Within our industry, this is a simple, tired old question. Yet, despite the best intentions of everyone involved, there is still a lack of understanding among homebuyers around this issue. In fact, our most common queries tend to revolve around the differences between valuations and surveys. With vast numbers of people still assuming they are one and the same.
To help overcome any confusion, our surveyors always go out of their way to explain exactly what a survey is, how it is different to a valuation and why there is a need for both. However, it’s easy to see how some borrowers can get a little confused.
So, let’s get back to basics…
What is a mortgage valuation?
A mortgage valuation is a basic assessment of a property carried out on behalf of a lender.
The sole purpose of a mortgage valuation is for lenders to determine the value of the asset and base their decision to lend, or not, on this information. It does not serve to highlight any defects, raise ongoing issues, or generate information regarding the condition of the property for the buyer.
In addition, an offer of a mortgage is not confirmation of either a property being free from issues or that a human has inspected the property. Many mortgage valuations are now generated remotely through an Automated Valuation Model.
What is a survey?
A survey is a detailed inspection recommended for all property types – new build withstanding – and these should only be conducted by a fully qualified surveyor who carries the full weight of the Royal Institution of Chartered Surveyors – the industry’s most respected surveying authority – on their shoulders.
For the purpose of this article, let’s focus on the main two types of survey – the Homebuyer Survey and the Building Survey.
RICS Level 2 Survey (formerly known as the The Homebuyer Survey)
Choose this report if you need more extensive information while buying or selling a conventional house, flat or bungalow, built from common building materials and in reasonable condition.
The focus is on assessing the general condition of the main elements of a property. This intermediate level of service includes a more extensive visual inspection of the building, its services, and grounds, but still without tests.
Concealed areas normally opened or used by the occupiers are inspected if it is safe and possible to do so (typical examples include roof spaces, basements, and cellars). The report objectively describes the condition of the different elements and provides an assessment of the relative importance of the defects/problems.
RICS Level 3 Survey (formerly known as a Building Survey)
Choose this report if dealing with a large, older, or run-down property, a building that is unusual or altered, or if you’re planning major works. It costs more than the other RICS reports because it gives detailed information about the structure and fabric of the property.
The report includes a detailed visual inspection of the building, its services and the grounds and is more extensive than a Level 2 survey.
Although the services are not tested, they are observed in normal operation – in other words, they are switched on or off and/or operated where the occupier has given permission and it is safe to do so. The report objectively describes the form of construction and materials used for different parts of the property. It also describes the condition and provides an assessment of the relative importance of the defects/problems.
Additionally, it should describe the identifiable risk of potential or hidden defects in areas not inspected and propose the most probable cause(s) of the defects based on the inspection.
Choosing the right survey
Choosing the right survey will help highlight any serious problems and advise buyers of any works which may need to be completed to get the property up to their desired standards. It’s then up to the buyers to decide on the extent of the required or desired works, collate the necessary quotes and to renegotiate on the purchase price if any major concerns – and potential costs – are raised.
RICS has previously warned that buyers risk huge repair costs after finding nasty surprises later.Its research with ComRes involving more than 1,000 buyers, found that one in five of those who did not bother with a survey later uncovered faults. They estimated that remedial work would cost £5,750 on average and that 17% of new owners ended up paying more than £12,000 to make their homes habitable.
This research though was conducted ten years ago, so inflation, along with the increased costs of building materials and labour mean these figures are conservative, to say the least.
This process in itself can help the purchaser to ascertain their own value of the property, although this certainly shouldn’t cloud the valuation/survey question. They remain separate but vital components in the homebuying process, and our experts are always on hand to guide you on every step in this often complex and emotive journey.
Matthew Cumber is MD of Countrywide Home Surveys
