The Question ….
The Answer ….
Hi Steve … Thank you for your question. This is quite a common question asked by both first-time buyers and those experienced with the ins and outs of the residential property market. In short, and I cannot emphasise this enough, a valuation is not a survey.
The Lenders Valuation Report
When you purchase a property and require a mortgage, your lender will need to assess the value of the property on which the loan will be secured. This is usually done by instructing an independent surveyor to carry out a valuation. Although this report in most cases will be paid for by the purchasers (i.e. you), the report is in fact prepared for the lenders use. The report will answer the lenders questions to provide them with the information needed to decide whether the property is safe to lend on.
Although some lenders may send you a copy of the mortgage valuation report, it is vital that you do not rely exclusively on this report to assist your decision on whether to proceed with the purchase. Mortgage valuations are limited in scope and will only comment on obvious defects which are likely to have a material effect on the property’s value. It is also very unlikely that you will be able to discuss any points raised in the valuation report directly with the surveyor as in most cases there is no contractual relationship between you and the surveyor undertaking the report.
Given that purchasers cannot truly rely on the mortgage valuation report, it is vital that they consider instructing a chartered surveyor to carry out a more detailed inspection of their potential new home or investment. Recent data published by the RICS (Royal Institution of Chartered Surveyors) found that, on average, homebuyers spend £5,750 on repairs once they have moved into their new home. Given the large and somewhat daunting financial commitment of purchasing your first home, it is vital that you know as much about the true condition of the property prior to legal commitment to purchase.
RICS qualified surveyors generally offer two forms of survey which are designed to help you gain a true appreciation of the property’s condition (there is a third survey format known as the Condition Report; however, in my experience this is only suitable for a relatively small number of properties).
The RICS HomeBuyer Report
The RICS HomeBuyer Report (HBR) follows a standard template designed by the RICS and therefore you will obtain the same format of report regardless of which firm you instruct. The report has a ‘traffic light’ system to highlight potential issues which require your immediate attention.
The HomeBuyers Report is a detailed report on the overall condition of the property. The survey will provided a description of each element of the building along with a comment on its condition. The report will also highlight any defects and will provide additional advice on the necessary repairs. The report also benefits from a section entitled “Issues for your legal advisers”, which highlights the matters which you should raise and clarify with your legal adviser or conveyancing solicitor prior to legal commitment to purchase.
The HomeBuyers Report is typically only suitable for buildings of conventional type and construction such as buildings which are of Victorian to present-day construction, appear to be in a reasonable state of repair, use conventional building materials and have common service installations.
The report further benefits from the surveyor’s opinion of the market value and a reinstatement cost (which you will need for insurance purposes).
A Building Survey
Formally known as the “Structural Survey” the Building Survey is the most comprehensive form of survey and although the RICS have produced a standard template, most firms choose to produce bespoke forms. Therefore, it is always advisable to obtain example reports from the firms you may wish to instruct.
The Building Survey is an extensive, in-depth inspection of the property’s form of construction and state of repair. It is suitable for most properties but is particularly useful where the property is in a poor state of repair, numerous structural alterations have been carried out (e.g. attic extensions, the removal of load-bearing walls, basement excavations etc.) or where you intend to carry out structural alterations yourself.
Unlike the HomeBuyers Report, a Building Survey is unlikely to provide an independent open-market valuation although, depending on the qualifications of the surveyor undertaking the inspection, it may be possible to obtain a valuation as an additional service.
The benefits of obtaining an independent survey are numerous. The lender’s mortgage valuation report, although paid for by the borrower, is not for the borrower’s purpose. Therefore, any purchaser proceeding to acquire a property without having obtained prior professional advice from a suitably qualified surveyor is doing so at their own risk. The emotive side of buying a property can lead to the most risk-adverse people making mistakes or missing key items.
Buying a property is an expensive and stressful time, and although avoiding the ‘optional’ survey may seem like an easy way of reducing the financial stress, especially where you have already ‘forked out’ for a valuation, it is far better to be aware of any issues before you purchase your dream home so that you can make an informed decision about how much you’re willing to pay for it.
Jamie Styles BSc(Hons) MRICS MCABE MFPWS