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You are completely correct, but I guess they are valuing as being in the scheme, if you want the true valuation you need to leave the scheme and then get the valuer back in.
All a bit of a nonsense I think. Probably not all valuers will do the same and if you are lucky you may not even have the problem. Guess you need to give it a go with your own NRAS property and see what happens, then come back and post on this thread then we can at least start increasing the sample size.
Scott
Exact wording in the valuation was "We believe this property is part of the NRAS scheme …", which does not look to me like a statement of fact. Anyway I don't really have an issue with that because assumption or not, it was correct.
You said "Based on the current restrictions, the highest & best use is NRAS." – sorry don't understand what you mean
Also "valuations are not based on tax incentives as each person's tax situation is different." – Fail to see any relevance here, why are we talking about a person's tax situation, obviously this has no bearing on a property valuation.
From my investigations and talking to other valuers about NRAS, it is clear that NRAS should be taken as an investment for what it is, ie a scheme that provides below market rent for tenants and that provides owners a payback for providing the lower rent. NRAS properties should not be expected to provide a great deal of equity, and whilst in the scheme will always lag behind the 'true' market in terms of property values.
I am done with this now. Thanks for the comments Scott and emptyvessel.
Interesting…
I just came off the phone from another major valuer who basically said the same – lenders are providing specific guidelines on particular types of properties, such as NRAS that indicate that it is a higher risk security and therefore the valuations will in most cases be lower. Another issue is that the banks require valuations to be done on a "vacant possession" basis and therefore view NRAS with long term tenants more difficult to get vacant possession once again resulting in higher risk to the valuer hence the lower valuations.
Thanks emptyvessel.
Those suggestions are along the lines I am thinking. I assume that the logic of the valuer is – as it stands on the day of valuation it is in NRAS so to sell as is, the buyers pool is limited. The interesting part about the valuation statement was that the valuer did not definitively know the property was NRAS, I am guessing they had a dicussion with the tenant about the rent they are paying and deduced it was NRAS, and the valuation was done on this assumption. I could say to tem, "how can you base the valuation on the [potentially invalid] assumption that it is NRAS?", but I guess the argument will then be " if it is not NRAS we accept it is incorrect, so will provide an updated valuation", to which I have to admit that actually it is NRAS and they then say the valuation still stands.
What I would really be interested to hear is other people's experience on revaluation, to see if this is the standard practice, in which case this is an as yet unpuplicised flaw in the NRAS model. Other than coming out of NRAS, the long term option is to wait until the ten years are up, revert to market rent and true market valuation.
Clarification – obviously it was the valuer that has provided the low valuation (I have full copy), the lender is not the issue, other than the fact that they used a particular valuer.
