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Influences on Secured Lending Property Valuations in the UK

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Author Info

  • Neil Crosby

    ()
    (Department of Real Estate & Planning, University of Reading Business School)

  • Cathy Hughes

    ()
    (Department of Real Estate & Planning, University of Reading Business School)

  • John Murdoch

    ()
    (School of Law, University of Reading)

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    Abstract

    A significant part of bank lending in the UK is secured on commercial property and valuations play an important part in this process. They are an integral part of risk management within the banking sector. It is therefore important that valuations are independent and objective and are used properly to ensure that secured lending is soundly based from the perspective of both lender and borrower. The purpose of this research is to examine objectivity and transparency in the valuation process for bank lending and to identify any influences which may undermine the process. A detailed analysis of 31 valuation negligence cases has been followed by two focus groups of lenders and valuers and also questionnaire surveys of commercial lenders and valuers. Many stakeholders exist, for example lenders, borrowers and brokers, who are able to influence the process in various ways. The strongest evidence of overt influence in the process comes from the method of valuer selection with borrowers and brokers seen to be heavily involved. There is some also some evidence of influence during the draft valuation process. A significant minority of valuers feel that inappropriate pressure is applied by borrowers and brokers yet there is no apparent part of the process that leads to this. The panel system employed by lenders is found to be a significant part of the system and merits further examination. The pressure felt by valuers needs more investigation along with the question of if and how the process could dispel such feelings. This is seen as particularly important in the context of bank regulation.

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    File URL: http://www.reading.ac.uk/LM/LM/fulltxt/1404.pdf
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    Bibliographic Info

    Paper provided by Henley Business School, Reading University in its series Real Estate & Planning Working Papers with number rep-wp2004-14.

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    Length: 26 pages
    Date of creation: 2004
    Date of revision:
    Handle: RePEc:rdg:repxwp:rep-wp2004-14

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    Postal: PO Box 218, Whiteknights, Reading, Berks, RG6 6AA
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    Web page: http://www.henley.reading.ac.uk/
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    Related research

    Keywords: property valuation; secured lending; valuation process; influence;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Neil Crosby & Anthony Lavers & Henry Foster, 1998. "Commercial property loan valuations in the UK: implications of current trends in valuation practice and legal liability," Journal of Property Research, Taylor & Francis Journals, vol. 15(3), pages 183-209, January.
    2. Paul Gallimore & Marvin Wolverton, 2000. "The objective in valuation: a study of the influence of client feedback," Journal of Property Research, Taylor & Francis Journals, vol. 17(1), pages 47-57, January.
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    Cited by:
    1. Krzysztof Olszewski, 2013. "The Commercial Real Estate Market, Central Bank Monitoring and Macroprudential Policy," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 5(2), pages 213-250, December.

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