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Mortgages - Valuation & Surveys

There are generally 3 types of Surveys

1- Basic Mortgage Valuation

All lenders require a basic valuation. They need to know that they are not lending you more than the agreed purchase price and that the property is an acceptable risk to the lender.

Although this is often referred to as a survey, it is really too superficial to merit this title. The Valuer arrives at a value by comparing the property with similar ones, taking factors such as age, condition and location into account. The valuation also points out any obvious major faults which could affect the property's value, but is very brief and is not nearly as detailed as a real survey.

The basic valuation is commissioned by your mortgage lender but is paid by you. It is for their benefit. If the house is valued lower than the purchase price or lower than the agreed loan to value, then the lender may decline to offer a mortgage or offer a mortgage upon the condition that specified work is carried out on it first. If it does reveal that the house is worth less than the price you have agreed to pay for it, you may be able to renegotiate the purchase price with the buyer.

The basic valuation takes up to 45 minutes, and typically costs between around £100 and £600, depending on the price of the house. Some mortgage lenders waive the fee for the basic valuation as part of a package to attract your custom.

We would only suggest this type of Survey (Valuation) where you are buying a new build property or a property built within the last 15 years which still has a building guarantee. Some individuals choose this Valuation as  it is the cheapest option. However, in our opinion this is a false economy and would suggest that paying a little more for the peace of mind is well worth it.

2- RICS Homebuyers Report

In most cases this is the Survey we would recommend. The cost depends upon the value (agreed purchase price) of the property you are buying, but as an example tends to range from £500 to over £1000.

The RICS (Royal Institution of Chartered Surveyors) introduced the new RICS Homebuyer Report in July 2009. The report was quite a radical departure from earlier formats and was developed following considerable market research and feedback from the general public. It is designed to be a user-friendly report with the minimum of technical jargon. The most significant change was the introduction of colour coded Condition Ratings usually referred to as the 'Traffic Lights System'. The surveyor must rate each element of the property using one of the following Condition Ratings.

- Condition Rating 1 (green) - No repair is currently needed. The property must be maintained in the normal way.

- Condition Rating 2 (amber) - Defects that need repairing or replacing but are not considered to be either serious or urgent. The property must be maintained in the normal way.

- Condition Rating 3 (red) - Defects that are serious and/or need to be repaired, replaced or investigated urgently.

The report is now quite lengthy, usually in the region of 15 to 25 pages, but it is divided into easily readable and logical sections as follows:-
A. Introduction to the report
B. About the inspection
C. Overall opinion and summary of the condition ratings
D. About the property
E. Outside the property
F. Inside the property
G. Services
H. Grounds (including shared areas for flats)
I. Issues for your legal advisers
J. Risks
K. Valuation
L. Surveyor's declaration

The report will also include a number of appendices which provide useful information about what the purchaser needs to do next and, particularly in the case of leasehold properties, any enquiries that legal advisers need to make prior to exchange of contracts. The format also allows the surveyor to add photographs to the report.

Section C is particularly useful to the buyer as it gives an overview of the Condition Ratings for each element of the building and includes a fairly concise section giving the surveyor's overall opinion of the property. This will include a comment as to whether or not the surveyor considers the agreed purchase price to be reasonable. Normally this would be the section that most would look at first.

Section D includes a brief section related to energy efficiency and will include reference to the Energy Performance Certificate that must be prepared before a property is marketed.

Section G will give an overview of the condition of the services based on a visual inspection. However, the surveyor will not test the services. If the property is vacant the services may have been turned off or disconnected. The surveyor will generally not be able to turn services on unless the vendor is present and is able to turn them on. The surveyor will recommend further investigations if these are considered appropriate. Often it will be necessary to have the gas, electric and central heating systems tested in older properties.

Section J of the report and is used to identify risks to the building, grounds or occupants. This could cover such problems as potential flooding, the presence of asbestos based materials, an unprotected pond that could be a danger to small children or lack of safety glazing to doors.
In most cases where an issue or problem is raised by the Surveyor who has conducted the report, it maybe prudent to make further independent enquiries or have a specialist look at the issue of concern.

3- Building Survey

This is the most comprehensive and the most costly type of survey. It is suitable for any building, but is especially recommended for older buildings (75 years and upwards); those constructed out of unconventional materials such as timber or thatch; and properties which have had lots of alterations or extensions, or which you intend to alter or renovate.

The surveyor will check the property thoroughly, looking at everything that is visible or easily accessible to examine the soundness of the structure, its general condition and all major or minor faults. The report you receive will be extremely thorough and very long, as Surveyors are legally obliged to inform you of all the findings of the survey. Don't necessarily be put off if it seems that endless defects are listed, every house has some defects and surveyors tend to show the worst-case scenario for anything they discover. You should be provided with a list of prices for repairs and maintenance work, which will also tend to over- rather than under-estimate prices.

A full structural survey normally takes much longer than the one or two hours required for the homebuyer's report. The survey report can also take a long time to produce, so this is a much lengthier process than for a homebuyer's report. You will probably have to wait up to two weeks after the inspection for the report, for which there is no standardised reporting format. The cost of the Survey is typically upwards of £1,000 depending upon the value of the property you are buying



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