The term property valuation can occasionally be used interchangeably with the term survey. However each are unique and there is not much overlap. A property valuation is just about the figures, a survey is going to tell you about the property integrity as a whole or a particular part of it.
There are three main types of survey you should consider:
In addition to this all homes will need an Energy Performance Certificate (EPC) and that often needs to meet a minimum threshold for mortgage lenders and to comply with current regulation. These are valid for 10 years.
We will expand upon the options, provide examples and allow you to request quotes from trusted partners below.
Property valuations are done by the lender to determine the risk associated with lending against the property. Mortgages are put into broad risk categories based on how much is being borrowed versus how much the house might be worth. If the loan can’t be repaid, the lender repossesses and sells the property. The bigger the stake the lender has in the property the higher the risk and therefore the higher the rate. When remortgaging a property the estimate on the value will come from the owner, who will directly benefit from lower rates, the higher the property can be valued. With a purchase, the fact that two parties have agreed on a price already makes the property valuation more realistic, after all if one person is prepared to pay £x for a property, it’s reasonable to expect someone else to pay the same or close.
Property valuations are crucial to lenders therefore and if remortgaging its essential to speak to one of our experienced brokers who will be able to guide you, with examples of other home sales in your locale, to an optimistic yet realistic price to propose. With a new purchase there are more important factors to consider.
A basic Property Valuation Report can be seen in the images below. As you can see the whole report is condensed into just 4 pages and is essentially just a set of tick boxes. There is very little contextual information in regards this property. It will help the lender decide if there are any risks that they want to explore further and will give them the market value they can use for the Loan to Value assessments.
The actual value of the property is based on comparable’s, or other property sales that have taken place in the last 3 months (possibly 6 months if they are pushed) on properties within a1/2 mile radius of the property being assessed. Much of this information comes from databases including Rightmove and Zoopla data, Land Registry information and conversations with local estate agents. If other similar properties have sold for less, there are factors to the property in question that make it less desirable than others, or simple a lack of comparisons, they surveyor might value the property lower than the asking price or estimated valuation.
Another option is to request a Homebuyers survey. These are often more expensive that the basic valuation required by the lender, and will serve two purposes. The same property valuation will be produced and sent to the lender, but in addition a more thorough report will be produced that grades each aspect of the house on a traffic light system. Green means no action need be taken on the area inspected, Amber means that repairs will be required in the future and Red means that urgent remedial work or replacement is going to be necessary.
Homebuyers reports won’t always tell you the complete picture. Surveyors are not trained electricians, plumbers etc, and so they may well recommend additional reports be commissioned for these specialist areas, however they will give you a good idea of whether these things need further attention or not. As anyone who has redecorated a home knows, issues may be lurking just beneath the surface. A freshly decorated wall may be hiding damp, and a freshly installed bookcase may hide cracks in the walls. A surveyor will have the experience and the knowledge to see past this and to establish the true integrity of the house.
The last type of report is a structural report. Again looking at the example below, you can see that this is a very specific and technical report aimed at properties over 80 years old. There is some overlap with the homebuyers report, but much of the surface condition of the property is ignored, whilst the deeper structure is tested and examined much more closely. Things like dry rot, woodworm and other structural issues would be uncovered. Building Surveys can cost twice as much as a homebuyers report and can take hours to complete. Unlike a Homebuyers survey they do not automatically include a property valuation and so building surveys are often commissioned independently of a mortgage application.
Given the high cost of these surveys, it can be more cost effective to commission reports for specific areas of a property that you think might be of questionable integrity from your own inspections. At AALTO Mortgage and Property Solutions we have experts on hand to talk you through the various types of survey and how they may benefit you. We can arrange for surveyors to contact you too if you want more specific information, and we have a panel of surveyors available across the county to allow us to schedule the surveys as quickly as possible.
Energy Performance Certificates are essential when you build, buy or rent a property. On 1 April 2018, new energy efficiency regulations were introduced. This means landlords are no longer be able to let properties or renew an existing tenancy if their property has an EPC rating below ‘E’.