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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Property survey:  things to remember when reading a survey report

Consider the findings of the survey against your expectations, taking into account your budget and how much work you are prepared to carry out. 

Some people read their property survey report and think they should look for another property instead.  It may sound as though an endless list of repairs are needed and that the property is far worse than anything else they could have chosen. While this is possible, in many cases the property may not be significantly worse than others in the area. It is a case of putting things into perspective.

If a property survey was commissioned on every similar property in the area the chances are that many would have issues to some degree.  It is even possible that a survey on your present house may reveal some issues, even though you may not have been aware of them and these have not stopped you making the house your home.

It is important to remember that you have employed a surveyor to report on any items which may affect your decision to purchase the property or renegotiate the purchase price so that you can make an informed decision.

Highlight any major issues

A property survey report will always report some issues (I have never known one which hasn’t).  Some may be major issues which require urgent or costly repairs, whereas others may be matters which can be dealt with over time and/or with insignificant cost.  Read the report carefully and highlight  any major issues.

If the report identifies any major repairs are needed (or may be needed depending on the results of further investigation or enquires) you should obtain cost estimates before you commit to purchase (usually exchange of contracts).

Most issues will fall into one of the following categories :

  1. Further investigations/enquires which should be carried out/made prior to commitment to purchase/exchange of contracts.
  2. Costly repairs which are urgent (these may or my not affect your decision to purchase, depending on your expectations and budget).
  3. Costly repairs which can be spread over time  (again, these may or may not affect your decision to purchase depending on your budget and how much work you are prepared to carry out).
  4. Minor repairs/maintenance which can be dealt with after moving in (and should be anticipated for most properties).

The important thing is to consider the findings of the survey against your expectations, taking into account your budget and how much work you are prepared to carry out.  The final decision can only be yours.

buying and selling a house

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Advantages of using a local surveyor when buying a house

If you instruct a surveyor in a local practice you can be fairly sure that the survey will be carried out by someone with local experience.

Most prudent house purchasers will arrange a survey, but there are advantages in using a local surveyor when buying a house.  Some surveyors cover a wide area and inspect properties in locations which vary considerably.  However, if you instruct a surveyor in a local practice you can be fairly sure that the survey will be carried out by someone with local experience.

  1. Firstly, a surveyor who is already known to you or who has been personally recommended, either by a friend, family member or solicitor, is more likely to be a local surveyor.  Most people would prefer to instruct a local surveyor when buying a house who has been recommended to them by a reliable person rather than someone who is not known to them.
  2. A local surveyor is more likely to be familiar with properties in the area, their form of construction, local materials and associated defects.  A local surveyor may have inspected other houses in the same road, or possibly even the house you are considering purchasing.
  3. Local knowledge is important particularly for items which cannot be seen.  For instance, a surveyor from another area may not be aware that a particular housing estate has pitch fibre drains.  Sometimes the drains are not visible, eg, if a manhole cover has been concealed by paving or decking or is simply too heavy to lift.  A local surveyor who has experience of inspecting other properties in the area will be able to warn of the possibility of pitch fibre drains where present in the area, and recommend further investigations prior to commitment to purchase to avoid unforeseen costly repairs at a later date.
  4. Similarly, a local surveyor is more likely to be aware of areas where black ash mortar has been used, which may sometimes not be visible, eg, behind rendering.  It is important to know whether back ash mortar has been used as this can increase the risk of wall tie corrosion which requires costly repairs.
  5. A local surveyor is more likely to be aware of areas which may be affected by mining.  Be aware that not all areas affected by mining will be obvious, particularly to someone who is not local.  Some green rural areas and built up areas of cities, such as parts of Bristol, may have former mine workings, with no or few visible signs.
  6. Some surveyors from outside the area may not recognise ex-Local Authority properties which have been rebuilt.  A local surveyor is more likely to have such knowledge and be aware of which properties are traditionally built and which are non-traditionally built.  This is important as some non-traditional properties may be defective and not be mortgageable.
  7. Many purchasers view flood maps which show a potential risk of flooding, but a local surveyor is more likely to know whether a particular area has actually flooded in recent years or within living memory.
  8. Similarly, some searches indicate that properties in a certain postcode area have a higher risk of subsidence.  A local surveyor is more likely to be aware of areas with a higher incidence of subsidence and is able to warn of the risk even if there are no visible signs.

For indication of the cost of a survey visit how much does a survey cost? 

To find a local surveyor when buying a house visit RICS Find a Surveyor

buying and selling a house

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Buying a house in winter

If you are buying a house in winter which is vacant there are a few extra items which need to be checked, particularly if the water has been turned off.

If you are buying a house in winter and it is occupied then the chances are that it is being heated (at least in part) and the service installations are being used.  But if you are buying a house in winter which is vacant there are a few extra items which need to be checked, particularly if the water has been turned off and the heating system drained down.  

If the water has been turned off you will not be able to check the water pressure, working order of the fittings, watertightness of pipework or be able to check whether the drains are flowing freely.  Ask the selling agent to arrange for the vendor to turn the water on so that these items can be checked by specialists before you agree to purchase the property.  

When the water is turned on, arrange for a heating contractor (contact a Gas Safe Registered contractor if the heating is gas) to inspect and test the heating and hot water system.  Have its age and condition checked and make sure the boiler is a sufficient size to adequately heat the property.  

If the house is damp, check whether this is simply condensation due to the house not being adequately heated and ventilated, or whether there is rising dampness or penetrating dampness.  If there is rising dampness or penetrating dampness find out the specific cause/s of the dampness and deal with the defect/s.  Some replastering may be required if plasterwork has been affected by salts.  See also Buying a 1930s House.   Consider instructing a Chartered Surveyor to report on any dampness and/or condensation issues.  This can be checked as part of a detailed house survey.  Visit RICS Find A Surveyor to find a surveyor in your area. 

Check whether and drains or gullies have become blocked by leaves.  Check whether gutters need clearing to avoid overflowing and/or rain penetration which may lead to dampness internally and staining externally.  

See also Selling a house in winter.

 

 

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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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Buying a property: websites not to miss

Most people buying a property will be familiar with websites such as Rightmove and Zoopla.  But much more information is needed before making a decision whether to buy a particular property or not.  How do you go about choosing a solicitor or surveyor?  How do you know whether there is asbestos in the property you plan to buy and what should you do about it?  What do you need to know if you are buying a property to let?  Where can you find information if the house you propose to buy is in a Conservation Area?  What should you do if bats are roosting in your new home?  How do you identify Japanese Knotweed?

General advice on buying and selling a house

Visit https://www.which.co.uk/money/mortgages-and-property/first-time-buyers/buying-a-home/how-to-buy-a-house-alm0r9l4yf5x  for general advice on the house buying process.  This site includes information on applying for a mortgage, making an offer, appointing a solicitor, arranging a survey, arranging insurance, exchanging contracts and more.

For further general advice visit also https://www.money.co.uk/guides/how-to-buy-a-house.htm

For advice on selling your home, including choosing between a local estate agent and an online estate agent, visit  http://www.rics.org/uk/knowledge/consumer-guides/selling-your-home/

 

Searching for a property and researching selling prices

Rightmove is a widely used website when buying a property.  It allows you to browse properties on the market and view photos and floor plans.  Rightmove also allows you to register for alerts for new properties coming onto the market in a chosen area.  There is also a facility under “House Prices” to check sold prices, which may be helpful for checking the selling prices of properties in your chosen area.  Rightmove has an App for phones and tablets and is useful for when you are on the go.  Visit  https://www.rightmove.co.uk/

Zoopla is an alternative site for searching for properties on the market and for checking sold prices.  It also includes statistics on property values and trends in a chosen area.  Visit  http://www.zoopla.co.uk/

If you are selling a property, don’t forget to check www.nethouseprices.com  for sold prices in your area.  If similar properties have sold recently it may indicate whether the asking price for your property is realistic.

 

Energy Performance Certificate (EPC)

Visit  https://www.gov.uk/buy-sell-your-home/energy-performance-certificates to find out which properties require an EPC and which properties are exempt.

Visit https://www.epcregister.com/searchAssessor.html to find a Domestic Energy Assessor to produce an EPC before marketing your property.

 

Appointing a Surveyor when buying a property

The Royal Institution of Chartered Surveyors (RICS) has a search facility to find a surveyor.  The site enables you to enter a town or postcode and a surveying service, eg, Residential Surveys, Energy Performance Certificates (EPCs), RICS HomeBuyer Reports, etc.  To find a suitably qualified surveyor in your chosen area visit  https://www.ricsfirms.com/

For information on the benefits of having a survey when buying a property, and different types of surveys visit  http://www.rics.org/uk/knowledge/consumer-guides/home-surveys/

 

Choosing a Solicitor

For information on choosing a solicitor visit  https://www.which.co.uk/conveyancing/conveyancing-process/england-and-wales/find-a-solicitor/  This site provides information on solicitors and conveyancers, gives an indication of typical fees and has a list of FAQs.

 

Asbestos

Any house built or refurbished before 2000 has the possibility of having asbestos containing materials (ACMs).  For information on where asbestos containing materials can be found in a property visit  http://www.hse.gov.uk/asbestos/building.htm

If you are buying a property which contains asbestos containing materials visit  http://www.hse.gov.uk/asbestos/member-of-public.htm

 

Flooding

There has been an increased awareness of flooding in recent years.  For information on flood risk from rivers and sea, flood risk from surface water and flood risk from reservoirs visit

https://flood-warning-information.service.gov.uk/long-term-flood-risk/map

 

Bats

Many rural properties have bats.  If you are buying a property where bats are present visit http://www.bats.org.uk/  and http://www.bats.org.uk/data/files/BatsandBuildings_2012.pdf

 

Buy to Let

If you are buying a property to let then it is essential to visit https://www.gov.uk/private-renting/  for information on rights and responsibilities, tenancy deposits, houses in multiple occupation, etc.

For further information on becoming a landlord, appointing a letting agent, information on buy to let mortgages and insurance visit  https://www.which.co.uk/money/mortgages-and-property/buy-to-let

 

Conservation Areas and Listed Buildings

If you are buying a property in a Conservation Area or a property which is Listed, visit the Historic England website at  https://historicengland.org.uk/advice/your-home/owning-historic-property/conservation-area/

 

Japanese Knotweed

For information on  identification of Japanese Knotweed, prevention of spread, and disposal, visit:

https://www.gov.uk/guidance/prevent-japanese-knotweed-from-spreading

 

Mobile phone coverage

https://www.which.co.uk/reviews/mobile-phone-providers/article/mobile-phone-coverage-map

Not something to be overlooked.  Use this link to check the mobile phone coverage map.  You can enter a particular location (town or postcode) although some areas have more results than others.  Many service providers also produce their own data.

 

Broadband speed

Don’t forget to check the estimated broadband speed for a property before you decide to buy.  Use this link to enter your postcode or location to check any measured download and upload speeds.  Again, some areas have more results than others. https://www.uswitch.com/broadband/speedtest/streetstats/

 

And of course, don’t forget to visit other informative posts on this site including:

Is a mortgage valuation the same as a survey?

Buy to let property:  choosing, managing, student lets and landlord’s responsibilities.

Instructing a surveyor when buying a house or flat. 

What should I do after having a survey?

Should I have a survey before selling my house?

 

 

 

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Renegotiating the purchase price of a property following a survey

Reasons for renegotiating the purchase price of a property

Renegotiating the purchase price of a property is an obvious thing to consider if your house survey reveals unexpected defects, particularly if they are going to be costly to repair.  Most purchasers would make an offer “subject to survey”, making it clear that firstly, they plan to have a survey, and secondly, if the survey reveals defects which they were not aware of they may consider revising their offer.   Visit the following:  https://www.gov.uk/buy-sell-your-home/offers

Renegotiating the purchase price of a property may also be necessary if you are seeking a mortgage and the mortgage valuation is less than the previously agreed purchase price.

 

How to renegotiate the purchase price

Renegotiating the purchase price of a property would typically be done through the estate agent.

After receiving the survey report, the buyer should obtain cost estimates from contractors for any recommended works prior to commitment to purchase.  The estimates can be used as a basis for negotiation.

It is important to remember that the seller is under no obligation to reduce the price, even if works are required.  Most sellers would have a minimum price for which they are prepared to sell their property.  This may be based on how much they need to repay a mortgage or how much they need to be able to buy their next home.  However, some purchasers may be in a position to agree a reduced price in order to achieve a sale.  The selling agent may know the vendor’s position and should be able to advise the buyer whether there is any room for negotiation.

Sometimes the selling agent or vendor will ask to see a copy of the survey report.  The survey report has been prepared for the buyer, and the buyer is under no obligation to provide this to anyone.  However, in some cases it may be helpful to show extracts of the report, along with quotations for the works, but this is entirely the buyer’s choice.

If the reason for renegotiating the purchase price is because the mortgage valuation is lower than the previously agreed purchase price then the purchaser may not be able to proceed with the purchase unless the price is lowered or the buyer has additional funds to put towards the purchase.

The success of negotiations will depend on a number of factors including the seller’s financial position, whether the seller needs to sell the property and whether there are any other potential purchasers on the scene who are in a position to proceed and are prepared to pay a higher price.

Remember that the seller does not have to reduce the price and may even decide to not sell the property if it does achieve  a particular selling price.  The success of any negotiation depends not only on the cost of any works but also on the individual circumstances of both the buyer and seller.

 

buying and selling a house

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Buying a cheap house – what to consider

If you are moving house and have found a cheap house, or one which is for sale for lower than you might expect, it is important to find out exactly why the vendor is prepared to sell for a low price.

When a property is marketed by an estate agent the asking price is pitched to generate interest from buyers but at the same time achieve the best price for the seller.

Many factors affect the value of a property, including size, location, condition, etc.  Some properties may seem cheaper than other similar properties for obvious reasons.  If you are buying what seems to be a cheap house, it is important to know why the seller is prepared to sell the property for a lower price than could otherwise be achieved.  Reasons could include:

  1. It may be in poor condition and require costly repairs.
  2. It may be poorly presented, eg dirty or smell of tobacco or pets.
  3. The vendor needs to achieve a quick sale.
  4. Lack of parking.
  5. It may be located on a busy road or have difficult access.
  6. The area may be less desirable.
  7. Neighbouring properties may be less desirable.
  8. Neighbouring land use may have an adverse effect, eg, business premises which may generate noise.

Less obvious reasons may include:

  1. A defect which you are not aware of.
  2. A short lease.
  3. Restrictions on use of the property, eg, agricultural tie or for occupation by elderly residents, etc.
  4. Planning proposals for neighbouring properties or land which may affect the property either adversely or due to uncertainty.
  5. Difficulty in obtaining house insurance on normal terms, possibly due to a previous claim, eg, flooding, subsidence, etc.
  6. Lack of Planning Permission for all or part of the property.
  7. Lack of NHBC or similar certificate for a new property.
  8. Presence of mine shafts on or near the plot.

The above lists give an idea of factors to consider when buying what seems to be cheap house, but are not exhaustive.

If you are planning to buy a house which is seems cheaper than you would have expected it to be it is important to find out the reason why so that you are in full knowledge of the property you are buying and the area it is in so that you can make an informed decision about the purchase.

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