29th April 2024
Roger Hannah
At Roger Hannah, our mission is to empower every buyer to make well-informed decisions regarding their property acquisitions. In pursuit of this objective, we’ve crafted this concise guide to delineate the crucial distinctions between a mortgage valuation and a home survey. We fervently advocate that every prospective property buyer obtain a survey, and herein, we elucidate why.
Does everyone need a house survey?
Purchasing a house or apartment entails a substantial and protracted process, representing one of the most significant financial commitments an individual can undertake. Safeguarding this investment necessitates certainty regarding the property’s condition, a role fulfilled by a survey.
While obtaining a survey isn’t mandated by law, recent studies reveal that over 2.8 million residential property transactions have been finalised without one. Presumably, buyers opt to proceed based solely on a favourable outcome from a mortgage valuation.
Regrettably, what many fail to recognise is the clear distinction between a home survey and a mortgage valuation. Misinterpreting these roles leaves homebuyers vulnerable to undisclosed defects, costly repairs, and potentially substantial legal entanglements upon occupancy.
What is a mortgage valuation?
Typically conducted by an appointed valuer or a specialised surveyor, a mortgage valuation serves solely to ascertain whether the building’s worth aligns with the proposed purchase price. The assessment typically relies on the prices of comparable properties in the vicinity, coupled with the observable condition of the house or apartment.
While they may appear to offer buyers insight into the fairness of their property’s price tag, mortgage valuations primarily serve the lender’s interests. The findings aid in evaluating the bank’s ability to recover their investment by selling the property in case of default on loan repayments.
What is checked in a mortgage valuation?
Lenders employ various methods for conducting mortgage surveys. Traditionally, an assessor physically visits the property to verify its particulars and conduct a cursory inspection. Mortgage valuations typically span 15–30 minutes, allowing the valuer to assess the property’s surface condition. While evident defects with the potential to impact the property’s value are noted, the process does not entail an exhaustive investigation into potential underlying flaws.
Subsequently, a concise report is compiled, factoring in recent sales transactions of comparable properties in the vicinity as well as the local market’s supply and demand dynamics.
In contemporary practice, surveyors may also determine the property’s value by utilising recent online sales data and conducting a visual assessment from the roadside. If the lender deems the property a low-risk investment, they may opt for a desk-based or drive-by valuation.
What is a property survey?
In contrast, an independent property survey serves the specific purpose of assessing a property’s condition, empowering buyers with comprehensive insights into their prospective investment. Its primary objective is to identify any structural or maintenance issues within the property, enabling buyers to factor potential repair costs into their decision-making process before finalising a purchase agreement.
Various types of surveys are available to buyers, each catering to different property types and buyer needs. At Roger Hannah, our surveys adhere to the guidelines established by RICS (the Royal Institution of Chartered Surveyors). RICS offers three levels of surveys: Level 1 Condition Reports, Level 2 HomeBuyer Reports, and Level 3 Building Surveys.
What’s involved in a property survey?
Each tier of the RICS survey offers varying degrees of detail within its respective report, ensuring that regardless of the chosen level, buyers receive transparent insights into the condition of their potential property and any pertinent concerns.
A Level 1 Condition Report represents the most elementary assessment, typically suitable for newly constructed or nearly new buildings of conventional construction that exhibit apparent good condition. It provides a concise professional overview of the building’s condition as observed on the day of inspection.
For Level 2 and Level 3 home surveys, our surveyors conduct comprehensive examinations of both the interior and exterior of the property. This entails identifying existing building defects such as dampness, timber decay, and structural instability while also pinpointing potential issues or foreseeable future risks. A Level 3 Building Survey, offering the most exhaustive analysis, is ideally suited to aged and expansive properties, unconventional constructions, extensively altered buildings, and renovation projects.
The survey report employs RICS’ traffic light condition ratings to denote the severity and immediacy of each identified defect, along with recommendations for remedial measures.
Does a valuation mean a mortgage offer is approved?
Your mortgage Agreement in Principle (AIP) is typically contingent upon certain conditions, with a satisfactory valuation being among them. Your lender will insist on assessing the property’s value to ascertain its suitability for the loan amount requested. However, it’s essential to note that this valuation does not guarantee automatic approval of your mortgage.
Indeed, there are numerous factors that could lead to the property failing to meet the lender’s criteria, resulting in the mortgage being declined post-valuation. These factors may include:
- Unsatisfactory condition of the property
- Incompatibility of the property’s construction methods or materials with the lender’s policy
- Appraisal of the selling price as too high compared to the property’s true value
- Property situated in an undesirable area, such as a high-risk flood zone
It’s crucial to recognise that while the mortgage valuation is a pivotal aspect of the home-buying process, it’s one over which you, the homebuyer, have no direct control. The most effective way to gain comprehensive insight into the property’s condition and anticipate potential repair costs is to commission an independent property survey.
What happens if the valuation is lower than the mortgage offer?
Experiencing a down-valuation from the mortgage company can be a significant setback. It entails the lender approving a mortgage amount lower than what you applied for, potentially rendering the desired home financially out of reach. Moreover, it might lead to an outright rejection of your application.
Challenging an adverse mortgage valuation can prove arduous, particularly without access to specific comparable properties that corroborate the price you’re willing to pay. Nevertheless, commissioning an independent property survey conducted by a RICS surveyor can furnish credible insights along with robust cost estimates, bolstering your ability to advocate for your case.
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The disparities between a Mortgage Valuation and an independent property survey are stark. When purchasing your next home with a mortgage, your lender will conduct their own valuation as part of the loan approval process. However, this assessment typically falls short of providing comprehensive information regarding the property’s condition.
Opting for a RICS home survey administered by our seasoned surveyors is the optimal approach to garnering essential facts essential for gaining a thorough understanding of the building’s structural integrity and maintenance needs, thus facilitating informed purchasing decisions.
If you’re uncertain about the type of survey suitable for your needs, please don’t hesitate to reach out. Our team of expert surveyors boasts extensive experience across various property types and can assist you in determining the most suitable option to ensure your complete peace of mind.