Tens of thousands of properties are valued every year by mortgage lenders. Sometimes it’s for new property purchases and sometimes it’s so the homeowner can remortgage their property
Valuers look at a variety of factors such as the condition of the property and the price of comparable properties nearby. But they are also looking for things that could make the property difficult or nearly impossible to sell. In that case, the valuer may deem that the property is worth zero.
"Some lenders will zero value certain properties where Japanese Knotweed is present"
When does this happen?
High cost of renovations: If the cost of renovating the property is deemed to be more than the value of the property post-renovations, the lender may zero value it. Lenders are cautious and such a decision can sometimes be overturned if you can provide detailed estimates that would allay their fears.
External cladding and more than six storeys: Since the Grenfell Tower disaster, some lenders have been allocating zero values to properties where the cladding has not been tested or is currently unidentified. When the cladding has been found to be defective, the owners have often faced large bills to remedy the problems. This, from a lender’s point of view, creates uncertainty and higher risk, neither of which they like.
Japanese Knotweed: Some lenders will zero value certain properties where Japanese Knotweed is present. Japanese Knotweed was introduced into the UK by Victorian engineers to hide/stabilise unsightly railway embankments. However, Japanese Knotweed is a pernicious plant that can grow through tarmac, destroy drains, and grow under and through foundations. Plus, it can grow as fast as 10cm a day, with the roots growing up to three metres deep. If you find it in your garden, you will need to employ a specialist firm to eradicate it.
"If you already own the property, you may have to wait it out a lender so the sooner you start the better. "
Smells, social issues and fire hazards: Some lenders are unwilling to lend to properties above commercial properties, especially ones that create smells, such as launderettes and hairdressers. They also don’t like properties above off-licences, bookmakers and sex shops. Some steer clear of properties above commercial properties that present potential fire hazards too, for example, takeaways. This is where a good mortgage advisor really earns their money. They should be able to ensure they pick the lender most likely to lend on your particular property.
The reasons listed above are not definitive. There are other more arbitrary reasons too. Anyone lending money wants to ensure they will get it back. So, I guess, it’s for them to decide who they lend to. We can’t change that.
What if you do receive a zero valuation?
Firstly, you could appeal your lender’s decision. After all, they can only say “no”. If they don’t budge, ask for a detailed report as to why they reached their conclusions. This will help you identify the issues and try to remedy them as much as possible.
Moreover, this information also will help your mortgage advisor find you a lender who is willing to take you on. And, if you didn’t use a mortgage advisor first time around, now is probably the time to do so.
However, if you already own the property, you may have to wait it out. For example, it can take several years to completely eradicate Japanese Knotweed. The sooner you start the better.
Read more: How to choose where to live
Read more: Financing your property renovation
Keep up with the top stories from Reader's Digest by subscribing to our weekly newsletter