Is a Mortgage Valuation the same as a Survey?

A mortgage valuation is not a survey. It is not intended to inform a buyer of the condition of the property.

Is a mortgage valuation the same as a survey?

Many buyers who have had a valuation carried out for their mortgage are under the impression they have had a survey.  Many buyers ask the question “is a mortgage valuation the same as a survey?”  A mortgage valuation is not a survey.  It is not intended to inform a buyer of the condition of the property and some lenders do not release a copy to the purchaser.  The valuation is arranged by the mortgage company and may be carried out either by an in-house valuer, or a valuer on their panel.  The purpose of the valuation is to confirm to the mortgage lender the value of the property in the event that the home owner defaults on the mortgage payments the lender needs to know that the property offers sufficient security for the loan.

For an average 3 bedroomed house the mortgage valuer is likely to spend no more than 20 to 30 minutes carrying out the inspection.  The valuer will not normally get into the roof space (head and shoulders inspection only) and will not usually lift back edges of carpets, open windows, run water down the drains, etc.   Part of this time will be spent measuring the property in order to calculate the rebuilding cost therefore the inspection itself will not be detailed.

In comparison, a surveyor carrying out a survey on the same property is likely to spend around 3 hours carrying out the inspection, although the actual time will obviously vary from one property to another.  The surveyor will normally carry out a detailed inspection of the roof space (if safe access is available), lift edges of carpets (where possible) to check the construction of the floors, open windows, run water down the drains (where possible) in addition to inspecting other parts of the property.

 

What Types of Property Require a Survey?

All properties require a survey, whether new, old or newly refurbished.

A survey is not only necessary to check whether a property has any defects, other items may be identified in the course of a survey which require further investigation or specific enquiries to be made by your solicitor.  Questions may include:

  • If there have been any recent alterations to the property have these been carried out with Local Authority approvals?
  • Are there any issues with trespass such as overhanging gutters or trees?
  • Are there any asbestos containing materials (ACMs) within the property? These are not always obvious and may be in the form of textured coatings to ceilings and/or walls, floor tiles, etc.
  • Has adequate fire protection been provided between the house and any attached/integral garage?
  • Are there any flying and/or submerged freeholds? These may affect your buildings insurance.
  • If you are purchasing a flat do you know whether there is adequate fire protection and means of escape?
  • Are there any trees which may be within the zone of influence of the building?
  • Are there any known issues in the area, such as subsidence, pitch fibre drains, etc?

The survey can either be carried out by the valuer at the same time as the mortgage valuation or you can instruct a surveyor of your choice to carry this out separately.  You are able to instruct a surveyor who you think is most suited to carry out the task, this may be someone who is recommended by a friend, family, solicitor or anyone else.     You are NOT under any obligation to have the survey carried out by the valuer who carries out the mortgage valuation.   Remember to obtain written quotations on the cost of a survey.

To find a Chartered Surveyor in your area visit:

http://www.ricsfirms.com/

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How much does a survey cost? What affects the cost of a survey?

As a rough guide, the cost of a survey for most properties will fall within the range of £300 to £1,200, depending on type of property, type of survey, level of detail, experience of the surveyor, geographical location, whether a valuation and insurance rebuilding cost are included, etc.  For larger properties the fee could be anything upwards of this figure.  If a firm is VAT registered then VAT will be added to the surveyor’s fee and so you should check whether the fee quoted is inclusive or exclusive of VAT.

The cost of a survey will vary depending on a number of factors including:

  1. Size of property.  Clearly, a house with more rooms will take longer to inspect and this will affect the cost of a survey.
  2. Age of the property.  Many older properties have been the subject of alterations and improvements, some of which may be detrimental to the property.  Alterations give the surveyor more issues to consider during the course if the survey.
  3. Type of property, eg, house, flat, maisonette.
  4. Complexity of the property, eg, whether there are any extensions, whether any alterations have been carried out, whether there are any flying or submerged freeholds, etc. Typically, a surveyor carrying out a survey will ask the vendor about any alterations and other works which they have carried out.  However, some surveyors may simply report that a client ‘s solicitor should make enquiries on such matters.
  5. How detailed the report will be.  Survey reports vary considerably.   A surveyor who prepares a detailed report will clearly need to take more notes and photographs than a surveyor who merely reports “satisfactory” “in need of repair”, etc.

 

Survey with valuation and/or insurance rebuilding cost

A survey cost can vary if any additional services are required such as a valuation figure and/or insurance rebuilding cost. This will clearly affect the time input and therefore the cost of the report.

 

Cost of a survey when carried out by the mortgage valuer at the same time as the valuation

If you are taking out a mortgage then there may be an option to have a survey carried out at the same time as the mortgage valuation.  The mortgage lender will choose who carries out the valuation but remember that it is you, the buyer, who chooses who carries out the survey as this will be carried out on your behalf.  While this may be a cost effective way of having a survey, some purchasers prefer to have the survey carried out by a surveyor who has been recommended to them, eg, by family, friends or their solicitor.

 

Surveys on flats

Some purchasers are surprised at the cost of a survey on a flat.  Flats vary significantly.  A flat may be small, with, say, four rooms, but if it forms part of a large building then it is likely that the Surveyor will need to inspect the external parts of the block, or possibly other blocks on the site.  The terms of the lease must be checked before the survey is carried out, and all areas which the flat owner is either wholly or partly responsible for must be inspected.  This may include roof coverings, roof spaces, walls, drives, parking spaces, walls, etc.  In some cases a survey on a flat will take longer than a survey on a small house, and this is likely to be reflected in the price of the survey.

 

Obtain quotations

You can find names of Chartered Surveyors in your area by contacting the RICS Find a Surveyor facility on ://www.ricsfirms.com/

It is a good idea to forward the sales details for the property to a small number of Surveyors to obtain quotations.  When you obtain quotations for surveys, ask for sample reports so that you can compare the level of detail in addition to the price.  Also, ask who will be carrying out the survey and check that you are happy with their level of experience.  Remember that price is not the only factor in choosing a surveyor.

 

 

 

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What can I do if my house is down valued?

Down valuation is when a property is valued by a mortgage valuer at a lower figure than the agreed purchase price. It does not mean that the valuation is too low.

 

When a house is down valued, this can cause frustration to a buyer and problems in a chain.  This article will explain what down valuation is, the reasons why a property may be down valued and suggests paths a buyer may consider if the house they plan to buy has been down valued.

 

What is down valuation?

Down valuation is when a property is valued by a mortgage valuer at a lower figure than the agreed purchase price.  If a house is down valued it does not mean that the valuation is too low.

 

Reasons why a house is down valued

A property isn’t strictly “down valued”, it is more accurate to say that it has been “valued” by the mortgage valuer, but the valuation figure just happens to be lower than the agreed purchase price.

The valuer will arrive at the valuation figure “Market Value” after considering the actual sale prices of several similar properties in the area.  Sometimes there may be recent sales of a number of similar properties, for instance for a house on a large housing estate.  Other properties may be more difficult to value, particularly if there is nothing similar in the area.  However, the valuer will still look at the actual sale prices of other properties in the area and make adjustments for size, condition, saleability and desirability of a property, the date previous sales took place and any other relevant factors.  The mortgage valuation would generally be prepared by a valuer with experience of valuing properties in the area. The valuer’s decision will not be made lightly as there may be consequences if a house is valued negligently.

 

Problems which can occur when a house is down valued

One of the most common problems a buyer might experience during the house buying process is down valuation.  Often a buyer is unable to proceed without the required funding from the mortgage lender.  Also, a lower valuation by the mortgage valuer may alert the buyer to the possibility that they may have agreed a purchase price that is too high.  Either of these factors may result in a buyer not proceeding with the purchase, which may in turn lead to a chain falling through.

 

Steps to take if a house is down valued

If a buyer is unable to proceed without the anticipated funding from the mortgage valuer, a buyer could pull out from the sale and look for another property, or they could try to negotiate a lower purchase price.  However, the seller is under no obligation to agree to a reduced selling price, and it is possible that the seller may not be in a position to reduce the price particularly if they have a high mortgage or need the funds to purchase another property.  If a buyer tries to negotiate a lower price and if there are other potential purchasers who are in a position to proceed, eg, a purchaser who does not require a mortgage, or a smaller mortgage, the seller may decide to sell the property to one of the other buyers.  This is a risk the buyer must consider.

If a buyer discovers the agreed purchase price is too high, they may choose to withdraw from the sale.  Many buyers consider this to be a nuisance but in many cases the abortive cost of the valuation will outweigh the benefit of paying too much for a property.

In a situation where a buyer wishes to purchase a property for a particular reason, for instance the property is close to family, a preferred school, or the property may be in an area where houses rarely come onto the market, then the buyer can still purchase the property, they simply need to find the shortfall in funding, eg, from savings or money put to one side for improvements.  The buyer may decide to still buy the house even if it means making sacrifices such as making do with the old kitchen or bathroom fittings instead of replacing them straight away.

While down valuation is viewed as a problem by many people during the house buying and selling process, it is sometimes an issue which can be resolved.

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