A survey is for the lender, not you!

Some weeks there is just too much news to take in and it can be difficult to assimilate and decide which to report on.  Then there are quiet weeks where nothing much seems to happen.  This week has been the latter and the mortgage market has been quieter than normal.  So, what to discuss?  Surveys!

Valuations on properties to be mortgaged come in various guises.  Every mortgage lender will require a valuation on the property to ensure the property is suitable security for their purposes.  Although, in some cases, they will not actually visit.  This is because they can often access detailed information electronically, normally called an  Automated Valuation Model (AVM).  Of course, this can prompt a borrower, who has paid a fee, to question the reasonableness of this method.  In fairness to the lenders, it is a tried and tested system and rarely proves incorrect.  They have expenses regardless of the visit and this system does have the effect of keeping prices down. 

Remember that this, fairly basic valuation is for the lender, paid for by the borrower, and it should not be relied upon as a guarantee that the property is sound and fit for purpose.  It only responds to the questions lenders ask relating to the property being suitable security for mortgage purposes.  They have no obligation to tell you what is in the report, or give you a copy!  Therefore you should always consider the benefit of an independent survey on the property you are purchasing to ensure that any and all defects are noted before signing contracts. There are two main types of survey available, aside from the mortgage valuation.

Homebuyer Report - a standard format set out by the Royal Institution of Chartered Surveyors (RICS). This will not focus on every aspect of the property as a building survey will (below), but will advise on urgent matters needing attention. It may advise if items (a leaky roof for example) might have an adverse affect on the value of the property, or if further investigations are required.

A Building Survey – an in-depth survey for all properties: listed buildings: buildings that have had extensive alterations, or of an unusual construction. The surveyor will examine all accessible parts of the property and advise on technical information: the condition relative to age: further special investigations required, and provide extensive information on major or minor defects.

Both will comment on whether the agreed asking price is reasonable, whether it reflects the condition of the property and should give you peace of mind whilst making the biggest purchase of your life! 

The valuation on your property is for the Lender

As part of the mortgage application process, lender's will require a valuation of the property on which the mortgage loan will be secured.  Normally, this is carried out by a surveyor who visits the property and they will value it for mortgage security purposes.  i.e, to make sure the value is suitable for the lender to recover their monies should the owner not pay the mortgage and they have to repossess and sell on.  The surveyor is the eyes of the lender and not usually employed by them.  The surveyor gives a valuation of the property and the lender relies on this in their mortgage calculations and offerings.  These may (or may not) compare with the valuation from the Estate Agent...

As this report is for the lender, they have no obligation to tell you what is in the report, or give you a copy! Therefore you should always consider the benefit of an independent survey on the property you are purchasing to ensure all defects are noted before signing contracts. There are a number of types of survey available, aside from the mortgage valuation, however the main two tend to be:

Homebuyer Report - a standard format set out by RICS (Royal Institution of Chartered Surveyors). This will not focus on every aspect of the property like a building survey will, but will advise on urgent and visible matters needing attention such as damp and subsidence. It may advise if items might have an adverse affect on the value of the property.

A Building Survey - an in-depth survey for all properties: listed buildings: buildings that have had extensive alterations, or of an unusual construction. The surveyor will examine all accessible parts of the property and advise on technical information: the condition relative to age: further special investigations required, and provide extensive information on major or minor defects.

In the height of 2007, many lenders used Automated Valuations Models (computer algorithms) to value the security property, rather than sending round a surveyor.  Fast forward to 2016 and we're seeing some lenders move back to this way of valuing. With AVMs, there is a huge reliance on data and an element of trust as a number of properties are not even viewed and unless the recent extension, or alterations to the property are documented in the data research, these may not be taken in to account, or increase the properties value!  These may also not pick up any issues as a more in-depth survey will, therefore consider paying the extra to get the satisfaction you are purchasing a decent property.