What is the difference?
Mortgage valuations and surveys can often be misunderstood”
“Education in the intermediary and mortgage market is a wide-ranging topic, especially when you take into account all the links in the mortgage chain,” according to Matthew Cumber managing director of Countrywide Surveying Services.
Despite mortgage valuations and surveys being a staple component within residential lending, Cumber said they can often be misunderstood and much maligned.
Cumber explained that this was underlined in a webinar poll conducted by Countrywide Surveying Services (CSS) late last year, which highlighted that four-out-of-five consumers still confuse a mortgage valuation with a survey.
“Educating consumers and streamlining the information required to buy and sell a home is why the Home Buying & Selling Group was set up and while this continues to do some great work, there is still some way to go,” Cumber said.
He believes it is up to the industry to continue raising consumer awareness around valuations and surveys to help homebuyers understand exactly what they need and what they are getting when they enter into the homebuying process.
“Then there are the ancillary areas such as protection and general insurance to add to this equation which often means that the survey is pushed down the advice pecking order, leaving it as something of an afterthought rather than an integral part of the mortgage plan,” Cumber said.
Cumber added that some brokers are not entirely comfortable with the difference between the valuation, which is required by the lender, and a survey, which highlights if any remedial works are required as well as identifying any potential issues for buyers which may arise post-completion.
In addition, he said there are still many borrowers and even advisers out there who believe that a valuation will point out any major problems.
“However, the reality is that it will not. This is a report whose sole aim is to determine the market value,” Cumber said.
On top of this, with AVMs and desktop valuations becoming more commonplace for lower loan-to-value (LTV) transactions, Cumber explained that a large number of valuations take place without anyone even stepping foot inside a property.
As such, he believes that a good holistic advice process should include educating clients on the merits of a survey.
“One of the main reasons for this is that the cost of something like a homebuyers survey is tiny in comparison to the overall cost of a property, and secondly because it’s potentially a fraction of the expense it may cost for work to be done which was not identified before completion,” he said.
He explained that surveys have moved on in recent years and he believes they are now very photo-orientated and clear in showing what is a problem and what it is not.
“Increased levels of education from surveyors to intermediaries and from intermediaries to their clients will certainly help demystify the whole surveying process – a move which can only be a good thing for everyone concerned,” Cumber concluded.
4 Important Reasons Why Home Buyers Should Get a Survey
A mortgage provider’s valuation is not for your benefit
Many people don’t realise that when their mortgage provider says they are going to do a ‘valuation’ of the property, they mean get a price of the property for their lending purposes and not an ‘Evaluation’ which would be an assessment or analysis of the condition of the property.
A lender’s valuation on the property you’re looking to buy, is purely for them to check that the money they are lending you (against the property in the form of a mortgage), is not too high. They must be sure it’s the right type of property – and at the right price.
The valuation is often only 2 to 3 pages in length; it will confirm the value of the property and will include prices of similar properties sold in the area. It will also tell the lender if there are any significant defects that could affect the property’s value to ensure it’s a good decision for them to lend you the money.
However, it’s not a detailed survey and won’t tell you what repairs or maintenance you might need to carry out. If no repairs are needed you have peace of mind the house is fine, and you won’t be stung with a huge repairs bill when you move in. But if any repairs are needed you can ask the vendor to fix them before you complete the purchase or alternatively you could negotiate on the price to cover getting these repairs done yourself when you move in.
Buyers who did not get a survey, faced £5,750 on average in repair costs
Surveys highlight any defects that may not be immediately obvious when viewing a property. There could be hidden defects such as structural damage, wet or dry rot, and problems with the roof. These sorts of problems often get worse over time and could be an expensive problem to fix after you have moved in.
According to the Royal Institution of Chartered Surveyors (RICS) buyers who didn’t get a survey faced on average £5750 worth of repairs when they moved in and 17% of these ended up paying more than £12,000 on average to make their homes habitable.
Surveys can help you to renegotiate the price of the property
If the survey report shows that there are defects that require expensive repairs, it doesn’t necessarily mean you shouldn’t purchase the property. You can point them out to the sellers and negotiate on the asking price to reflect you having to get theses repairs done yourself. By decreasing the purchase price, you will have the money to do the repairs by someone that you choose.
Alternatively, you could ask the sellers to fix the issue before you complete the purchase and provide certificates/ warranties where possible.
You’re making one of the most expensive purchases of your life
Choosing a place to buy is one of the most expensive decisions you will ever make – so investing in the wrong house just isn’t worth it. A survey often costs less than 1% of the full price of a property and for this small cost you can have peace of mind to find out if the place you’ve chosen is worth investing in. Getting a HomeBuyer Report (Level 2) or a Building Survey (Level 3) will identify any repairs that may be essential and could potentially save you much larger sums of money in the future.
…and finally, don’t forget to ensure you choose a RICS regulated surveyor
Getting a survey from a RICS regulated firm means that you will get independent, expert advice on the property you wish to purchase. Surveyors who are members of the Royal Institution of Chartered Surveyors (RICS) must follow stringent codes of conduct and ensure high standards are maintained in the public interest. An independent RICS surveyor will help you to have all the facts about your home of choice. They will work solely for you (rather than on the lenders behalf). It is their job to uncover any visible defects that would cost you money in the future.