Video Transcript

The most common basis of value that we see, a market value and market rent for loan security purposes, although there are other bases for different purposes. We then typically see variations of market value by assumptions or special assumptions like market value with the assumption of vacant possession or restricted time scales like 180 days or 90 days in which to achieve a sale. The lender will then choose which value to lend against depending on their lending criteria or their risk profile. Naturally, if we restrict the available time frame to sell a property, then a discount on market values likely to be appropriate. The property may not be exposed to the market for a sufficient period, or it may not be long enough for potential purchases to do full due diligence or to arrange finance.

We typically see variations of market value by assumptions or special assumptions.

The assumptions and special assumptions are a way of de-risking the loan for lenders by providing them with the worst-case scenario. So, the property becomes vacant, or they have to dispose of the property in a recovery scenario. And these special assumptions are often also fairly contentious as a lot of applicants don’t understand the rationale behind these values or that the value has been instructed to provide them by the lender for their own internal purposes.