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A mortgage valuation for is not a survey – buyers should be warned says RSPA.

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.”

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RICS reminds buyers of the importance of a home survey

For many people, buying a home is one of the biggest decisions they will ever make. However, by failing to commission a survey before purchase, homebuyers across England and Wales* are risking potential bills running into thousands of pounds.

According to RICS research, a quarter of all homebuyers who fail to have a survey are forced to make unplanned building works to their property after purchase**. The average bill for these works, such as damp proofing or repairing a roof, is over £1,800 – but the cost can be much higher.

A common misconception is that a mortgage lender’s valuation report represents a survey. In fact, it is merely a valuation carried out on the mortgage lender’s behalf and is not designed to highlight any potential problems with the property. By commissioning a home survey, any structural problems or urgent defects are highlighted, enabling the buyer to make an informed decision before committing to the property.

The RICS Condition Report is a new home survey which is both simple and affordable. Designed for newer properties and conventional homes, it provides a clear report on the condition of the property, plus details of urgent faults and advice for legal advisors. It does not provide an additional valuation, but sits alongside a mortgage valuation.

Alongside the Condition Report, RICS offers additional surveys, tailored to the type and age of a property:

  • RICS Condition Report: A clear, concise picture of the property with ‘traffic light’ ratings. It shows the condition of the property, offers advice to legal advisors and highlights details of any urgent defects. The lowest priced of the surveys; it is aimed at conventional properties and newer homes.
  • RICS HomeBuyer Report: Contains all the features of the Condition Report, plus a market valuation and insurance rebuild costs. It also includes advice on defects that may affect the value of the property with repairs and ongoing maintenance advice.
  • A building survey: The most comprehensive report includes defects, repair and maintenance options. Essential for larger or older properties, or if you’re planning major works.

In difficult economic times it pays to be prepared. Nobody wants to be left with a home that needs extensive repairs or one they can’t sell on. By having a survey you’ll be armed with information on the condition of the property which puts you in a stronger position to decide whether to proceed with the purchase, or negotiate a better deal.

Interestingly, other parts of the housing market are also using surveys to their benefit. For landlords this can be to assess their investments, while we are also seeing sellers turning to surveys in order to prepare for the sale of property. These highlight any problems that may potentially delay the sale or impact on the price later in the process.

RICS spokesperson, David Dalby