Here is an easy guide to help you understand the main differences between a mortgage valuation and a home survey. We will also explain why it is crucial for every property buyer to invest in a comprehensive survey to identify potential issues and avoid costly surprises later.
Should You Always Get a Property Survey?
Buying a property is a significant and often lengthy commitment, both emotionally and financially. To ensure that your investment is protected, it is crucial to verify the property’s condition. A property survey plays a key role in giving you the confidence that the building is structurally sound and free from hidden issues.
While obtaining a property survey is not a legal requirement, studies show that a considerable number of residential property sales have gone ahead without one. In these cases, buyers may have felt that a positive result from the mortgage valuation was enough to move forward with the purchase.
What most buyers do not realise is that a mortgage valuation and a home survey are fundamentally different. If you rely solely on the mortgage valuation, you may be blindsided by costly hidden defects, repairs, and even potential legal troubles once you own the property.
What is the Purpose of a Mortgage Valuation?
A mortgage valuation is typically performed by a qualified valuer or surveyor and focuses on determining whether the property’s value justifies the purchase price. It looks at comparable property prices in the local area and provides an assessment based on the observable condition of the property.
What’s Included in a Mortgage Valuation Report?
Lenders conduct mortgage valuations in various manners, but an assessor will visit the property for a brief inspection, usually lasting between 15 and 30 minutes. During this time, the valuer will look at the basic condition of the property and note any obvious issues that may affect its value. However, this is not a detailed survey and does not delve into potential structural problems.
After conducting the property visit, the surveyor will prepare a concise report, considering recent local sales data and current market conditions. With the advent of online resources, surveyors can easily check sales trends and conduct a brief roadside inspection to help assess the property’s value. If the property is considered low-risk, the lender may choose a more streamlined approach, such as a desk-based or drive-by valuation.
Understanding a Property Survey: What It Involves
Unlike a mortgage valuation, an independent property survey focuses solely on evaluating the condition of a property. This helps buyers make an informed decision by identifying any issues that could lead to future repair costs. The right survey depends on the property type, with several options available to suit diverse needs.
The Level 1 Condition Report is the most basic survey and is typically suitable for newer homes or properties in excellent condition. It provides an overview of the property’s condition on the inspection date, with little detail on underlying issues. For a more in-depth review, a Level 2 or Level 3 survey will be required. These surveys look more closely at both the interior and exterior, identifying defects such as timber decay, damp, and structural movement, while also flagging up any potential future problems. A Level 3 Building Survey is the most comprehensive option, best suited to large, old, or unusually constructed properties, as well as homes in need of major repairs.
What Happens After a Mortgage Valuation? Does it Mean Approval?
Your mortgage AIP (Agreement in Principle) will typically be conditional upon several factors, including a satisfactory property valuation. The lender needs to confirm that the property is worth the amount you have applied for in the loan. However, it is important to note that the AIP is not an automatic approval. There are many reasons why a property may not meet the lender’s criteria after the valuation, and the mortgage could still be declined. These reasons can include:
- The property’s physical condition is substandard and requires substantial improvements.
- The methods or materials used in constructing the property are inconsistent with the lender’s lending guidelines.
- The asking price for the property is deemed too high compared to its actual worth.
- The location of the property is considered undesirable due to factors such as being in a flood zone or another high-risk area.
The mortgage valuation is a key part of the home-buying process, but it is important to realize that you, as the buyer, have no influence over it. The valuation is conducted solely to confirm the property’s value for the lender’s purposes. To gain a true understanding of the property’s condition and any repair expenses, you will need to arrange an independent property survey.