Mortgage Finance Gazette (MFG) has reported that the Council of the Residential Property Surveyors Association (RSPA) has written to Hector Sants, chief executive of the Financial Services Authority, calling for an investigation into the advice mortgage lenders give their borrowers regarding valuations and surveys.
MFG state that in the letter the RSPA asks that the FSA takes urgent action to ensure that lenders take more responsibility to inform borrowers that the valuation carried out is on behalf of the lender, and is not a survey.
MFG further reports “Only one in five homebuyers obtain a survey or condition report on the property they are buying, yet 80% of homebuyers believe that they get a survey. The main reason for this discrepancy is that most mortgage borrowers believe that their lenders’ valuation is a survey – which it is not.
RSPA says lenders do little to inform their customers, and suggested it could be because they make so much money out of valuation fees. Some people estimate the net income to be as much as £100 million a year.
A Which? survey found in May 2008 that one in four homebuyers who did not get a survey spent on average more than £2,500 to put problems right that they would have known about with a survey. For one in ten people the cost was over £10,000.
The Which? report also found that those people that did get a survey achieved a reduction in the asking price of the property of £2,000 on average.
RPSA Council member Alan Milstein said: “It is time for lenders to take responsibility for providing their clients with proper advice. They should make it explicit to their borrowers that the valuation they procure is for their purpose alone and says nothing about the condition of the property. They should advise homebuyers to get a survey or condition report and take a written signed instruction to this effect.
“If the only way that lenders will take responsibility is by way of dictate by the FSA then that is what must happen. That is why we as a Council have written to Hector Sants to take urgent action to investigate this issue.”