The Target Figure in a Bank Valuation

Issues and threats

• The bank's €2.4m figure is a target, not evidence. Adopting it would breach independence and objectivity: the valuation must be the valuer's opinion, not a number chosen to fit lending policy.
• Fee dependence (30% of quarterly income) plus annual panel review creates a self-interest and intimidation threat. The fee must not be contingent on the outcome, and the firm should apply safeguards such as independent review.
• The request for a 'commercial, not academic' valuation is ambiguous and may be an attempt to suppress caveats. Scope, basis and assumptions must be agreed in writing.
• Borrower-supplied 'off-market comparables' are not independent evidence. They may be biased, unverified or confidential; each must be checked against reliable sources.
• The €120,000 roof liability cannot be ignored; it affects net income and marketability.
• The four-day deadline may compromise inspection and verification. Competence includes having sufficient time.

Effect if unmanaged The valuer could overstate value by ignoring capex and vacancy, mislead the lender, and create professional liability. The correct response is to document the pressure, value on evidence, and decline if the client requires a predetermined figure.

Before

• Reply in writing: confirm the instruction, purpose, basis of value, scope, inspection, fee and that the fee is not contingent on the figure.
• State that you cannot accept a target and explain why. Ask for the bank's loan-to-value policy only as context, not as a valuation input.
• Request the borrower's comparables in writing, but verify them independently; do not let the borrower control the evidence.
• Check title, leases, service charge, EPC, planning and repair liabilities; inspect and measure.

During

• Keep a contemporaneous file note of the email, the fee dependence and your response.
• Run an independent comparable and income check; test a range around €2.05m–€2.20m, including the roof cost and vacancy.
• Ask a senior colleague who has no relationship with the bank to review the file; disclose the fee dependence to compliance.

After

• Report the value with clear assumptions, the capex treatment and a sensitivity note.
• Include an independence statement and the fact that the instruction was refused.
• If pressure continues, escalate internally and be prepared to withdraw. A valuation signed to order is not a valuation.

Documentation Record who said what, when, the evidence accepted or rejected, and the reasoning. This protects the valuer and the lender.

Key points for the written response

1. 'I cannot provide a figure of €2.4m. My provisional opinion is €2.05m–€2.20m, based on passing rent above market, 8% vacancy, the roof liability and market evidence.'
2. 'A valuation is an independent opinion, not a confirmation of a lending target. If the loan requires €2.4m, the bank may need to adjust the loan amount, take additional security or obtain a different risk assessment; changing the valuation is not an option.'
3. 'I will consider the borrower's comparables, but I must verify them and give them only the weight the evidence supports.'
4. 'My fee is not conditional on the value, and I have disclosed the bank's share of our fee income to my firm's compliance function.'
5. 'If you require a report that adopts a predetermined figure, I must decline the instruction and will not sign it.'
6. 'I am happy to discuss the assumptions and to provide a sensitivity analysis so credit committee can see the range of outcomes.'

This keeps the relationship professional while protecting independence.