Can you explain the concept of a cash value?

Video Transcript

Most high street banks and building societies have set criteria for what they will and won’t lend against. For example, they might not lend against certain types of construction or flats above hot food takeaways. If the property doesn’t fit the lender’s criteria, valuers are instructed to report a nil value and the lender will decline the application. I think the first point to address is that the valuer isn’t saying the property is worth nothing, they’re simply following the lender’s specific instructions. Many specialist lenders will lend against the types of property that mainstream lenders won’t consider. However, they acknowledge that there will be a limited availability of finance, so in order to de-risk the loan, they may request a cash value, effectively the amount that a cash rich investor may pay for the property with no funding needed. One issue is that this can be extremely subjective, especially with specialist or unique properties or properties that fit hardly any lenders criteria, and it can often lead to confusion as to why values reported don’t meet expectations. My advice would be to work with lenders to understand their lending criteria in terms of which type of assets are acceptable to them and understand when they may seek a cash value.