want to be the deliverer of good news?
Stronger lender relationships
Without checking and challenging a valuation at the outset, brokers aren’t just missing out on a host of opportunities – they’re setting the lender up to be the bearer of bad tidings.
It’s a job no-one wants but someone must do.
The earlier an unrealistic valuation is challenged, the better. It’s easier for the broker to do so upfront than leave it to the lender further down the line.
By doing so it will help build stronger relationships with lenders instead of fostering combative ones.
So in response to the age old debate, is a home really worth what one buyer is prepared to pay for it?
Let’s leave technology to answer that one and get rid of the blame game for good.