How to choose the right valuation method for a bridging loan
By Alice Ingram
Valuations are a key part of any bridging loan.
They determine how much a lender is willing to lend, how quickly a deal can progress and, in some cases, whether a transaction proceeds at all.
But not all valuations are the same.
Depending on the deal, lenders may use automated valuation models (AVMs), desktop valuations or full inspections. Understanding the differences can help you choose the right approach and avoid unnecessary delays.
Why valuation choice matters
The type of valuation used can impact:
- speed of the transaction
- cost of the deal
- level of risk for the lender
- overall loan-to-value (LTV)
In bridging finance, where timing is often critical, selecting the right valuation method can make a significant difference.
The main types of valuation
Automated valuation models (AVMs)
AVMs use data and algorithms to estimate a property’s value instantly.
They are typically used for:
- standard residential properties
- lower loan-to-value deals
- cases where speed is a priority
Pros:
- very fast (often instant)
- low cost
- minimal friction in the process
Cons:
- limited accuracy for complex properties
- not suitable for all asset types
- often capped at lower LTVs
Desktop valuations
Desktop valuations are carried out by a surveyor using comparable data, without visiting the property.
They are commonly used for:
- straightforward properties
- moderate loan sizes
- deals where a balance between speed and accuracy is needed
Pros:
- quicker than full valuations
- more informed than AVMs
- cost-effective
Cons:
- no physical inspection
- may miss property-specific issues
- still subject to lender criteria
Full (Red Book) valuations
A full valuation involves a physical inspection of the property by a qualified surveyor.
These are typically required for:
- higher value or complex properties
- development projects
- higher loan-to-value transactions
Pros:
- highest level of accuracy
- detailed assessment of condition and risks
- suitable for complex deals
Cons:
- slower (can add days or weeks)
- higher cost
- can introduce delays if issues arise
How to choose the right valuation method
1. Consider the property type
Simple, standard residential properties are more suited to AVMs or desktop valuations.
More complex assets, mixed-use properties or development sites will usually require a full valuation.
2. Look at the loan size and LTV
Higher loan amounts and higher LTVs generally require more robust valuations.
Lenders will often insist on a full valuation where risk is higher.
3. Factor in timescales
If speed is critical, AVMs or desktop valuations can help move a deal forward more quickly.
However, choosing speed over accuracy can create issues later if the valuation doesn’t reflect reality.
4. Understand lender requirements
Each lender has their own criteria.
Some are more comfortable using AVMs or desktop valuations, while others will require a full inspection regardless of the scenario.
5. Balance cost vs risk
Cheaper valuations can reduce upfront costs, but may not always be appropriate.
In some cases, paying for a full valuation upfront can prevent issues later in the process.
Common mistakes to avoid
Using an AVM for a complex property
This can lead to inaccurate valuations and delays later on.
Prioritising speed over suitability
The fastest option isn’t always the right one for the deal.
Not checking lender criteria early
This can result in having to redo the valuation, adding time and cost.
How this fits into the bridging process
Valuations sit alongside:
- legal due diligence
- underwriting
- exit strategy assessment
Delays in any of these areas can slow a transaction, so aligning them early is key.
Find the right surveyor or valuation partner
Working with the right surveyor can help ensure valuations are accurate, appropriate and aligned with lender requirements.
Explore surveyors and valuation partners working in the specialist finance market:
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