What is a Valuation?
A valuation is an assessment of a property’s suitability to be used as security against a substantial loan (specifically a mortgage) that a lender will extend to a borrower. It’s done by a valuation surveyor on behalf of the lender, so they will be looking to collect the information the mortgage company needs.
This is important, because buyers often forget that valuations are done for the benefit of the mortgage company, not the buyer – even if the buyer is responsible for paying the valuer’s fees. Sometimes (but not always), your lender will instruct a surveyor to visit the site and inspect the condition of the property from a valuation perspective, following the lenders strict guidance. Valuations will vary depending on the lender and even the property type, which means a valuation might not cover all areas of the property. For example, some lenders don’t require valuers to look in the roof space, which means they can miss significant problems. For some properties, only a ‘desktop’ valuation will be completed, meaning that the valuer doesn’t visit the property at all.
Bearing in mind that you’ll be contributing towards the value of the property through providing a deposit, the lenders interest isn’t completely aligned with yours. If you stop paying your mortgage, the lender only needs to recover, say, 80% of the property value, or less depending on how far into the mortgage you are. So they aren’t really as interested in addressing defects in the property as you are.
To put that in perspective, let’s use an example. Say that a lender loans out 80% of an averagely priced house. That’s a property value of £288,000, and around £230,000 loaned as a mortgage. The mortgage company could theoretically swallow over £50,000 of disrepair before it starts losing money in the event of a repossession. But if you flip that around, could you afford to stump up £50,000 on unforeseen defects on that same averagely priced house?
What is a Survey?
A survey is like the other side of the coin. It’s not really worried about the market value of the house at all – instead surveys are focused on the true condition of the bricks and mortar of the building. A survey, whether Level 2 or Level 3, will give your surveyor the opportunity to inspect the physical property in much greater detail than a valuation survey would ever do. Surveys are usually conducted by building surveyors rather than valuation surveyors, and for good reason. The training and experience building surveyors go through means their expertise is more ingrained, allowing them to spot issues that could be overlooked by a valuation surveyor.
A survey helps reveal the true cost of owning a property beyond the cost of the mortgage payment. During surveys we regularly find hidden issues that even the vendors say they don’t know about. It really isn’t unusual for our surveyors to find disrepair that, if not addressed, would cost well over £10,000. That sounds scary, but having this kind of knowledge before buying can avoid stress and cashflow problems down the line, as well as giving you the opportunity and leverage to renegotiate the purchase price.
In other words, a survey is for the benefit of the buyer, not the lender.
Why do I Need Both?
It isn’t really a case of needing either a valuation or a survey. They both have their own unique purpose, and when you’re buying a home you will need both to cover all of your bases.
If your estate agent tells you that you don’t need a survey because the lender is sending their valuer to the property, this should be a red flag. It could mean they think something is wrong with the property or there is something to hide, and they want to avoid putting any hurdles in the road to their nice tidy commission. In this case, make sure you get your own survey done!
At Harrison Clarke, we don’t offer valuations at the moment. This is so that we can focus on the bricks and mortar, providing you with a detailed, expert opinion on the property you’re buying. We then present you with factual reports, giving you the tools you need to decide whether the property you’ve fallen in love with is really the right one for you. Once you’ve read your survey report, you’ll have as much access to your surveyor as you need to ask questions, discuss options and make an informed decision on the biggest purchase of your life. To chat with one of our experts, just call 023 8155 0051.
We also have a range of videos talking through various aspects of Surveying. You can access them via our website or our YouTube channel.
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