Mortgage Valuation: Is it really a bad thing if your house is down valued?

Unless you are happy to pay more than a house is worth, it may not be not such a bad thing if your mortgage valuation is less than you had been prepared to pay.

Is your mortgage valuation less than the agreed purchase price?

A number of buyers purchasing a property with a mortgage see the mortgage valuation as a potential hiccup in their purchase.  If a buyer is relying on a mortgage with a large loan to value they may not be able to proceed as planned if the lender’s Valuer provides a valuation lower than the agreed purchase price.   Similarly, some buyers are concerned that the mortgage valuation may lead to a buyer pulling out (or making a lower offer) if they don’t get the mortgage offer they had expected.

If you had your heart set on a particular property and find you are unable to proceed (unless you use some of your own funds) then at minimum this is likely to be a disappointment.  If you have to start and look for another suitable property this may cause a delay, which could possibly lead to problems with the chain and you may even lose your own buyer.

But is it really a bad thing if your mortgage valuation is less than the purchase  price?

If you spend the time finding out why the property has been valued lower than the price you have agreed to pay, you may find there is a good reason.  A Valuer will use details of similar properties which have recently sold or are under offer, in conjunction with their knowledge of the local area, to arrive at the valuation figure.  It is possible that you have made an offer which is too high.  Other factors which may affect value include:

  1. Condition of the property (remember that a valuation is not a survey).
  2. Tenure.
  3. Works carried out without Local Authority approvals.
  4. Planning proposals which may affect the property.
  5. Detrimental use of land/property in the vicinity.

Once you establish the reason for the lender’s valuation being less than your agreed purchase price, you may wish to revise your offer, or even reconsider the purchase.  So, unless you are happy to pay more than a house is worth, perhaps it is not such a bad thing if your mortgage valuation is less than you had been prepared to pay.

buying and selling a house

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Choosing a survey: Does it really matter what your survey report is called?

When choosing a survey, the name of the survey report does not really matter.  The most important thing is to check what your report will cover and make sure it will provide the information you are looking for. 

What type of survey should we have?  This is a question many house buyers ask when choosing a survey, puzzled at the assortment of terms, including Building Survey, Homebuyer Report, Condition Report, and more.

Putting terminology aside, what do most buyers want from a survey?  A typical house buyer would want to be aware of any repairs needed, the urgency of any repairs and have an idea of costs involved.

Some buyers choose a property knowing that works will be required and the survey will help them plan the works and obtain estimates from contractors.  After all, there is little point going ahead with fitting out a new kitchen or decorating when more disruptive works such as rewiring need to be attended to first. On the other hand, some buyers seek a property which needs as little work as possible (although, inevitably it is likely that some work will be necessary).

Whatever the name of the survey, it is important to check what will be included.  Most pre-purchase surveys have a similar level of inspection, but the information within the report can vary from one surveyor to another.  This can be due to the level of knowledge and experience of the surveyor and the amount of time spent carrying out the survey and preparing the report.  Some firms place high demands on their surveyors and expect two (and sometimes more!) surveys to be carried out in a day, whereas other firms allow more time for each survey and are more likely to produce a more thorough and detailed report (which may be reflected in the cost).

In a nutshell, when choosing a survey, the name of the survey report does not really matter.  The most important thing is to check what your report will cover and make sure it will provide the information you are looking for.  And most importantly, make sure you choose the right surveyor, ideally someone who has been recommended to you and is familiar with the local area.

 

buying and selling a house

 

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Why do surveyors ask for further investigations?

An experienced surveyor will be able to use his or her knowledge and experience to assess whether there are likely to be any hidden defects which require further investigations.  

Some buyers may wonder why their surveyor has asked for further investigations or a report from a specialist.  Firstly, it is important to remember what the surveyor was instructed to do.  Typically, a surveyor would carry out a single inspection.  The property may be occupied, furnished, have floor coverings and in some cases there may be many stored items which hamper the inspection.   In most cases a surveyor would not carry out any opening up to inspect hidden areas such as floor timbers, wall ties, etc (unless previously agreed and with the permission of the vendor).

Most properties will have some restrictions to the inspection including:

  1. Roof spaces without access hatches or with unsafe access, for instance where a roof hatch is positioned above a stairwell.
  2. Floor voids without access and floor timbers generally.
  3. Areas covered by furniture and/or floor coverings.
  4. Areas at high level, such as behind parapets, stacks, or simply not visible due to the roof configuration or height.
  5. Flat roofs to upper storeys, including bay roofs.
  6. Wall ties within cavities.
  7. Underground drainage runs.

Even though not all parts of a building may be visible, an experienced surveyor will be able to use his or her knowledge and experience to assess whether there are likely to be any hidden defects which require further investigations.

For instance, a surveyor will recognise the distinctive pattern of cracking associated with wall tie corrosion and may recommend that a sample of ties is checked using a borescope (instrument to view within a cavity).

Similarly, if movement is noted and there is a possibility of defective drains which may affect the property, the surveyor may recommend a CCTV survey to confirm the route and condition of the hidden drains.

Also, a surveyor may suspect rot and/or woodworm to a timber floor even without an inspection, particularly if there is springiness, dampness and/or a lack of ventilation.  Further investigations may be recommended in the form of opening up, to establish the extent of defects and repairs needed.

In addition to further investigations, a surveyor may ask for one or more specialist reports, such as from an electrician, Gas Safe contractor or HETAS engineer.  This is simply because these are specialist matters which need input from the appropriately trained and qualified specialist.

After reading your survey report, don’t feel inconvenienced if any further investigations or specialist reports are recommended.  This is simply part of the process of finding out the true condition of the property you are thinking of buying so that you can proceed with the purchase in full knowledge of the condition.

buying and selling a house

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How to avoid a delay when buying a house

It may not be possible to eliminate delays altogether, but it is possible to take a few steps to avoid a delay when buying a house.   

In order to avoid a delay when buying a house is a good idea to be aware of the key stages in the house buying and selling process and anticipate any problems. 

By asking a few questions in the early stages you will find out whether there is a long chain, whether a seller is trying to move quickly whether there have been any previous buyers who have pulled out of the purchase, and if so, find out the reason.

One way to avoid a delay when buying a house is to be aware of the most common causes of a delay, and be prepared for them.    

Some of the most common things which may cause a delay when buying a house buying include:

  • Your buyer has a property to sell but does not have a buyer who is in a position to proceed.  This may cause a delay in the sale of your property, and in turn the purchase of your next property.  Before a seller accepts an offer, check that the buyer is in a position to proceed, ie, either has nothing to sell, such as a first time buyer, or has a buyer for their property who is also in a position to proceed.  
  • The seller has not found another property to move to.  If you find a property you would like to buy then check the seller’s position, ie, have they found a property to move to, or, check whether  they are prepared  to go ahead with the sale of their property and move into rented accommodation to reduce the length of the chain.
  • The seller bought the property under the government help to buy scheme and must follow their procedure before selling. If the seller bought the property under the Help to a Buy scheme there is a procedure to follow, which includes having a Valuation carried out by a Chartered Surveyor before the property can be sold.   
  • The Valuer for the buyer’s mortgage company values the property less than the agreed purchase price (down values the property).  If this happens and if both parties still wish to proceed then the buyer and seller may be able to renegotiate the purchase price at the amount at which the property has been valued by the mortgage Valuer. 
  • The Valuer for the buyer’s mortgage company places a retention on the mortgage.  If the buyer still wishes to proceed and has sufficient funds then it may be possible to renegotiate the price or carry out any works the subject of the retention.
  • The Valuer for the buyer’s mortgage company requests further investigations/specialist reports.  If any further investigations/specialist reports are required then make sure these are obtained ASAP.  Chase your buyer if necessary.

While some of these issues may be outside your control, there are some steps which can be taken and enquires which can be made at an early stage to reduce the risk of delays in the house buying process.  

buying and selling a house

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What should I do after having a survey?

What should I do after having a survey?

There is plenty of information and advice about having a survey before buying a property, but not so much advice about what to do after having a survey.  Remember that the purpose of a house survey is to identify any defects.  Even if a property is in a good order it would be unusual for no defects to be noted.  Any minor items can be dealt with once you have purchased the property.  However, if a survey report reveals that extensive works and/or investigations are needed then some purchasers may be unclear about the best way forward.

Firstly, you should forward a copy of the report to your solicitor as there may be items which your solicitor may need to check such as:

  • Ownership and responsibility of boundaries.
  • Ownership and responsibility of drains.
  • Ownership and responsibility of any shared drives/access ways.

Typically, a purchaser should obtain quotes from builders before commitment to purchase (normally exchange of contracts).  By doing this, the purchaser will be able to decide whether or not to proceed with the purchase in full knowledge of the level of expenditure required.

In some cases, a vendor might offer to arrange for minor repairs to be carried out before the sale of the property.  However, for most works, if you plan to proceed with the purchase it is better to wait and have the work carried out after completion of the sale.  By choosing your own contractor you will be in control of the quality of work carried out.  However, you should still obtain quotation/s before exchange of contracts.

Sometimes further investigations will be required, eg, if a defect is suspected but cannot be confirmed within the scope of the survey.  Opening up may  be required (with the vendor’s consent) or a specialist (such as a drainage contractor, wall tie contractor, etc,) may need to attend.

If the survey report recommends further investigations which are disruptive the vendor might not be willing to have these undertaken.  For example, if ground floors need to be taken up to inspect floor timbers to check for dampness and/or rot then this may involve moving large amounts of furniture and may damage carpets.  If this is the case, it is better for a buyer to budget for the worst case scenario, such as removal of ground floors, replacement with a solid concrete floor, etc.  The investigations can then be carried out after the sale has completed.  If the works required are found to be less extensive then a saving will be made.

If the cost of repairs is found to be significant, you may choose to speak to the selling agent to check whether the vendor may renegotiate the sale price.  If the vendor is keen to sell the property and if their financial position allows them to reduce the price, either in part or in whole, then the estate agent will negotiate to agree on a selling price.  However, the vendor is under no obligation to reduce the price.  In some situations a vendor may not be in a position to reduce the price, particularly if the vendor has a high mortgage or needs to sell at or close to the asking price to be able to buy their next house.

Above all, after having a survey, read the report carefully and read it more than once.  Highlight any important parts, obtain prices for any works and carry out any further investigations (if possible) before exchange of contracts.

 

buying and selling a house

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Does my solicitor need a copy of my survey report?

 

The answer to this question is simple.  Yes, your solicitor should have a copy of your survey report.  Some solicitors may ask for a copy as a matter of course but many do not.  Your solicitor is not likely to have visited the property you plan to buy but your surveyor will probably have spent several hours carrying out an inspection before preparing the survey report.

It is likely that there will be items in the report which will need the input of your solicitor including:

  • Checking whether any extensions to the property (including loft conversions) have Local Authority approvals (Planning Permission, Building Regulation approval and Listed Building consent where appropriate).  Your surveyor is likely to note any recent extensions which your solicitor may not otherwise be aware of.
  • During the course of the survey your surveyor is likely to note any works which appear to have been carried out recently which would have required Building Regulation approval. Your solicitor should check whether Building Regulation approval has been obtained for any alterations to the property or any other works controlled under Building Regulations including formation of new openings in a wall, works to the drainage installation, etc.  Also, if cavity wall insulation has been installed then this will be noted by your surveyor and your solicitor should obtain the installation documentation to confirm that this has been carried out satisfactorily.
  • If any parts of the property trespass, ie, gutters, satellite dishes, trees, opening windows along a boundary, etc, then your solicitor can provide advice before you commit to purchase the property. Similarly, if any parts of a neighbour’s property trespass then advice can be obtained prior to purchase.
  • Confirming ownership and responsibility of boundaries.
  • Confirming ownership and responsibility for drain runs.
  • If you are buying a flat then your solicitor will need to check the lease and confirm your responsibilities for repairs and maintenance, including external and communal areas.

Your solicitor may be happy with a digital copy of the report rather than a hard copy.  This can easily be forwarded by email so can be read and acted upon a day earlier than a hard copy would be received by post.

So, even if a property looks to be in a good order, it is worth having a survey in the event there are issues which need to be checked by your solicitor.

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