Buying a house can be confusing and buyers often believe that a mortgage valuation is the same as a survey. This article will explain that they are not the same, and why both matter.
Difference between a Mortgage Valuation and an RICS Home Survey
Mortgage valuation and survey are not the same. A mortgage valuation checks a house’s price for the bank, while a survey looks at its condition for you.
Purpose and Scope of a Mortgage Valuation
A mortgage valuation does not identify structural issues with the property unless they are glaringly obvious.
A mortgage valuation is intended for the lender’s interest. It verifies the property value to confirm it’s a solid backing for the credit you are applying for. This evaluation is relatively simplistic and much cheaper than a comprehensive review carried out by a chartered surveyor.
This procedure assists mortgage firms in determining whether to provide a loan or not. The bank seeks to verify whether the purchase price aligns with the credit sum they’re considering extending to you.
Purpose and Scope of a Structural Survey
A Structural Engineer Survey gives a close look at a house or flat. Qualified surveyors do this job: they check the building to find any problems by looking for things that need fixing and giving advice on how to fix them.
Surveys are meant for people buying homes, as they help buyers know more about the condition of their future property before they buy it. Building surveys can show big issues like roof leaks or risks with basements, which might cost a lot to repair later on.
Royal Institution of Chartered Surveyors (RICS) describes different types of surveys – from simple checks to detailed reports, particularly for older properties requiring repair work.
Types of Surveys and Valuations
When you’re looking at surveys and valuations, there’s a selection to choose from and each one fits different needs – be it checking the house structure or its market value.
RICS Building Surveys (Level 3)
RICS Building Surveys , also known as a Level 3 Survey, are ideal for older homes or those needing a lot of work. Qualified RICS surveyors carry out these thorough checks. They look closely at the property condition.
This type of survey is the most in-depth, as it sees what needs fixing now and what might need attention later.
A Full Building Survey helps buyers understand whether the building condition lives up to the asking price. Knowing the condition also avoids unexpected costs after buying. For houses with basements or big changes, this is very helpful, as buyers get a clear view of the property build quality with a detailed report by an RICS Surveyor (or CIOB/RPSA surveyor).
RICS Homebuyer Surveys (Level 2)
An RICS Homebuyer Survey is a standard check-up for houses. It’s good for homes which appear to be in reasonable condition and don’t seem too old or complicated. This survey tells you about big problems that might cost you a lot to fix later on, but it’s not as in-depth as the Level 3 survey, though it still gives you important information.
A Home Buyer report makes sure you know what issues the house has before you buy it, as you get to see if there are defects like damp walls or if the roof needs fixing without spending much money on the survey itself, given that it is relatively low-cost.
RICS Valuations
RICS valuations are assessments by RICS valuers on houses and flats to work out how much they’re worth. They look at a variety of factors to determine the value, like where the property is located, how big it is, and what condition it’s in.
Our panel of surveyors carry out valuations in big cities like London, Manchester, and Birmingham, making sure everything’s fair value when you’re getting a mortgage and/or thinking about investing in property.
So, if you need to prove how much your home is worth—for a loan or schemes like Help to Buy—you should make an enquiry for an RICS valuation.
Help to Buy Valuations
Help to Buy Valuations are undertaken by a qualified surveyor to help both buyers and mortgage providers understand the true market value of a property for staircasing. For anyone in this scheme, getting a valuation done correctly is a requirement under Help to Buy rules and guidelines. This valuation step can not be skipped, because it needs to be done before you go ahead with your purchase or sale under this programme.
Concerns and Misconceptions
Mortgage valuations and building surveys both need to be arranged, otherwise you risk incurring significant costs on the property.
Lack of Clarity from Lenders
Lenders often do not make things clear: they ought to tell buyers that valuations help the lender, not the buyer. The Royal Society for Public Affairs (RSPA) has asked the Financial Conduct Authority (FCA) to investigate this culture and remedy it accordingly.
Every year, lenders make £100 million from valuation fees without telling buyers what they’re really for, says an expert. This shows a big problem with how mortgage companies talk about property values and loans. Customers need better advice from their mortgage broker or estate agent on what a valuation means for them.
Consumer Misunderstanding on Mortgage Valuation Surveys – You Need to Get a Level 2 Survey or Level 3 Survey as well!
Due to unclear advice from mortgage lenders, many people buying homes get confused and fail to arrange a building survey. They believe the property has been assessed in respect of its condition when it has not. Instead, there is only a quick look by the bank or building society to see how much the house is worth and this isn’t enough to spot all possible issues with the property.
Extra steps need to be taken to learn more about the house condition through detailed reports or surveys. Otherwise, it can lead you into trouble because you might end up with unexpected repair bills later on. It therefore seems there’s a gap in understanding what kind of checks are really needed before saying yes to a new home.
Financial Impact of Not Obtaining a House Survey
Misinterpretation between buyers and lenders can frequently result in ignoring an essential step – acquiring a house survey. The expense of this miscalculation can be substantial. For instance, a quarter of homebuyers who neglected to get a survey were faced with over £2,500 in repair costs.
Even more alarming, 10% found their expenses exceed £10,000, which is a considerable economic impact that could have been prevented with proper diligence.
Conversely, those who chose a property condition report sometimes have the opportunity to reduce the sales price through renegotiation. These figures suggest that investing in a thorough property evaluation shields you from unforeseen repairs and also provides you with leverage when making offers.
The figures speak for themselves: avoiding a survey might save you a little money in the beginning but could end up costing substantially more in the long run.
Recommendations – Mortgage Valuation and an Independent RICS Home Survey
Groups like RSPA are speaking up, saying big changes are needed. They want banks to give better advice before you borrow money for a house.
RSPA’s Call for Intervention
RSPA took a big step by sending a letter to the head of the FSA and asking for an investigation into how lenders talk about valuations and surveys to borrowers. RSPA wants lenders to make things clearer. This is because they care a lot about protecting buyers. Clear communication from lenders can greatly help borrowers understand their options.
They pointed out that not everyone understands how important this advice is. This could lead people to make choices that might hurt them financially in dealing with property valuations, loan-to-value ratios, and more.
Importance of Clear Advice from Lenders – Mortgage Valuations Explained
Following RSPA’s call for action, lenders have a big role. They must give clear advice. Alan Milstein, from the council of RSPA, said lenders need to make things simple. They should tell customers what valuations are for. He also said buyers should get a good survey or report on the condition of their new home.
Mortgage valuation surveys are to the benefit of the lender and so you need a full structural survey fitting for the type of property you are looking to purchase. This will help you avoid inconvenient repairs and help you understand whether you’re buying a property at the correct value.
A Mortgage Valuation is Not the Same as a Property Survey
So, a mortgage valuation is not the same as a building survey. The first checks the house value for the bank, whereas the home survey looks inside out for any significant structural issues you should be aware of personally (i.e. condition of the property).
You do not just want to know how much a house costs; you also want to know if it is in good condition. Both types of survey should therefore be carried out. Both market forces and building pathology will affect the value of the property. You should therefore commission a homebuyer report or an RICS home survey, which can also be carried out by CIOB and RPSA surveyors.
Here is a good Checklist for House Surveys by Kingston Surveyors on what you should look out for in terms of property condition. Also, Wimbledon Surveyors discusses the Common Myths about a Property Survey regarding mortgage valuations v building surveys.