Conveyancing Manchester Comments….
Most buyers – of residential and commercial properties – represented by Conveyancing Manchester realise that they need an expert opinion on the physical condition of the property they intend to purchase.
Increasingly, however, buyers seem content to rely on a valuation report prepared for their mortgage lender, rather than having their own independent survey done. These valuations are often inexpensive (some lenders include them in the cost of the mortgage application, or roll the cost into the fees paid over the life of the loan). But as with all things, you get what you pay for. Valuations are prepared for the mortgage lender, not the buyer. Valuations are purely the
valuer’s confirmation to the lender that the property is suitable as security for the loan. Many problems that would matter to the buyer are not relevant to the lender, and valuers give them short shrift. For example, valuers are not always required to physically inspect the interior of the property – they may do a “drive by” valuation or rely on “comparables” (reported values for neighbouring properties of similar type). A valuer who does not enter the property may not become aware of problems such as dampness, internal alterations which affect the property’s structural integrity, lack of adequate cavity wall and loft insulation, outdated wiring or heating systems that will need replacement. These can all be costly repairs, particularly to a first-time buyer or purchaser who has had to come up with a very large deposit. Even a valuer who does physically inspect the property will almost never enter the loft space or inspect the roof. A number of buyers
have found themselves with costly roof repairs only a few months after
purchasing their new home.
Conveyancing Manchester understands that
Buyers who rely on a mortgage valuation and later discover structural problems with their property may also have difficulty reclaiming their costs from the valuer. The valuer is instructed by the lender. There is rarely a direct contract between the valuer and the buyer, and the valuation report may specifically disclaim any liability to the buyer.
Between the lack of contractual “privity” and disclaimers, the buyer who suddenly finds him or herself shouldering costly repairs that they feel should have been revealed in the valuation report may not even be able to recover these costs from the valuer who missed the problem in the first place.
A house may be the most expensive single item an individual
ever buys. Commercial premises may be a business’s single largest overhead. So why leave such a vital evaluation as the physical condition of the property in the hands of valuer who may not even inspect the property, and who may not be liable to the buyer if they fail to discover costly problems?
Buyers report that cost is the biggest factor. Many buyers are forced to pay for a mortgage valuation as part of their mortgage application and resent “paying twice” for an independent valuation. Some buyers also believe that a survey will cost “thousands.” Buyers need to understand all their options before deciding whether or not to rely on a valuation report.
Many mortgage lenders will accept an independent survey in place of a valuation. A savvy buyer will ask their mortgage advisor early in the application process whether the lender will accept a Homebuyer’s Survey in place of the valuation. It is the rare lender who requires a buyer to “pay twice.”
Further, surveys, particularly Homebuyer’s surveys and condition reports (as distinct from a full structural survey) have become much
more competitively priced in recent years. A Homebuyer’s survey may be as little as £200 more than the valuation report. Condition reports (which are more limited than a Homebuyer’s survey, but more comprehensive than a valuation) can be even less costly. As neither of these surveys need to be commissioned through the lender, the buyer
can “shop around” to find competitive prices and is not locked into the price the lender has negotiated with the valuer.
Finally, the buyer may recoup the cost of the survey instantly in the form of a reduced purchase price. Richard Sexton, the director of chartered surveyors for ESurv, reports that on average, buyers who have a Homebuyer’s survey negotiate a reduction in purchase price of £1,800 as a result of problems revealed by the survey. At the
recent Society of Licensed Conveyancers conference in Derby that Conveyancing Manchester attended, a representative from the Residential Property Surveyors Association reported that one in ten buyers negotiate a reduction in excess of £10,000. While these statistics should encourage the buyer who decides to have a survey, they should terrify a buyer who doesn’t! Very few buyers would be happy to proceed with their purchase knowing that they have a one in four chance of needing another £2,000 for repairs on top of the purchase price, or a one in ten chance of a £10,000 repair bill looming in their future!
A valuation report may still be right for some buyers. Buyers who have a construction or architectural background may not need a more comprehensive survey. But for Mr and Mrs Smith Homebuyer, or for Mr and Mrs Business Owner, relying on the lender’s valuation report is like playing Russian Roulette, only with worse odds.
So why has Conveyancing Manchester devoted so much time and
space to warning buyers about the downsides of relying on a valuation
report? It is the job of the lawyers at Conveyancing Manchester to investigate the title of the property, and without a survey, our investigation is handicapped.
Valuers almost never look at issues which matter to Conveyancing
Manchester from a title perspective, such as rights of way, shared accessways, party walls, potential boundary disputes, and the adequacy of easements, while surveyors actively identify potential title problems.
Get 100% satisfaction from Conveyancing Manchester
Although the lawyers at Conveyancing Manchester like to see
the properties we help our clients purchase, we rarely get to. This means that we rely on the valuation or survey report, too, and if our investigation is limited by a valuation report, we feel like the blind leading the blind! Our goal as your lawyers is 100% client satisfaction, 100% of the time, and a buyer who relies on a valuation and then
discovers problems with the property is not going to be a satisfied
client! Conveyancing Manchester strongly recommends that all buyers have at least a Home Condition survey done, if not a Homebuyer’s Survey, and that commercial buyers consider a full structural survey in every case.
If you’re considering purchasing a property and want more information about the differences between valuations and
surveys, please give Alison or Pam a call and let Conveyancing Manchester help you sort it out!