for borrowers

Mortgage Valuations and Surveys

Home buying valuations and surveys – do you know the difference?

As part of the home buying process it is likely that you will need to have the property you want to buy valued and/or surveyed before you can proceed with the transaction. In this guide we look at the difference between a valuation and a survey, and explain the various types of building survey available.

 

Mortgage Valuation

A mortgage valuation is carried out to satisfy your mortgage lender that the property you wish to buy is worth the price you have offered for it and, perhaps more crucially, the sum you are asking to borrow. This is because the lender needs to be reassured that their investment is safe before approving your mortgage. However, it is important to understand that although a mortgage valuation may enable a buyer to receive a mortgage, it is prepared purely for the benefit of the bank or building society. As such, a mortgage valuation has limitations, including the following:

  • it will not identify structural problems

  • it will not identify defects such as damp or dry rot

  • it will not identify necessary repairs

  • it may sometimes be carried out remotely in a matter of minutes using only online valuation tools

  • it confers no contractual relationship between the buyer and the firm providing the valuation and as such cannot be relied upon by the buyer

  • it is limited in scope and is likely to provide only brief information

  • the information is intended for the purposes of the lender only

The mortgage valuation is arranged by the lender and the fee will typically be charged alongside other items as part of the total mortgage costs. Some lenders include the valuation fee for free as part of the mortgage deal.

The cost of a mortgage valuation typically ranges from £150 to £1,500, with larger and more unusual properties attracting a higher fee.

In the event that the mortgage valuation values the property at less than your offer for the property, or the amount you have asked to borrow, you can either dispute the valuation by providing price evidence of similar properties in the area or return to the vendor with a revised offer based on the lender’s valuation.

 

Surveys

In contrast to a mortgage valuation, a survey is prepared for the benefit of the buyer. It is intended to serve as a health check on the condition of the property and to identify any problems that might affect its value or suitability to the buyer.

There are two main professional bodies who provide survey reports:

  • Royal Institute of Chartered Surveyors (RICS)

  • Residential Property Surveyors Association (RPSA)

Not all surveys are the same; some are more exhaustive than others and will take longer and cost more to complete. Generally surveys are denoted by their level of scrutiny: Level 1, Level 2 or Level 3.

The type of survey you choose will depend on your budget and your needs – for example, whether you are buying a newbuild property or an older, more unusual property. Below we take a look at the major types of survey, from the most basic to the most comprehensive.

Please note, all types of survey are paid for by the buyer.

Mortgage Valuation and Survey Guide Table

RICS Level 1 Survey – Condition Report

As the most basic type of survey a condition report does not contain advice or a valuation. It one of the least expensive surveys, and is available from around £350 for properties under £100,000 with the cost rising in relation to the property price and complexity. Information provided is limited to the following:

  • basic “traffic light” summaries of the property’s condition. Green equals “ok”; orange equals “cause for concern”; red equals “essential repairs needed”

  • a basic summary of the property’s defects.

 

RICS Level 2 Survey – Homebuyer Report

According to RICS, this is the most popular option for home buyers in Britain. There are two types of Homebuyer Report.

Homebuyer Report (survey-only): This survey will identify any major defects and issues – for example, subsidence, damp or rot – and begins at around £400.

Homebuyer Report (survey and valuation): This survey is slightly more comprehensive and also includes a valuation and an insurance reinstatement value. As such it is slightly more expensive, starting at around £450.

 

RICS Level 2 – L&G SmartrSurvey

SmartrSurvey is the Legal & General digital alternative to the traditional HomeBuyer survey and is designed to offer a quicker survey experience for the customer. Your SmartrSurvey can be viewed on a mobile, tablet or desktop device and the results of the survey are ranked in order of severity with clear photographs and helpful, jargon free, statements. You can share the results of your SmartrSurvey directly with tradespeople and your conveyancer to ensure you are fully informed of any potential costs. This may help you to renegotiate the purchase price of a property.

Your surveyor will call to talk you through your SmartrSurvey before and after the inspection, ensuring you completely understand what will happen and answer any questions you may have with the report.

L&G SmartrSurvey prices start from around £300 to £1,300.

 

RPSA Level 2 - Home Condition Survey

The RPSA Home Condition Survey typically costs around £450 to £1,050 depending on the property value, and is an independently checked report which is published in a “consumer-friendly format”. It includes the following:

      • a damp assessment

      • any pertinent boundary issues

      • a review of the inside and outside condition of the fabric of the building

      • information about broadband speed

      • pictures and diagrams to help the buyer "understand" the property.

 

RICS Level 3 Survey – Building Survey

Starting at upwards of £600 but rising significantly in the case of larger and more complex properties, a Building Survey is the most comprehensive and detailed survey available. It includes the following information:

    • advice on repairs, including estimated deterioration timescales and remedial and repair work costs

    • an insurance reinstatement value or market valuation (if requested).

 

RPSA Level 3 - Building Survey (Structural survey)

Suitable for all types of houses (not flats), but typically used for purchases of older buildings, unusual properties or where a particular defect is suspected. The building survey will provide a thorough review of the property and its condition, including clear advice about repairs and ongoing maintenance required. The RPSA Building Survey will vary in price and starts at around £600.

 

New Build Snagging Survey

A new build snagging survey should be carried out independently (not by the builder/developer) to identify issues which will need to be fixed before the purchaser moves in. The survey should identify minor problems, such as doors and windows which need adjusting to more major defects such as structural issues.

A new build snagging survey will cost around £300 to £600.

 

What to do if the survey identifies a problem

It is important that you discuss the full implications of the report with the surveyor once it is completed. If a survey identifies problems, this gives you the chance to re-evaluate your interest in the property and, if you feel the property is still suitable for you, to adjust your offer in light of any likely repair costs.

With SmartrSurvey offered by L&G Surveying Services, through the portal you can send specific issues out to trades people who will provide quotes for the works that needs doing.

Remember, all offers are made Subject To Contract (STC). This means that you have no legal obligation to proceed until the exchange of contracts.

 

Disclaimer: The above is for information purposes only and does not constitute a recommendation of any particular service provider or product. All survey prices are approximate and will vary depending on the value and complexity of the property in question.

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