A Mortgage Lender’s Valuation is forthe lender only and should not be relied upon by a purchaser as a means ofaccurately assessing the condition of a property
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| Source:http://www.guardian.co.uk |
Buying and selling ofproperty can be one of the most daunting experiences of our lives. The complex process of dealing withSolicitors, Surveyors, Estate Agents, Mortgage Providers, Vendors (the person/sselling the property) and the like is something that the vast majority of us donot undertake on a regular basis, and is therefore something that often provesto be very stressful. First time buyersin particular will often feel overwhelmed by the whole process and will rely heavilyon their advisors to guide them through the process. Once a decision has been made to purchase aproperty, buyers will work out their finances and decide how much they canafford to borrow and then try to secure a mortgage or at least a mortgageguarantee before beginning the process of house hunting.
For most of uspurchasing a property will be the largest financial investment we will make inour lives. It is therefore essential thatwe know exactly what we are buying before we exchange contracts becauseit is at this point that a property comes into your legal ownership. Atexchange of contracts the law assumes that you have made all of your enquiriesand that you are fully aware of what you were buying. If subsequently you find problems with theproperty, then these problems become your responsibility to deal with (unlessyou feel that you have been advised inappropriately and that you can provethis). It is therefore advisable to be as thorough as you can be to establishthe full extent of any issues with a property before you exchange contracts. A range of different surveys can be carriedout during the conveyance process for which the inexperienced, particularly firsttime buyers often do not understand the purpose or scope of the range ofdifferent surveys available. For clarity,this article will consider conveyance in respect of a residential dwelling.
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| Source:http://www.thisismoney.co.uk |
Firstly, if youapply for a mortgage, a valuation inspection will be carried out by the lender on theproperty you are considering purchasing.Do not be misled by this inspection.This is for the lender and not the purchaser. The purpose of theinspection is for the lender to be satisfied that in the event that you default insome way on your repayments then in a ‘worse case scenario’ they will be ableto sell the property and re-coup the money they have borrowed to you. This is all about the lender assessing theirrisk. These types of inspections are notintrusive and in fact they are extremely brief and in most cases are completedin approximately 20 to 30 minutes. The ‘Valuation Surveyor’ will make a brief internal inspection looking in the roof space ifpossible (usually from the top of a ladder). The inspection will also look for visiblesigns of timber decay or woodworm, and also consider the electricalinstallation amongst other things. Thiswill be followed by an equally brief external inspection where the roof,chimneys, external walls etc will be inspected.As the Surveyor undertakes the inspection, a two or three page proforma,mainly consisting of tick boxes will be completed. The ‘report’ will then be returned to thelender and will identify whether the property is worth the agreed sale price andalso detail any urgent remedial works. Itis from this report that the lender will decide whether they will borrow theagreed amount to the buyer or withhold a certain amount (as retention) for anyworks the surveyor has identified as affecting the value of the property. I have a personal dislike for these types ofsurveys because in my opinion surveyors are far too cautious in what theyreport. They often recommend timber and damp surveys and electrical inspectionsas standard without any real grounds for doing so, and often inaccuratelyreport other issues. This is hardly surprising given the very brief inspection undertaken, however this cautious approach is more likely to be a result of thelitigious World we now live in, where Surveyors provide ‘their own safety net’, and therefore try to reduce the risk of being sued. To a certain extent this is understandable,but this should never be at the expense of accurate reporting.
I have recentlybought and sold a property. The Valuation Surveyorfor the lender of the prospective purchaser of my former house reported dampproblems and an issue with the chimney.A timber and damp survey was recommended (by the surveyor) with a £1000retention sum for repairs to the chimney.The prospective purchaser tried to use this to negotiate a reduction onthe asking price, however as a Chartered Building Surveyor I knew that this wascompletely inaccurate and unnecessary. Itried to challenge this, however as it was not my lender (it was the purchasersof my house), I continually hit a brick wall.My purchaser became unnecessarily nervous about buying a house whichthey now thought was riddled with damp and with a chimney that was about tocollapse! In the end, and to ensure that we did not lose the sale, throughgritted teeth, I agreed to a £500 reduction, even though this was completelyunnecessary. I am sure that many readingthis will have similar experiences, which I am also sure is one of the reasonswhy some property transactions fall through at the last minute, which is extremelyfrustrating.
This demonstratesthat lenders rely on the advice of surveyors who carry out such a briefinspection that it is almost laughable, who then recommend further inspections andremedial works that are often not necessary. Remember, a mortgage lender’s valuation is forthe lender only and should not be relied upon by a purchaser (mainly for thereasons stated above), as a means of accurately assessing the condition of aproperty. A much more comprehensiveinspection is therefore required and I would recommend that a Building Surveyoris instructed to undertake a full, comprehensive survey of a property prior tocontracts being exchanged. Although thiswill have a cost attached to it, you will often find that a building surveywill prove to be extremely cost effective as it will highlight possibledefects/issues which can either be used to negotiate the sale price, orpossibly allow the buyer the choice of pulling out of the sale, beforecontracts are exchanged. This is something I will discuss in next week’sarticle.
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