A property valuation is a fundamental part of buying a home, yet the process is still a mystery for many buyers and vendors.
One challenge is that, given the frequent requirement to hit a particular value to secure the mortgage offer, the proposed value of a property can be overestimated during the purchase or remortgage process.
As a result, when surveyors submit a more realistic valuation to the lender, they can sometimes be seen as pouring cold water on the application.
What do surveyors assess?
In some cases, this misunderstanding stems from the fact that many people don’t actually know the parameters of the surveyors’ brief from the lender and that each lender has different valuation criteria that must be adhered to.
For example, some people believe a valuation requires nothing more than a cursory glance at the property; or equally that a valuer should spend hours on site to ensure accuracy.
Neither is true. The process is designed to capture a wider range of information that the lender will need in order to decide whether the property is safe to lend on and up to what amount.
Surveyors will typically assess the following:
- The overall condition of the property, including any work that has been done to modernise it;
- Whether the accommodation declared is accurate;
- Whether the property is affected by external issues such as being in a high-risk flood zone, or above a shop or restaurant;
- A basic check of any structural issues, clues that there may be damp, problems with the roof or any wiring issues. If these are flagged in the mortgage valuation report, the surveyor will often recommend that a more detailed report is completed if there is a concern.
For lender or borrower?
Our core activity is to consider and report upon all these risks on behalf of the lender, during the valuation process.
Unfortunately, as many homebuyers believe the mortgage valuation is a survey conducted for their benefit, fewer than one in five take out a Royal Institute of Chartered Surveyors Home Buyer report.
As a result, the average homebuyer spends nearly £6,000 on unforeseen repairs after they’ve moved.
Of course, it is equally important to ensure that the property is structurally safe, as homeowners could find themselves in a dangerous position, should the worst happen and their home suffers from an unforeseen structural problem.
The valuing surveyor’s main aim is to identify any risks associated with buying that home – for lender and mortgage applicant alike.
Determining an accurate valuation of the property is an important part of this commitment. For this reason, surveyors will consider the price of similar properties in the area that have recently sold, alongside their assessment of the physical and environmental attributes of the property.
Overestimates often come to light when surveyors begin to look at these figures. Every valuation is typically measured against a minimum of three other properties to compare prices and make considered adjustments that take account of differences.
In some cases, there may not be a recent comparable; ideally, the “house next door” will have been sold in the past month, but this is a regrettably rare scenario.
Consequently, surveyors will need to look further afield, both in geographical terms or timewise. Older or dissimilar comparables are therefore not a sign of an inaccurate valuation, as the surveyor will make appropriate adjustments and state this on the mortgage valuation report, when considering their relevance to the subject property.
Our data has shown that over the past three years, there has been a general decrease in overestimated property prices. This is due in part to an easing of lender loan-to-value (LTV) limits making the absolute valuation less critical.
Dealing with overestimates
In any case, the ultimate goal is for surveyors to derive the most accurate valuation possible. That final figure may not always be good news for the seller.
In cases where a valuation is less than the price agreed during the buying process, buyers can panic, as they may fear they’re about to lose their dream home.
However, in most instances, this scenario triggers a sensible conversation between parties and a compromise is usually reached.
This is when brokers can step in and work very closely with their clients. At this point, it is worth pointing out that this lower valuation could save the buyers some money, as it may open the door to re-negotiating a lower price with the vendor.
Homebuyers and lenders alike look to surveyors who specialise in managing risks like these throughout the process. Investment in technology has made it easier than ever to achieve efficient and precise valuations.
Our surveyors have access from their iPads to comparable property data and all the information they need to derive accurate valuations.
We are committed to ensuring that our surveying methods prevent lending against a property at the incorrect level. But also wherever possible, that we facilitate a considered lending offer and successful application.
Contrary to the thoughts of some, valuing surveyor have always, and will continue to report accurately.
They have no incentive (financial or otherwise) to do anything else, whereas a mortgage applicant may well have a need for a certain figure.
A commitment to undertaking fair and accurate valuations is the valuing surveyor’s contribution to a buoyant and stable property market.
For this reason, just like a mortgage broker, we play an invaluable role in the home buying process.
Written by: Richard Sexton, director of E.surv