Before you buy a property both you and your lender need to know it’s worth what you’ve agreed to pay to the seller. To do this, you’ll need a mortgage valuation report and property survey.
What is a mortgage valuation?
Carried out by your mortgage lender, a mortgage valuation checks for anything that could impact the property’s value. This is only a brief inspection: it isn’t the same as the homebuyer survey and should not be used as a substitute.
Hopefully the result of the valuation will be that the property is worth what you’ve agreed to pay. However, if the report values it below, you can either go back to the seller with a new offer based on the lender’s suggestion, or provide evidence to the lender that proves the property’s worth. This could be examples of similar, nearby properties that have sold for the same (or higher) price.
Mortgage valuations can cost from around £150 to £1,500, but many lenders offer it as a freebie.
In addition to the mortgage valuation (which is done for the lender’s benefit, not yours), you should get one of the homebuyer surveys listed below.
What are the different types of homebuyer survey?
Homebuyer surveys all examine the condition of a property, but you only need one. The size and state of your property should determine which level you choose.
Don’t try and scrimp on cost here – a lower level, less comprehensive survey may be cheaper, but it might mean something gets missed that could prove to be a very costly problem later down the line.
Whichever one you decide on, make sure the surveyor has the right qualifications. Those accredited by the Royal Institute of Chartered Surveyors (RICS) are fully vetted and carry professional indemnity insurance.
Level one: Condition report (£250+)
Not especially detailed, a condition report is an overview that essentially backs up the mortgage valuation. It’s most suitable for new builds or properties that are in good condition.
It uses a traffic light system to explain the state of different parts of the property. Red means there are serious problems that need to be addressed, amber means there are non-urgent issues, and green means everything is fine.
Level two: Homebuyer report/home condition survey (£400+)
According to RICS, this is the most popular survey level. The reports are more in-depth than the condition report and as such offer you greater security.
There are two types of homebuyer report, both offered by RICS: the homebuyer report and survey; and the homebuyer report with survey and valuation.
They highlight obvious problems like rot, damp and subsidence but are non-intrusive. This means the surveyor won’t drill holes to check the state of the walls, lift floorboards or move furniture. So, if a chest of drawers is covering an area of damp, a homebuyer report won’t reveal it.
The surveyor advises on any necessary repairs and how much they will cost. You can then use the results to try and renegotiate the property’s price with the seller. For instance, if the report states the property requires £5,000 worth of repairs, you could ask for that amount to be taken off the agreed selling price.
A homebuyer report with survey and valuation includes all of the above plus a valuation and insurance rebuild costs (how much it would cost to rebuild your property from scratch).
A home condition survey is offered by the Residential Property Surveyors Association (RPSA), but includes the same benefits as the RICS options above.
Level three: Building or full structural survey (£600+)
This is the most thorough, in-depth survey you can get. It’s most suitable for older or larger properties or if you’re planning to do a lot of work, like build an extension or completely remodel.
Like the homebuyer report, it lists defects and gives advice on repairs, but the details are more extensive.
The surveyor checks in the attic, behind walls and under floorboards and you can ask them to project repair costs and estimate how long things will take to fix.
Again, you can use the results to renegotiate the overall cost of the property, but beware: if the results of the survey are dire, you may need to rethink buying the property altogether. Ask yourself if it is really worth the time, money and energy to fix all the problems to make it liveable, or if you’d be better off looking elsewhere.
Do I need a survey?
A mortgage valuation is compulsory because no lender will loan you the mortgage without one.
A survey, on the other hand, while not required to buying a property, is highly recommended. If you go ahead and buy a property without one, you could uncover problems later down the line (or as soon as you move in) that are expensive to fix. Once contracts are signed and exchanged, there’s no such thing as a refund!
Worst case scenario is you’re so out of pocket because of costly repairs, you need to take out an additional loan or immediately run into arrears as you struggle to meet the mortgage payments.
How do I get a survey?
For a survey, you’ll need a qualified surveyor who’s a member of RICS. They should have either MRICS or FRICS after their name, but you can also check on the RICS website.
Estate agents, lenders, conveyancers and mortgage brokers often recommend surveyors but they might get commission for doing so, which may mean you wind up paying more.
Shop around locally and get quotes from a few different firms. Remember, there is always room to negotiate. Don’t be afraid to ask for copies of previous reports of the level of survey you want to see how useful the report is.
What should I do if the survey uncovers serious problems?
Damning surveys can lead to sales falling through, but they don’t have to.
If the surveyor has advised certain repairs are absolutely necessary, call in an expert. Ask a builder or tradesman you trust to accompany you to the property and give you a better idea about the size and scope of the problem. As with anything, get a couple of quotes to get a clear idea of the cost.
If you have any questions about the survey itself, ask the surveyor to talk you through it. As you’ve already paid for the survey, this won’t cost extra.
You can’t rule out the possibility of counting your losses and walking away from the property. Ultimately, it will come down to what you can afford so it’s imperative you remain realistic and don’t become blinded by a house you’ve fallen in love with.
Read our guide on the total cost of buying a house