The Role of the Valuer in the EWS Process

A residential valuer is the person who calculates the market value of a residential property that is being purchased or sold.

In most cases, this market valuation will be for a lender to ensure the market value of the property is at or above the price being paid for it, which in turn supports the calculation of the loan value the lender is able to offer and avoids plunging buyers straight into a negative equity situation.

Professional valuations are not only vital to protect buyers from unruly costs but are also vital to a healthy property/asset market and a stable economy.

For many, property is one of the biggest investments a person will make, and valuers have a duty to report responsibly, accurately, and diligently to protect the interests of both purchasers and lenders.  As an industry, we also have a duty to affordable lending.

When it comes to valuing properties of multi-storey, and multi-occupancy, valuers are expected to adhere to the conditions set out in the RICS Global Valuation Standards (Red Book), and to follow the RICS Guidance on the Valuation of property in multi-storey, multi-occupancy residential buildings with cladding.  They must also work in line with the instructions set out by the lender, which can differ from lender to lender depending on their own risk criteria.

In laymans terms, this means that valuers, when undertaking a valuation of a flat, will consider a building as a whole and if the external wall system is of unknown make up, they will use the guidance and trigger an EWS1 process.  It’s important to note that this currently only occurs in about 5% to 6% of buildings under 18m.  

The valuer requests the EWS1 Form because in any mortgage valuation, it is their role to highlight to their client, the lender, any risks that could impact the terms of the mortgage offered to the purchaser. They also need to be clear if there is a need to seek further specialist information on any unknowns. For buildings with cladding that can be a recommendation that an EWS1 form is completed. It is then for a professional, trained to carry out EWS assessments, to check whether remediation is required.

If a building requires further investigation to check the safety of the external wall systems and its fire risk a valuer may temporarily mark the property value at zero. This is sometimes known as a ‘nil valuation’. This doesn’t mean that the property is worthless, but it says to the lender that there are too many unknowns for the valuer to provide an accurate valuation and therefore it would be unfair to proceed and offer a mortgage until those investigations are complete. Buildings currently require remediation to be complete before a lender will proceed with the mortgage offer.

The EWS1 form and subsequent guidance wasn’t brought in to be a blocker to the market, indeed all lenders supported the need for an easy to digest form for valuing this type of property, and lenders support the principles set out in the framework of the guidance note. Both were designed to protect borrowers and lenders from surprise costs, and mortgages that would be unaffordable or incorrect.