property survey

moneybags_3

Hi all

When applying for a mortgage to purchase a house, Is the survey based on the selling value of the property or the value of the purchaser's mortgage. Say the property was on the market for 80,000 pounds and the mortgage 65,000 pounds.

yonk

A bank will want a valuation if they lend money and that should be the house in question assessed against recent market evidence.

It is the market value that a willing purchaser will pay a willing seller based on comparable properties that have been sold in the area recently.

If there are special circumstances, then it can be more or less than comparable houses but that is unusual and the reasons have to be stated.

Hence the Loan-to-Value - eg. house valued at 100k, mortage of 80k which is an 80% LTV. Lenders normally lend on the lower of the purchase price or valuation.

terrierlady

remember there are two types of surveys, no 1 explained by above poster , you may also wish to pay for a full structural survey which will generate a report on the home , it will show any problem that the surveyor has discovered and any possible future problems just coming to light.the cost is more but you may consider it worth while, it could save you thousands as once you have the report you can renegotiate on price to take in any repairs if necessary.

lisyloo

Actually I thought there were three.

The lenders valuation which is just for their purposes to see of the property is good security.
Not much use to the buyer.
Can just involve a "drive by" to check the house exists.

A "homebuyers report" typically costing a few hundred that does detail some basic stuff to the house buyer.
OK for fairly new houses.

and the "full strutural survey" typically costing about £1K and going into much more detail.
Usually done on older properties.

Mortgageman

....three

Correct

Prices are dependant on value of the property, and the main differences are the thoroughness of the survey and the accountability of the surveyor should faults later arrise.

yonk

Indeed there are three and the differences are quite significant, as are the costs.

You cannot rely on a bank valuation to show up faults in a property. It is literally a check by the bank that they can recover their money in event of a problem.

A "Homebuyer" survey can be relied on to show faults/problems in modern or fairly standard types of houses.

And you consider a full structural survey for older or unusual properties.

There should be a full explanation of this on the RICS website somewhere as the three types are regulated by the RICS.

terrierlady

I stand corrected, just a quick thought, i wonder how many people have paid for a full survey/homebuyers report or just paid the mortage lenders valuation fee?
I have never heared of a Lenders survey being just a driveby so it just goes to prove, you can teach an old dog new tricks.

lisyloo

I would imagine it depends on the area and the LTV.

From the lenders point of view they only care about the fact that your house would cover the loan in the case of repossession.

If it's an area that they have valued many times before and are familiar with the houses and you are not asking for a high LTV e.g. 50%, then there is really not much need for them to do a detailed survey.

I don't work in the industry but have heard about "drive by valuations" from people that work in the industry.

I don't expect it happens all the time, only in certain circumstances.
Maybe flats or terraces that get valued regularly that they don't perceive a need to keep inspecting.

yonk

I'm fairly sure the RICS would not be happy if they thought valuations were done as drive-bys. There is quite a lot of case law about the margin of error allowable and a valuation should be done to a standard it can be defended in court.

However, I've heard it does happen and was most common for things like the council tax band valuations. So if your house is the only house on the street with an extension out the back and a swimming pool, it is to your benefit!

Mortgageman

It depends what kind of valuation it is - many of the valuations conducted as "drive by's" are one where the lender pays (i.e. it is free to the client) - as such they will negotiate a lower fee with the valuer, but agree that if it meets certain criteria a drive by will be OK.

It happens quite a bit

lisyloo

My house for exmaple was a brand new one.
There are 40 similar houses (about 5 deisgns).

Once a valuer has checked that the houses are adequately built, then why would there be a reason to physically inspect a brand new house of identical design?

A "drive by" might be a bit of an exaggeration, but I can't see the reason to go through the same thorough process for two identical houses built by the sam company.
Surely there can justifiably be some economy of effort in these cases.
Same with houses that turn over quickly.

If a flat was inspected 12 months ago and the owner sells it, then why does the valuer (assuming it's the same one) need to do it all again.
Remeber they are only interested in the basic soundness of the property and not any minor details.

I can see some justication for economy of effort in identical houses and ones that turn over quickly that were valued fairly recently.

At the end of the day it's down to them as to whether they think they can defend it court.